Document:

exv10w3

 

Exhibit 10.3

ELECTRIC CITY CORP. AND CERTAIN OF ITS SUBSIDIARIES

MASTER SECURITY AGREEMENT

	 	 	 
	To:

	 	Laurus Master Fund, Ltd.
	 

	 	c/o M&C Corporate Services Limited
	 

	 	P.O. Box 309 GT
	 

	 	Ugland House
	 

	 	South Church Street
	 

	 	George Town
	 

	 	Grand Cayman, Cayman Islands

Date: November 22, 2005

To Whom It May Concern:

     1.   To secure the payment of all Obligations (as hereafter defined), ELECTRIC CITY CORP., a
Delaware corporation (the “Company”), each of the other undersigned parties (other than Laurus
Master Fund, Ltd., (“Laurus”)) and each other entity that is required to enter into this Master
Security Agreement (each an “Assignor” and, collectively, the “Assignors”) hereby assigns and
grants to Laurus a continuing security interest in all of the following property now owned or at
any time hereafter acquired by such Assignor, or in which such Assignor now has or at any time in
the future may acquire any right, title or interest (the “Collateral”): all cash, cash equivalents,
accounts, accounts receivable, deposit accounts (including, without limitation, the Multi Party
Blocked Account Agreement (the “Blocked Account”) maintained at American Chartered Bank (Account
Name: ___, Account Number:___) referred to in the Multi Party Blocked Account
Agreement), inventory, equipment, goods, fixtures, documents, instruments (including, without
limitation, promissory notes), contract rights, commercial tort claims set forth on Exhibit B to
this Master Security Agreement, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable than those current in
effect among such Assignor’s affiliates), chattel paper, supporting obligations, investment
property (including, without limitation, all partnership interests, limited liability company
membership interests and all other equity interests owned by any Assignor), letter-of-credit
rights, trademarks, trademark applications, tradestyles, patents, patent applications, copyrights,
copyright applications and other intellectual property in which such Assignor now has or hereafter
may acquire any right, title or interest, all proceeds and products thereof (including, without
limitation, proceeds of insurance) and all additions, accessions and substitutions thereto or
therefor. In the event any Assignor wishes to finance the acquisition in the ordinary course of
business of any hereafter acquired equipment and has obtained a written commitment from an
unrelated third party financing source to finance such equipment, Laurus shall release its security
interest on such hereafter acquired equipment so financed by such third party financing source.
Except as otherwise defined herein, all capitalized terms used herein shall have the meanings
provided such terms in the Securities Purchase Agreement referred to

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below. All items of Collateral which are defined in the UCC shall have the meanings set forth
in the UCC. For purposes hereof, the term “UCC” means the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of New York; provided, that in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, Laurus’ security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC”
shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the
provisions of this Agreement relating to such attachment, perfection, priority or remedies and for
purposes of definitions related to such provisions; provided further, that to the extent that the
UCC is used to define any term herein and such term is defined differently in different Articles or
Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern.

     2.   The term “Obligations” as used herein shall mean and include all debts, liabilities and
obligations owing by each Assignor to Laurus arising under, out of, or in connection with: (i) that
certain Securities Purchase Agreement dated as of the date hereof by and between the Company and
Laurus (the “Securities Purchase Agreement”) and (ii) the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and each Related Agreement, as
each may be amended, modified, restated or supplemented from time to time, collectively, the
“Documents”), and in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or agreements referred to
therein or otherwise, and in connection with any other indebtedness, obligations or liabilities of
each such Assignor to Laurus, whether now existing or hereafter arising, direct or indirect,
liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to
or evidenced by a note, agreement, guaranty, instrument or otherwise, including, without
limitation, obligations and liabilities of each Assignor for post-petition interest, fees, costs
and charges that accrue after the commencement of any case by or against such Assignor under any
bankruptcy, insolvency, reorganization or like proceeding (collectively, the “Debtor Relief Laws”)
in each case, irrespective of the genuineness, validity, regularity or enforceability of such
Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor
or of the existence or extent of such collateral, and irrespective of the allowability, allowance
or disallowance of any or all of the Obligations in any case commenced by or against any Assignor
under any Debtor Relief Law.

     3.   Each Assignor hereby jointly and severally represents, warrants and covenants to Laurus
that:

     (a)   it is a corporation, partnership or limited liability company, as the case may be,
validly existing, in good standing and formed under the respective laws of its jurisdiction
of formation set forth on Schedule A, and each Assignor will provide Laurus thirty
(30) days’ prior written notice of any change in any of its respective jurisdiction of
formation;

     (b)   its legal name is as set forth in its Certificate of Incorporation or other
organizational document (as applicable) as amended through the date hereof and as set forth
on Schedule A, and it will provide Laurus thirty (30) days’ prior written notice of
any change in its legal name;

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     (c)   its organizational identification number (if applicable) is as set forth on
Schedule A hereto, and it will provide Laurus thirty (30) days’ prior written notice
of any change in its organizational identification number;

     (d)   it is the lawful owner of its Collateral and it has the sole right to grant a
security interest therein and will defend the Collateral against all claims and demands of
all persons and entities;

     (e)   it will keep its Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature (“Encumbrances”), except
(i) Encumbrances securing the Obligations and (ii) Encumbrances securing indebtedness of
each such Assignor not to exceed $50,000 in the aggregate for all such Assignors;

     (f)   it will, at its and the other Assignors’ joint and several cost and expense keep
the Collateral in good state of repair (ordinary wear and tear excepted) and will not waste
or destroy the same or any part thereof other than ordinary course discarding of items no
longer used or useful in its or such other Assignors’ business;

     (g)   it will not, without Laurus’ prior written consent, sell, exchange, lease or
otherwise dispose of any Collateral, whether by sale, lease or otherwise, except for the
sale of inventory in the ordinary course of business and for the disposition or transfer in
the ordinary course of business during any fiscal year of obsolete and worn-out equipment or
equipment no longer necessary for its ongoing needs, having an aggregate fair market value
of not more than $25,000 and only to the extent that:

     (i)   the proceeds of each such disposition are used to acquire replacement
Collateral which is subject to Laurus’ first priority perfected security interest,
or are used to repay the Obligations or to pay general corporate expenses; or

     (ii)   following the occurrence of an Event of Default which continues to exist
the proceeds of which are remitted to Laurus to be applied to the Obligations;

     (h)   it will insure or cause the Collateral to be insured in Laurus’ name (as an
additional insured and loss payee) against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as Laurus shall specify in amounts and
under policies by insurers acceptable to Laurus and all premiums thereon shall be paid by
such Assignor and the policies delivered to Laurus. If any such Assignor fails to do so,
Laurus may procure such insurance and the cost thereof shall be promptly reimbursed by the
Assignors, jointly and severally, and shall constitute Obligations;

     (i)   it will at all reasonable times allow Laurus or Laurus’ representatives free access
to and the right of inspection of the Collateral; and

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     (j)   such Assignor (jointly and severally with each other Assignor) hereby indemnifies
and saves Laurus harmless from all loss, costs, damage, liability and/or expense, including
reasonable attorneys’ fees, that Laurus may sustain or incur to enforce payment, performance
or fulfillment of any of the Obligations and/or in the enforcement of this Master Security
Agreement or in the prosecution or defense of any action or proceeding either against Laurus
or any Assignor concerning any matter growing out of or in connection with this Master
Security Agreement, and/or any of the Obligations and/or any of the Collateral except to the
extent caused by Laurus’ own gross negligence or willful misconduct (as determined by a
court of competent jurisdiction in a final and nonappealable decision);

     (k)   all commercial tort claims (as defined in the Uniform Commercial Code as in effect
in the State of New York) held by any Assignor are set forth on Schedule B to this
Master Security Agreement; each Assignor hereby agrees that it shall promptly, and in any
event within five (5) Business Days after the same is acquired by it, notify Laurus of any
commercial tort claim acquired by it and unless otherwise consented to in writing by Laurus,
it shall enter into a supplement to this Master Security Agreement granting to Laurus a
security interest in such commercial tort claim, securing the Obligations.

     4.   The occurrence of any of the following events or conditions shall constitute an “Event of
Default” under this Master Security Agreement:

     (a)   any covenant or any other term or condition of this Master Security Agreement is
breached in any material respect and such breach, to the extent subject to cure, shall
continue without remedy for a period of fifteen (15) days after the occurrence thereof;

     (b)   any representation or warranty, or statement made or furnished to Laurus under this
Master Security Agreement by any Assignor or on any Assignor’s behalf should prove to any
time be false or misleading in any material respect on the date as of which made or deemed
made;

     (c)   the loss, theft, substantial damage, destruction, sale or encumbrance to or of any
of the Collateral or the making of any levy, seizure or attachment thereof or thereon except
to the extent:

     (i)   such loss is covered by insurance proceeds which are used to replace the
item or repay Laurus; or

     (ii)   said levy, seizure or attachment does not secure indebtedness in excess of
$100,000 in the aggregate for all Assignors and such levy, seizure or attachment has
been removed or otherwise released within ten (10) days of the creation or the
assertion thereof;

     (d) an Event of Default shall have occurred under and as defined in any Document.

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     5.   Upon the occurrence of any Event of Default and at any time thereafter, Laurus may declare
all Obligations immediately due and payable and Laurus shall have the remedies of a secured party
provided in the UCC as in effect in the State of New York, this Agreement and other applicable law.
Upon the occurrence of any Event of Default and at any time thereafter, Laurus will have the right
to take possession of the Collateral and to maintain such possession on any Assignor’s premises or
to remove the Collateral or any part thereof to such other premises as Laurus may desire. Upon
Laurus’ request, each Assignor shall assemble or cause the Collateral to be assembled and make it
available to Laurus at a place designated by Laurus. If any notification of intended disposition
of any Collateral is required by law, such notification, if mailed, shall be deemed properly and
reasonably given if mailed at least ten (10) days before such disposition, postage prepaid,
addressed to the applicable Assignor either at such Assignor’s address shown herein or at any
address appearing on Laurus’ records for such Assignor. Any proceeds of any disposition of any of
the Collateral shall be applied by Laurus to the payment of all expenses in connection with the
sale of the Collateral, including reasonable attorneys’ fees and other legal expenses and
disbursements and the reasonable expenses of retaking, holding, preparing for sale, selling, and
the like, and any balance of such proceeds may be applied by Laurus toward the payment of the
Obligations in such order of application as Laurus may elect, and each Assignor shall be liable for
any deficiency. For the avoidance of doubt, following the occurrence and during the continuance of
an Event of Default, Laurus shall have the immediate right to withdraw any and all monies contained
in any deposit account in the name of any Assignor and controlled by Laurus and apply same to the
repayment of the Obligations (in such order of application as Laurus may elect).

     6.   If any Assignor defaults in the performance or fulfillment of any of the terms, conditions,
promises, covenants, provisions or warranties on such Assignor’s part to be performed or fulfilled
under or pursuant to this Master Security Agreement, Laurus may, at its option without waiving its
right to enforce this Master Security Agreement according to its terms, immediately or at any time
thereafter and without notice to any Assignor, perform or fulfill the same or cause the performance
or fulfillment of the same for each Assignor’s joint and several account and at each Assignor’s
joint and several cost and expense, and the cost and expense thereof (including reasonable
attorneys’ fees) shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law, or, at Laurus’ option, debited by Laurus from any
other deposit accounts in the name of any Assignor and controlled by Laurus.

     7.   Each Assignor appoints Laurus, any of Laurus’ officers, employees or any other person or
entity whom Laurus may designate as such Assignor’s attorney, with power to execute such documents
in each such Assignor’s behalf and to supply any omitted information and correct patent errors in
any documents executed by any Assignor or on any Assignor’s behalf; to file financing statements
against such Assignor covering the Collateral (and, in connection with the filing of any such
financing statements, describe the Collateral as “all assets and all personal property, whether now
owned and/or hereafter acquired” (or any substantially similar variation thereof)); to sign such
Assignor’s name on public records; and to do all other things Laurus deem necessary to carry out
this Master Security Agreement. Each Assignor hereby ratifies and approves all acts of the
attorney and neither Laurus nor the attorney will be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than gross

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negligence or willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision). This power being coupled with an interest, is irrevocable so
long as any Obligations remains unpaid.

     8.   No delay or failure on Laurus’ part in exercising any right, privilege or option hereunder
shall operate as a waiver of such or of any other right, privilege, remedy or option, and no waiver
whatever shall be valid unless in writing, signed by Laurus and then only to the extent therein set
forth, and no waiver by Laurus of any default shall operate as a waiver of any other default or of
the same default on a future occasion. Laurus’ books and records containing entries with respect
to the Obligations shall be admissible in evidence in any action or proceeding, shall be binding
upon each Assignor for the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or more of the remedies
available to Laurus, successively, alternately or concurrently. Each Assignor agrees to join with
Laurus in executing such documents or other instruments to the extent required by the UCC in form
satisfactory to Laurus and in executing such other documents or instruments as may be required or
deemed necessary by Laurus for purposes of affecting or continuing Laurus’ security interest in the
Collateral.

     9.   THIS MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. All of the rights, remedies,
options, privileges and elections given to Laurus hereunder shall inure to the benefit of Laurus’
successors and assigns. The term “Laurus” as herein used shall include Laurus, any parent of
Laurus’, any of Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now
existing or hereafter created or acquired, and all of the terms, conditions, promises, covenants,
provisions and warranties of this Agreement shall inure to the benefit of each of the foregoing,
and shall bind the representatives, successors and assigns of each Assignor.

     10.   Each Assignor hereby consents and agrees that the state of federal courts located in the
County of New York, State of New York shall have exclusive jurisdiction to hear and determine any
claims or disputes between Assignor, on the one hand, and Laurus, on the other hand, pertaining to
this Master Security Agreement or to any matter arising out of or related to this Master Security
Agreement, provided, that Laurus and each Assignor acknowledges that any appeals from those courts
may have to be heard by a court located outside of the County of New York, State of New York, and
further provided, that nothing in this Master Security Agreement shall be deemed or operate to
preclude Laurus from bringing suit or taking other legal action in any other jurisdiction to
collect, the Obligations, to realize on the Collateral or any other security for the Obligations,
or to enforce a judgment or other court order in favor of Laurus. Each Assignor expressly submits
and consents in advance to such jurisdiction in any action or suit commenced in any such court, and
each Assignor hereby waives any objection which it may have based upon lack of personal
jurisdiction, improper venue or forum non conveniens. Each Assignor hereby
waives personal service of the summons, complaint and other process issues in any such action or
suit and agrees that service of such summons, complaint and other process may be made by registered
or certified mail addressed to such assignor at the address set forth on

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the signature lines hereto and that service so made shall be deemed completed upon the earlier
of such Assignor’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper
postage prepaid.

     The parties desire that their disputes be resolved by a judge applying such applicable laws.
Therefore, to achieve the best combination of the benefits of the judicial system and of
arbitration, the parties hereto waive all rights to trial by jury in any action, suit, or
proceeding brought to resolve any dispute, whether arising in contract, tort, or otherwise between
Laurus, and/or any Assignor arising out of, connected with, related or incidental to the
relationship established between them in connection with this Master Security Agreement or the
transactions related hereto.

     11.   It is understood and agreed that any person or entity that desires to become an Assignor
hereunder, or is required to execute a counterpart of this Master Security Agreement after the date
hereof pursuant to the requirements of any Document, shall become an Assignor hereunder by (x)
executing a Joinder Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall reasonably request and
(z) taking all actions as specified in this Master Security Agreement as would have been taken by
such Assignor had it been an original party to this Master Security Agreement, in each case with
all documents required above to be delivered to Laurus and with all documents and actions required
above to be taken to the reasonable satisfaction of Laurus.

     12.   All notices from Laurus to any Assignor shall be sufficiently given if mailed or delivered
to such Assignor’s address set forth below.

	 	 	 	 	 
	 	Very truly yours,

ELECTRIC CITY CORP.

 	 
	 	By:  	
/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	GREAT LAKES CONTROLLED ENERGY CORPORATION.

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Treasurer 	 

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	 	MAXIMUM PERFORMANCE GROUP, INC.

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Treasurer 	 
	 

	 	 	 	 	 
	 	ELC VNPP SUB I, LLC

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	ELC VNPP SUB II, LLC

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	 	Name:  	Jeffrey Mistarz 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	ACKNOWLEDGED:

LAURUS MASTER FUND, LTD.

 	 
	 	By:  	                    /s/ David Grin
 	 
	 	 	Name:  	David Grin 	 
	 	 	Title:  	Director 	 
	 

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SCHEDULE A

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Jurisdiction of	 	 	Organization	 
	 	Entity	 	 	Formation	 	 	Identification Number	 
	 	Electric City Corp.

	 	 	Delaware	 	 	 	 
	 	Great Lakes Controlled
Energy Corp.

	 	 	Delaware	 	 	 	 
	 	Maximum Performance
Group, Inc.

	 	 	Delaware	 	 	 	 
	 	ELC VNPP SUB I, LLC

	 	 	Delaware	 	 	 	 
	 	ELC VNPP SUB II, LLC

	 	 	Delaware	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 

 

 

SCHEDULE B

COMMERCIAL TORT CLAIMSexv10w4

 

Exhibit 10.4

SUBSIDIARY GUARANTY

 

	 	 	 	 	 
	New York, New York

	 	 
	 	 
	 

	 	 
	 	November 22, 2005

     FOR VALUE RECEIVED, and in consideration of note purchases from, or credit otherwise extended
or to be extended by Laurus Master Fund, Ltd. (“Laurus”) to or for the account of ELECTRIC CITY
CORP., a Delaware corporation (the “Company”), from time to time and at any time and for other good
and valuable consideration and to induce Laurus, in its discretion, to purchase such notes or make
other extensions of credit and to make or grant such renewals, extensions, releases of collateral
or relinquishments of legal rights as Laurus may deem advisable, each of the undersigned (and each
of them if more than one, the liability under this Guaranty being joint and several) (jointly and
severally referred to as “Guarantors” or “the undersigned”) unconditionally guaranties to Laurus,
its successors, endorsees and assigns the prompt payment when due (whether by acceleration or
otherwise) of all present and future obligations and liabilities of any and all kinds of the
Company to Laurus and of all instruments of any nature evidencing or relating to any such
obligations and liabilities upon which the Company or one or more parties and the Company is or may
become liable to Laurus, whether incurred by the Company as maker, endorser, drawer, acceptor,
guarantor, accommodation party or otherwise, and whether due or to become due, secured or
unsecured, absolute or contingent, joint or several, and however or whenever acquired by Laurus,
whether arising under, out of, or in connection with (i) that certain Securities Purchase Agreement
dated as of the date hereof by and between the Company and Laurus (the “Securities Purchase
Agreement”) and (ii) each Related Agreement referred to in the Securities Purchase Agreement (the
Securities Purchase Agreement and each Related Agreement, as each may be amended, modified,
restated and/or supplemented from time to time, are collectively referred to herein as the
“Documents”), or any documents, instruments or agreements relating to or executed in connection
with the Documents or any documents, instruments or agreements referred to therein or otherwise, or
any other obligations or liabilities of the Company to Laurus, whether now existing or hereafter
arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due and
whether under, pursuant to or evidenced by a note, agreement, guaranty, instrument or otherwise
(all of which are herein collectively referred to as the “Obligations”), and irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or of any instrument
evidencing any of the Obligations or of any collateral therefor or of the existence or extent of
such collateral, and irrespective of the allowability, allowance or disallowance of any or all of
the Obligations in any case commenced by or against the Company under Title 11, United States Code,
including, without limitation, obligations or indebtedness of the Company for post-petition
interest, fees, costs and charges that would have accrued or been added to the Obligations but for
the commencement of such case. Terms not otherwise defined herein shall have the meaning assigned
such terms in the Securities Purchase Agreement. In furtherance of the foregoing, the undersigned
hereby agrees as follows:

     1. No Impairment. Laurus may at any time and from time to time, either before or
after the maturity thereof, without notice to or further consent of the undersigned, extend the
time of payment of, exchange or surrender any collateral for, renew or extend any of the

 

 

Obligations or increase or decrease the interest rate thereon, or any other agreement with the
Company or with any other party to or person liable on any of the Obligations, or interested
therein, for the extension, renewal, payment, compromise, discharge or release thereof, in whole or
in part, or for any modification of the terms thereof or of any agreement between Laurus and the
Company or any such other party or person, or make any election of rights Laurus may deem desirable
under the United States Bankruptcy Code, as amended, or any other federal or state bankruptcy,
reorganization, moratorium or insolvency law relating to or affecting the enforcement of creditors’
rights generally (any of the foregoing, an “Insolvency Law”) without in any way impairing or
affecting this Guaranty. This Guaranty shall be effective regardless of the subsequent
incorporation, merger or consolidation of the Company, or any change in the composition, nature,
personnel or location of the Company and shall extend to any successor entity to the Company,
including a debtor in possession or the like under any Insolvency Law.

     2. Guaranty Absolute. Subject to Section 5(c) hereof, each of the undersigned jointly
and severally guarantees that the Obligations will be paid strictly in accordance with the terms of
the Documents and/or any other document, instrument or agreement creating or evidencing the
Obligations, 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 Company with respect thereto.
Guarantors hereby knowingly accept the full range of risk encompassed within a contract of
“continuing guaranty” which risk includes the possibility that the Company will contract additional
obligations and liabilities for which Guarantors may be liable hereunder after the Company’s
financial condition or ability to pay its lawful debts when they fall due has deteriorated, whether
or not the Company has properly authorized incurring such additional obligations and liabilities.
The undersigned acknowledge that (i) no oral representations, including any representations to
extend credit or provide other financial accommodations to the Company, have been made by Laurus to
induce the undersigned to enter into this Guaranty and (ii) any extension of credit to the Company
shall be governed solely by the provisions of the Documents. The liability of each of the
undersigned under this Guaranty shall be absolute and unconditional, in accordance with its terms,
and shall remain in full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever,
including, without limitation: (a) any waiver, indulgence, renewal, extension, amendment or
modification of or addition, consent or supplement to or deletion from or any other action or
inaction under or in respect of the Documents or any other instruments or agreements relating to
the Obligations or any assignment or transfer of any thereof, (b) any lack of validity or
enforceability of any Document or other documents, instruments or agreements relating to the
Obligations or any assignment or transfer of any thereof, (c) any furnishing of any additional
security to Laurus or its assignees or any acceptance thereof or any release of any security by
Laurus or its assignees, (d) any limitation on any party’s liability or obligation under the
Documents or any other documents, instruments or agreements relating to the Obligations or any
assignment or transfer of any thereof or any invalidity or unenforceability, in whole or in part,
of any such document, instrument or agreement or any term thereof, (e) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating
to the Company, or any action taken with respect to this Guaranty by any trustee or receiver, or by
any court, in any such proceeding, whether or not the undersigned shall have notice or knowledge of
any of the foregoing, (f) any exchange, release or nonperfection of any collateral, or any release,
or

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amendment or waiver of or consent to departure from any guaranty or security, for all or any
of the Obligations or (g) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the undersigned. Any amounts due from the undersigned to Laurus
shall bear interest until such amounts are paid in full at the highest rate then applicable to the
Obligations. Obligations include post-petition interest whether or not allowed or allowable.

     3. Waivers.

     (a) This Guaranty is a guaranty of payment and not of collection. Laurus shall be
under no obligation to institute suit, exercise rights or remedies or take any other action
against the Company or any other person or entity liable with respect to any of the
Obligations or resort to any collateral security held by it to secure any of the Obligations
as a condition precedent to the undersigned being obligated to perform as agreed herein and
each of the Guarantors hereby waives any and all rights which it may have by statute or
otherwise which would require Laurus to do any of the foregoing. Each of the Guarantors
further consents and agrees that Laurus shall be under no obligation to marshal any assets
in favor of Guarantors, or against or in payment of any or all of the Obligations. The
undersigned hereby waives all suretyship defenses and any rights to interpose any defense,
counterclaim or offset of any nature and description which the undersigned may have or which
may exist between and among Laurus, the Company and/or the undersigned with respect to the
undersigned’s obligations under this Guaranty, or which the Company may assert on the
underlying debt, including but not limited to failure of consideration, breach of warranty,
fraud, payment (other than cash payment in full of the Obligations), statute of frauds,
bankruptcy, infancy, statute of limitations, accord and satisfaction, and usury.

     (b) Each of the undersigned further waives (i) notice of the acceptance of this
Guaranty, of the extensions of credit, and of all notices and demands of any kind to which
the undersigned may be entitled, including, without limitation, notice of adverse change in
the Company’s financial condition or of any other fact which might materially increase the
risk of the undersigned and (ii) presentment to or demand of payment from anyone whomsoever
liable upon any of the Obligations, protest, notices of presentment, non-payment or protest
and notice of any sale of collateral security or any default of any sort.

     (c) Notwithstanding any payment or payments made by the undersigned hereunder, or any
setoff or application of funds of the undersigned by Laurus, the undersigned shall not be
entitled to be subrogated to any of the rights of Laurus against the Company or against any
collateral or guarantee or right of offset held by Laurus for the payment of the
Obligations, nor shall the undersigned seek or be entitled to seek any contribution or
reimbursement from the Company in respect of payments made by the undersigned hereunder,
until all amounts owing to Laurus by the Company on account of the Obligations are
indefeasibly paid in full and Laurus’ obligation to extend credit pursuant to the Documents
has been irrevocably terminated. If, notwithstanding the foregoing, any amount shall be
paid to the undersigned on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full and Laurus’ obligation to extend credit
pursuant to the Documents shall not have been terminated, such amount shall be held by the
undersigned in trust for Laurus, segregated from other

3

 

funds of the undersigned, and shall forthwith upon, and in any event within two (2)
business days of, receipt by the undersigned, be turned over to Laurus in the exact form
received by the undersigned (duly endorsed by the undersigned to Laurus, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as Laurus may
determine, subject to the provisions of the Documents. Any and all present and future
obligations and liabilities of the Company to any of the undersigned are hereby waived and
postponed in favor of, and subordinated to the full payment and performance of, all
Obligations of the Company to Laurus.

     4. Security. All sums at any time to the credit of the undersigned and any property
of the undersigned in Laurus’ possession or in the possession of any bank, financial institution or
other entity that directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, Laurus (each such entity, an “Affiliate”) shall be
deemed held by Laurus or such Affiliate, as the case may be, as security for any and all of the
undersigned’s obligations and liabilities to Laurus and to any Affiliate of Laurus, no matter how
or when arising and whether under this or any other instrument, agreement or otherwise.

     5. Representations and Warranties. Each of the undersigned hereby jointly and
severally represents and warrants (all of which representations and warranties shall survive until
all Obligations are indefeasibly satisfied in full and the Documents have been irrevocably
terminated), that:

     (a) Corporate Status. It is a corporation, partnership or limited liability
company, as the case may be, duly formed, validly existing and in good standing under the
laws of its jurisdiction of formation indicated on the signature page hereof and has full
power, authority and legal right to own its property and assets and to transact the business
in which it is engaged.

     (b) Authority and Execution. It has full power, authority and legal right to
execute and deliver, and to perform its obligations under, this Guaranty and has taken all
necessary corporate, partnership or limited liability company, as the case may be, action to
authorize the execution, delivery and performance of this Guaranty.

     (c) Legal, Valid and Binding Character. This Guaranty constitutes its legal,
valid and binding obligation enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting the enforcement of creditor’s
rights and general principles of equity that restrict the availability of equitable or legal
remedies.

     (d) Violations. The execution, delivery and performance of this Guaranty will
not violate any requirement of law applicable to it or any contract, agreement or instrument
to which it is a party or by which it or any of its property is bound or result in the
creation or imposition of any mortgage, lien or other encumbrance other than in favor of
Laurus on any of its property or assets pursuant to the provisions of any of the foregoing,
which, in any of the foregoing cases, could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

4

 

     (e) Consents or Approvals. No consent of any other person or entity
(including, without limitation, any creditor of the undersigned) and no consent, license,
permit, approval or authorization of, exemption by, notice or report to, or registration,
filing or declaration with, any governmental authority is required in connection with the
execution, delivery, performance, validity or enforceability of this Guaranty by it, except
to the extent that the failure to obtain any of the foregoing could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse Effect.

     (f) Litigation. No litigation, arbitration, investigation or administrative
proceeding of or before any court, arbitrator or governmental authority, bureau or agency is
currently pending or, to the best of its knowledge, threatened (i) with respect to this
Guaranty or any of the transactions contemplated by this Guaranty or (ii) against or
affecting it, or any of its property or assets, which, in each of the foregoing cases, if
adversely determined, could reasonably be expected to have a Material Adverse Effect.

     (g) Financial Benefit. It has derived or expects to derive a financial or
other advantage from each and every loan, advance or extension of credit made under the
Documents or other Obligation incurred by the Company to Laurus.

     (h) Solvency. As of the date of this Guaranty, (a) the fair saleable value of
its assets exceeds its liabilities and (b) it is meeting its current liabilities as they
mature.

     6. Acceleration.

     (a) If any breach of any covenant or condition or other event of default shall occur
and be continuing under any agreement made by the Company or any of the undersigned to
Laurus, or either the Company or any of the undersigned should at any time become insolvent,
or make a general assignment, or if a proceeding in or under any Insolvency Law shall be
filed or commenced by, or in respect of, any of the undersigned, or if a notice of any
lien, levy, or assessment is filed of record with respect to any assets of any of the
undersigned by the United States of America or any department, agency, or instrumentality
thereof, or if any taxes or debts owing at any time or times hereafter to any one of them
becomes a lien or encumbrance upon any assets of the undersigned in Laurus’ possession, or
otherwise, any and all Obligations shall for purposes hereof, at Laurus’ option, be deemed
due and payable without notice notwithstanding that any such Obligation is not then due and
payable by the Company.

     (b) Each of the undersigned will promptly notify Laurus of any default by such
undersigned in its respective performance or observance of any term or condition of any
agreement to which the undersigned is a party if the effect of such default is to cause, or
permit the holder of any obligation under such agreement to cause, such obligation to become
due prior to its stated maturity.

     7. Payments from Guarantors. Laurus, in its sole and absolute discretion, with or
without notice to the undersigned, may apply on account of the Obligations any payment from the
undersigned or any other guarantors, or amounts realized from any security for the

5

 

Obligations, or may deposit any and all such amounts realized in a non-interest bearing cash
collateral deposit account to be maintained as security for the Obligations.

     8. Costs. The undersigned shall pay on demand, all costs, fees and expenses
(including expenses for legal services of every kind) relating or incidental to the enforcement or
protection of the rights of Laurus hereunder or under any of the Obligations.

     9. No Termination. This is a continuing irrevocable guaranty and shall remain in full
force and effect and be binding upon the undersigned, and each of the undersigned’s successors and
assigns, until all of the Obligations have been indefeasibly paid in full and Laurus’ obligation to
extend credit pursuant to the Documents has been irrevocably terminated. If any of the present or
future Obligations are guarantied by persons, partnerships, corporations or other entities in
addition to the undersigned, the death, release or discharge in whole or in part or the bankruptcy,
merger, consolidation, incorporation, liquidation or dissolution of one or more of them shall not
discharge or affect the liabilities of any undersigned under this Guaranty.

     10. Recapture. Anything in this Guaranty to the contrary notwithstanding, if Laurus
receives any payment or payments on account of the liabilities guaranteed hereby, which payment or
payments or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver, or any other party
under any Insolvency Law, common law or equitable doctrine, then to the extent of any sum not
finally retained by Laurus, the undersigned’s obligations to Laurus shall be reinstated and this
Guaranty shall remain in full force and effect (or be reinstated) until payment shall have been
made to Laurus, which payment shall be due on demand.

     11. Books and Records. The books and records of Laurus showing the account between
Laurus and the Company shall be admissible in evidence in any action or proceeding, shall be
binding upon the undersigned for the purpose of establishing the items therein set forth and shall
constitute prima facie proof thereof.

     12. No Waiver. No failure on the part of Laurus 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 Laurus of any right, remedy or power hereunder preclude any other or
future exercise of any other legal right, remedy or power. Each and every right, remedy and power
hereby granted to Laurus or allowed it by law or other agreement shall be cumulative and not
exclusive of any other, and may be exercised by Laurus at any time and from time to time.

     13. Waiver of Jury Trial. EACH OF THE UNDERSIGNED DESIRES THAT ITS DISPUTES BE
RESOLVED BY A JUDGE APPLYING APPLICABLE LAW. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH OF THE UNDERSIGNED HERETO WAIVES ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR ANY OF THE UNDERSIGNED ARISING OUT
OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS GUARANTY, ANY DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

6

 

     14. Governing Law; Jurisdiction. THIS GUARANTY CANNOT BE CHANGED OR TERMINATED
ORALLY, AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS. EACH OF THE UNDERSIGNED HEREBY CONSENTS AND AGREES THAT THE STATE
OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY OF THE UNDERSIGNED, ON THE
ONE HAND, AND LAURUS, ON THE OTHER HAND, PERTAINING TO THIS GUARANTY OR ANY OF THE DOCUMENTS OR TO
ANY MATTER ARISING OUT OF OR RELATED TO THIS GUARANTY OR ANY OF THE DOCUMENTS; PROVIDED,
THAT EACH OF THE UNDERSIGNED ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD
BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER
PROVIDED, THAT NOTHING IN THIS GUARANTY SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF LAURUS. EACH OF THE UNDERSIGNED EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
UNDERSIGNED HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. EACH OF THE UNDERSIGNED HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH UNDERSIGNED IN ACCORDANCE WITH SECTION 18 AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH UNDERSIGNED’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

     15. Understanding With Respect to Waivers and Consents. Each Guarantor warrants and
agrees that each of the waivers and consents set forth in this Guaranty is made voluntarily and
unconditionally after consultation with outside legal counsel and with full knowledge of its
significance and consequences, with the understanding that events giving rise to any defense or
right waived may diminish, destroy or otherwise adversely affect rights which such Guarantor
otherwise may have against the Company, Laurus or any other person or entity or against any
collateral. If, notwithstanding the intent of the parties that the terms of this Guaranty shall
control in any and all circumstances, any such waivers or consents are determined to be
unenforceable under applicable law, such waivers and consents shall be effective to the maximum
extent permitted by law.

     16. Severability. To the extent permitted by applicable law, any provision of this
Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,

7

 

be ineffective to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

     17. Amendments, Waivers. No amendment or waiver of any provision of this Guaranty nor
consent to any departure by the undersigned therefrom shall in any event be effective unless the
same shall be in writing executed by each of the undersigned directly affected by such amendment
and/or waiver and Laurus.

     18. Notice. All notices, requests and demands to or upon the undersigned, shall be in
writing and shall be deemed to have been duly given or made (a) when delivered, if by hand, (b)
three (3) days after being sent, postage prepaid, if by registered or certified mail, (c) when
confirmed electronically, if by facsimile, or (d) when delivered, if by a recognized overnight
delivery service in each event, to the numbers and/or address set forth beneath the signature of
the undersigned.

     19. Successors. Laurus may, from time to time, without notice to the undersigned,
sell, assign, transfer or otherwise dispose of all or any part of the Obligations and/or rights
under this Guaranty. Without limiting the generality of the foregoing, Laurus may assign, or grant
participations to, one or more banks, financial institutions or other entities all or any part of
any of the Obligations. In each such event, Laurus, its Affiliates and each and every immediate
and successive purchaser, assignee, transferee or holder of all or any part of the Obligations
shall have the right to enforce this Guaranty, by legal action or otherwise, for its own benefit as
fully as if such purchaser, assignee, transferee or holder were herein by name specifically given
such right. Laurus shall have an unimpaired right to enforce this Guaranty for its benefit with
respect to that portion of the Obligations which Laurus has not disposed of, sold, assigned, or
otherwise transferred.

     20. Joinder. It is understood and agreed that any person or entity that desires to
become a Guarantor hereunder, or is required to execute a counterpart of this Guaranty after the
date hereof pursuant to the requirements of any Document, shall become a Guarantor hereunder by (x)
executing a joinder agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall reasonably request
and/or as may be required by such joinder agreement and (z) taking all actions as specified in this
Guaranty as would have been taken by such such Guarantor had it been an original party to this
Guaranty, in each case with all documents required above to be delivered to Laurus and with all
documents and actions required above to be taken to the reasonable satisfaction of Laurus.

     21. Release. Nothing except indefeasible payment in full of the Obligations shall
release any of the undersigned from liability under this Guaranty.

     22. Remedies Not Exclusive. The remedies conferred upon Laurus in this Guaranty are
intended to be in addition to, and not in limitation of any other remedy or remedies available to
Laurus under applicable law or otherwise.

     23. Limitation of Obligations under this Guaranty. Each Guarantor and Laurus (by its
acceptance of the benefits of this Guaranty) hereby confirms that it is its intention that this

8

 

Guaranty not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Code, the Uniform Fraudulent Conveyance Act of any similar Federal or state law. To effectuate the
foregoing intention, each Guarantor and Laurus (by its acceptance of the benefits of this Guaranty)
hereby irrevocably agrees that the Obligations guaranteed by such Guarantor shall be limited to
such amount as will, after giving effect to such maximum amount and all other (contingent or
otherwise) liabilities of such Guarantor that are relevant under such laws and after giving effect
to any rights to contribution pursuant to any agreement providing for an equitable contribution
among such Guarantor and the other Guarantors (including this Guaranty), result in the Obligations
of such Guarantor under this Guaranty in respect of such maximum amount not constituting a
fraudulent transfer or conveyance.

[REMAINDER OF THIS PAGE IS BLANK.

SIGNATURE PAGE IMMEDIATELY FOLLOWS]

9

 

     IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned as of the date and year
here above written.

	 	 	 	 	 
	 	GREAT LAKES CONTROLLED ENERGY CORPORATION

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	Name:  	Jeffrey Mistarz 	 
	 	Title:  	Treasurer

	 	Address:  	630 Bonnie Lane
Elk Grove Village, IL  60007	 
	 	
Telephone:  (847) 437-1666

Facsimile: (847) 437-4969

State of Formation:  Delaware 
	 
	 	MAXIMUM PERFORMANCE GROUP, INC.

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	Name:  	Jeffrey Mistarz 	 
	 	Title:  	Treasurer
	 
	 	Address:  	45 W. 21st Street, Suite 403
New York, NY 11356	 
	 	
Telephone:  (847) 437-1666

Facsimile: (847) 437-4969

State of Formation:  Delaware 

10

 

	 	 	 	 	 

	 	 	 	 	 
	 	ELC VNPP SUB I, LLC

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	Name:  	Jeffrey Mistarz 	 
	 	Title:  	Chief Financial Officer
	 
	 	Address:  	1280 Landmeier Road
Elk Grove Village, IL 60007	 
	 	
Telephone:  (847) 437-1666

Facsimile: (847) 437-4969

State of Formation:  Delaware 
	 
	 
	 	ELC VNPP SUB II, LLC

 	 
	 	By:  	/s/ Jeffrey Mistarz
 	 
	 	Name:  	Jeffrey Mistarz 	 
	 	Title:  	Chief Financial Officer
	 
	 	Address:  	1280 Landmeier Road
Elk Grove Village, IL 60007	 
	 	
Telephone:  (847) 437-1666

Facsimile: (847) 437-4969

State of Formation:  Delaware 

11

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