GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("GUARANTY") is made June 14, 2006 by the
undersigned (each hereinafter referred to as a "GUARANTOR" and collectively, the
"GUARANTORS"), in favor of the purchasers (each a "BUYER" and collectively the
"BUYERS") of the 8% Senior Secured Notes (the "NOTES") pursuant to the Note
Purchase Agreement and the Exhibits thereto dated even date herewith (the "NOTE
PURCHASE AGREEMENT") (collectively, the "LOAN DOCUMENTS") from ZBB ENERGY
CORPORATION, a Wisconsin corporation (the "COMPANY").
NOW, THEREFORE, as a material inducement to each Buyer to purchase the
Notes from the Company, and for further good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantors hereby,
unconditionally, irrevocably and absolutely, warrant and represent to and
covenant with the Buyers as follows:
1. GUARANTY OF OBLIGATION. The Guarantors jointly, severally,
unconditionally, irrevocably and absolutely, guarantee to the Buyers that all
indebtedness evidenced by or provided in the Loan Documents ("GUARANTEED
INDEBTEDNESS"), will be promptly paid when due and in accordance with the terms
and provisions thereof (and as they may be amended, extended or renewed from
time to time) including, without limitation, interest on all of the above
amounts as agreed upon between the Company and the Buyers, and any and all
renewals, extensions and rearrangements of all or any part of the Guaranteed
Indebtedness. This is a continuing guaranty and shall continue to apply without
regard to the form or amount of indebtedness or obligation which the Company may
create, renew, extend or alter in whole or in part, without notice to the
Guarantors.
2. LIABILITY FOR OTHER INDEBTEDNESS. If the Guarantors are or become
liable for any indebtedness owing by the Company to any or all Buyers by
endorsement or otherwise than under this Guaranty, such liability shall not be
in any manner impaired or affected hereby, and the rights of such Buyer
hereunder shall be cumulative of any and all other rights that such Buyer may
ever have against the Guarantors. The exercise by such Buyer of any right or
remedy hereunder or under any other instrument, or at law or in equity, shall
not preclude the concurrent or subsequent exercise of any other right or remedy.
3. NO RELEASE FROM OBLIGATIONS. The obligations, covenants, agreements
and duties of the Guarantors under this Guaranty shall not be released or
impaired in any manner whatsoever, without the written consent of the Buyers,
including on account of any or all of the following:
a. any permitted assignment, endorsement or transfer, in whole or
in part, of the Guaranteed Indebtedness, although made without consent of the
Guarantors;
b. any waiver by any Buyer of the performance or observance by
either or both of the Company or the Guarantors of any of the agreements,
covenants, terms or conditions contained in any document evidencing, governing
or securing the Guaranteed Indebtedness;
c. any extension of the time for payment or performance of all or
any portion of the Guaranteed Indebtedness;
d. the renewal, rearrangement, modification or amendment (whether
material or otherwise) of any duty, agreement or obligation of the Company set
forth in any document evidencing, governing or securing the Guaranteed
Indebtedness;
e. the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of either or both of the
Company or the Guarantors;
f. any receivership, insolvency, bankruptcy, reorganization or
other similar proceedings or lack of corporate power, affecting either or both
of the Company or the Guarantors or any of their assets;
g. any release, withdrawal, surrender, exchange, substitution,
subordination or loss of any security or other guaranty at any time existing in
connection with all or any portion of the Guaranteed Indebtedness, or the
acceptance of additional or substitute property as security therefore;
h. the release or discharge of the Company or the Guarantors from
the observance or performance of any agreement, covenant, term or condition
contained in any document evidencing, governing or securing the Guaranteed
Indebtedness;
i. any action which the Buyers may take or omit to take by virtue
of any document evidencing, governing or securing the Guaranteed Indebtedness or
through any course of dealing with either or both of the Company or the
Guarantors;
j. the addition of a new guarantor or guarantors;
k. the operation of law or any other cause, whether similar or
dissimilar to the foregoing;
l. any adjustment, indulgence, forbearance or compromise that may
be granted or given by the Buyers to any party;
m. the failure by the Buyers to file or enforce a claim against
the estate (either in administration, bankruptcy or other proceeding) of the
Company;
n. if the recovery from the Company becomes barred by any statute
of limitations or is otherwise prevented;
o. any defenses, set-offs or counterclaims which may be available
to the Company;
p. any impairment, modification, change, release or limitation of
liability of, or stay of actions of lien enforcement proceedings against the
Company, its property,
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or its estate in bankruptcy resulting from the operation of any present or
future provision of the Bankruptcy Code or any other similar federal or state
statute, or from the decision of any court; or
q. any neglect, delay, omission, failure or refusal of the Buyers
to take or prosecute any action for the collection of any of the Guaranteed
Indebtedness or to foreclose or take or prosecute any action in connection with
any lien, right of security (including perfection thereof), existing or to exist
in connection with, or as security for, any of the Guaranteed Indebtedness, it
being the intention hereof that the Guarantors shall remain liable as principals
on the Guaranteed Indebtedness, notwithstanding any act, omission or thing which
might, but for the provisions hereof, otherwise operate as a legal or equitable
discharge of any Guarantor.
4. PAYMENT AND PERFORMANCE OF OBLIGATIONS. In the event of default by
the Company in payment or performance of the Guaranteed Indebtedness, or any
part thereof, when such indebtedness or performance becomes due, either by its
terms or as the result of the exercise of any power to accelerate, the
Guarantors shall, without notice or demand, and without any notice having been
given to the Guarantors of the acceptance by any Buyer of this Guaranty and
without any notice having been given to the Guarantors of the creating or
incurring of such indebtedness, pay the amount due thereon to each Buyer, at its
office, or at such other place as may be designated in writing by such Buyer,
and it shall not be necessary for any Buyer, in order to enforce such payment by
the Guarantors, first, to institute suit or exhaust its remedies against the
Company or others liable on such indebtedness, or to enforce its rights against
any security which shall ever have been given to secure such indebtedness.
5. WAIVER OF NOTICE. Notice to the Guarantors of the acceptance of
this Guaranty and of the making, renewing or assignment of the Guaranteed
Indebtedness and each item thereof, are hereby expressly waived by the
Guarantors.
6. PAYMENTS BY THE COMPANY. Each payment on the Guaranteed
Indebtedness shall be deemed to have been made by the Company unless express
written notice is given to the Buyers at the time of such payment that such
payment is made by the Guarantors as specified in such notice.
7. RELEASES AND WAIVERS. If all or any part of the Guaranteed
Indebtedness at any time be secured, the Guarantors agree that the Buyers may at
any time and from time to time, at their 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
obligations of the Guarantors hereunder. The Guarantors further agree that if
the Company executes in favor of the Buyers any collateral agreement, deed of
trust or other security instrument, the exercise by the Buyers of any right or
remedy thereby conferred on the Buyers shall be wholly discretionary with the
Buyers, and that the exercise or failure to exercise any such right or remedy
shall in no way impair or diminish the obligations of the Guarantors hereunder.
The Guarantors further agree that the Buyers shall not be liable for their
failure to use diligence in the collection of the Guaranteed Indebtedness or in
preserving the
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liability of any person liable on the Guaranteed Indebtedness, and the
Guarantors hereby waive presentment for payment, protest and notice thereof,
notice of acceleration, and diligence in bringing suits against any person
liable on the Guaranteed Indebtedness, or any part thereof.
8. NO RELEASE OF THE GUARANTORS. If the Guaranteed Indebtedness at any
time exceeds the amount permitted by law, or the Company is not liable because
the act of creating the Guaranteed Indebtedness is ultra xxxxx, or the officers
or persons creating the Guaranteed Indebtedness acted in excess of their
authority, and for these reasons the Guaranteed Indebtedness which the
Guarantors agree to pay cannot be enforced against the Company, such fact shall
in no manner affect the Guarantors' liability hereunder, but the Guarantors
shall be liable under this Guaranty notwithstanding that the Company is not
liable for the Guaranteed Indebtedness, and to the same extent the Guarantors
would have been liable if the Guaranteed Indebtedness had been enforceable
against the Company.
9. OPTIONAL ACCELERATION. In the Event of Default by the Company, as
such term is defined in the Note Purchase Agreement, and if any such Event of
Default shall occur at a time when any of the Guaranteed Indebtedness may not
then be due and payable, such Guaranteed Indebtedness, at the option of the
Buyers, shall thereupon be deemed to be immediately due and payable in full, and
the Guarantors shall pay to the Buyers forthwith the full amount which would be
payable hereunder if all Guaranteed Indebtedness were then due and payable.
10. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of the
Buyers, their permitted successors and assigns, and in the event of an
assignment by any Buyer, its permitted successors or assigns, of the Guaranteed
Indebtedness, or any part thereof, the rights and benefits hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness.
11. MODIFICATIONS AND WAIVERS. CUMULATIVE RIGHTS. No modification,
consent, amendment or waiver of any provision of this Guaranty, nor consent to
any departure by any Guarantor therefrom, shall be effective unless the same
shall be in writing and signed by an officer of each Buyer and Guarantor, and
then shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on the Guarantors in any case shall, of
itself, entitle the Guarantors to any other or further notice or demand in
similar or other circumstances. No delay or omission by any Buyer in exercising
any power or right hereunder shall impair any such right or power or be
construed as a waiver thereof or any acquiescence therein, nor shall any single
or partial exercise of any such power preclude other or further exercise
thereof, or the exercise of any other right or power hereunder. All rights and
remedies of the Buyers hereunder are cumulative of each other and of every other
right or remedy which the Buyers may otherwise have at law or in equity or under
any other contract or document, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies. In this Guaranty, whenever the context so requires,
the singular number includes the plural, and conversely.
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12. COMPLIANCE WITH LAWS. Should the Guarantors be permitted to raise
usury as a defense under applicable law, then no provision herein or in the Loan
Documents shall require the payment or permit the collection of interest in
excess of the maximum permitted by law. Should such defense be available, the
Guarantors shall not be obligated to pay the amount of such interest to the
extent that it is in excess of the amount permitted by law as to the Guarantors.
Should the Guarantors be permitted to raise the usury defense and prevail, the
Loan Documents shall be held subject to reduction of the interest charged to the
amount allowed under said usury laws as now or hereafter construed by the courts
having jurisdiction. The parties agree that New York law shall control as to
this issue.
13. BENEFIT TO GUARANTOR. The Guarantors acknowledge and warrant that
they have derived or expect to derive financial and other advantage and benefit,
directly or indirectly, from the Guaranteed Indebtedness and each and every
advance thereof and from each and every renewal, extension, release of
collateral or other relinquishment of legal rights made or granted or to be made
or granted by the Buyers to the Company.
14. ATTORNEY'S FEES. The Buyers shall be entitled to recover their
reasonable attorneys' fees and expenses in the event of any dispute between the
parties arising under this Agreement in which the Buyers are the prevailing
party.
15. GUARANTOR'S WARRANTIES. Each Guarantor hereby warrants and
represents to each Buyer that:
a. Such Guarantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and is duly
qualified and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect. Such
Guarantor has the corporate or other requisite power and authority to execute
and deliver this Guaranty and to perform the provisions hereof.
b. This Guaranty has been duly authorized by all necessary action
on the part of such Guarantor, and this Guaranty constitutes a legal, valid and
binding obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms.
c. The execution, delivery and performance by such Guarantor of
this Guaranty will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any lien, claim or encumbrance in
respect of any property of such Guarantor under, any indenture, mortgage, deed
of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws or other organizational document, or any other agreement or instrument
to which such Guarantor is bound or by which such Guarantor or any of its
properties may be bound or affected, (ii) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or governmental
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authority applicable to such Guarantor or (iii) violate any provision of any
statute or other rule or regulation of any governmental authority applicable to
such Guarantor.
d. No consent, approval or authorization of, or registration,
filing or declaration with, any governmental authority is required in connection
with the execution, delivery or performance by such Guarantor of this Guarantee.
e. Upon the execution and delivery hereof, such Guarantor will be
solvent, will be able to pay its debts as they mature and will have capital
sufficient to carry on its business.
16. SUBORDINATION AND NO SUBROGATION. If, for any reason whatsoever,
the Company now or hereafter becomes indebted to the Guarantors, such
indebtedness and all interest thereon, shall, at all times, be subordinate in
all respects to the Loan Documents, and the Guarantors shall not be entitled to
enforce or receive payment thereof until the Guaranteed Indebtedness has been
fully paid and satisfied. Notwithstanding anything to the contrary contained in
this Guaranty or any payments made by the Guarantors hereunder, the Guarantors
shall not have any right of subrogation in or under the Loan Documents or to
participate in any way therein, or any right, title or interest in and to any
mortgaged property or any collateral for the Guaranteed Indebtedness, all such
rights of subrogation and participation being hereby expressly waived and
released, until the Guaranteed Indebtedness has been fully paid and satisfied.
17. LAW GOVERNING AND JURISDICTION. This Agreement shall be enforced,
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such state,
without regard to the principles of conflict of laws. The parties hereto hereby
submit to the exclusive jurisdiction of the United States federal courts or New
York state courts located in New York, New York with respect to any dispute
arising under this Agreement, the agreements entered into in connection herewith
or the transactions contemplated hereby or thereby, and consent to the personal
jurisdiction of such courts and shall subject themselves to such personal
jurisdiction. The parties irrevocably waive the defense of an inconvenient forum
to the maintenance of such suit or proceeding. The parties further agree that
service of process upon a party mailed by first class mail shall be deemed in
every respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect any party's right to serve process in
any other manner permitted by law. The parties agree that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
The party which does not prevail in any dispute arising under this Agreement
shall be responsible for all fees and expenses, including attorneys' fees,
incurred by the prevailing party in connection with such dispute.
18. SEVERABILITY. If any provision of this Guaranty or the application
thereof to any person or circumstance shall, for any reason and to any extent,
be invalid or unenforceable, neither the remainder of this Guaranty nor the
application of such provision to
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any other persons or circumstances shall be affected thereby, but rather the
same shall be enforced to the greatest extent permitted by law.
19. PARAGRAPH HEADINGS. The paragraph headings inserted in this
Guaranty have been included for convenience only and are not intended, and shall
not be construed, to limit or define in any way the substance of any paragraph
contained herein.
20. COMPOUNDING AND SETTLEMENT. The Guarantors agree that Buyer, in
its discretion, may (i) bring suit against the Guarantors and other guarantors,
if any, jointly and severally or against any one or more of them, (ii) compound
or settle with any one or more of guarantor(s) for such consideration as the
Buyer may deem proper, and (iii) release one or more of guarantor(s) from
liability hereunder, and that no such action shall impair the rights of any
Buyer to collect the Guaranteed Indebtedness (or the unpaid balance thereof)
from the Guarantors, not so sued, settled with or released.
21. TERMINATION. This Guaranty shall terminate upon the Company's
repayment in full of the Guaranteed Indebtedness; provided, however, that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time payment of all, or any part thereof, of the principal of or interest
on any of the Obligations is rescinded or must otherwise be restored by any
Buyer, whether under any bankruptcy or insolvency proceeding or otherwise.
22. NO FRAUDULENT CONVEYANCE. The Guarantors and the Company hereby
confirm that it is their intention that the obligations of each Guarantor
hereunder shall not constitute a fraudulent transfer or obligation for the
purposes of the U.S. Bankruptcy Code and applicable state law, including any
state law based on the Uniform Fraudulent Transfer Act or the Uniform Fraudulent
Conveyance Act. To effectuate the foregoing intention, the Company and each
Guarantor (each a "CO-OBLIGOR" and collectively the "CO-OBLIGORS") agree to
reimburse, in an amount equal to (a) the amount of the proceeds that such
Co-Obligor received, directly or indirectly, from the Buyers under the Note
Purchase Agreement, less (b) seventy-five percent (75%) of the principal amount
such Co-Obligor repaid to the Buyers under the Note Purchase Agreement, but not
below zero, to each other Co-Obligor so that the receiving Co-Obligor receives
in the aggregate from each paying Co-Obligor an amount equal to (a) seventy-five
percent (75%) of the principal amount such receiving Co-Obligor repaid to the
Buyers under the Note Purchase Agreement, less (b) the amount of the proceeds
that such Co-Obligor received, directly or indirectly, from the Buyers under the
Note Purchase Agreement, but not below zero. Each Buyer and the Collateral Agent
is an intended third party beneficiary under this Section 22. Nothing in the
Section 22 shall limit each Guarantor's joint and several liability under this
Guaranty or any of the Company's or any Guarantor's obligations under the Note
Purchase Agreement or the other agreement referenced there.
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IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned
on the date set forth above.
GUARANTORS:
ZBB TECHNOLOGIES, INC.
By:
---------------------------------
Name:
Title:
ZBB TECHNOLOGIES, LTD.
By:
---------------------------------
Name:
Title:
BORROWER:
ZBB ENERGY CORPORATION
By:
---------------------------------
Xxxxxx Xxxxx
Chief Executive Officer
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