PERFORMANCE GUARANTY OF U.S. ENERGY SYSTEMS, INC.
This Performance Guaranty, dated as of November 28, 2000, is made by
U.S. ENERGY SYSTEMS, INC., a Delaware corporation (the "Guarantor), for the
benefit of the stockholders of Zapco (as defined below) as of the Effective
Date, acting solely through their representative, AJG Financial Services, Inc.
and specifically, its Vice President - General Counsel, as the Shareholder
Representative (the "Representative" or the "Counterparty.")
WHEREAS, the Guarantor, Xxxxxx Alternative Power Corporation, a
Delaware corporation ("Zapco") and USE Acquisition Corp., a Delaware corporation
and a subsidiary of Guarantor ("Merger Sub"), have entered into or will be
entering into the Agreement and Plan of Reorganization and Merger dated as of
the date hereof (the "Agreement").
NOW, THEREFORE, in consideration of, and as an inducement for, the
Counterparty entering into the Agreement, the Guarantor hereby covenants and
agrees as follows (capitalized terms used without being defined herein shall
have the meanings ascribed to such terms by the Agreement):
1. GUARANTY OF OBLIGATIONS
The Guarantor hereby unconditionally and irrevocably guarantees to the
Counterparty, the due and punctual performance of, and compliance with, the
obligation to make the Contingent Merger Payment; provided, however, that the
Guarantor's obligations with respect to the Contingent Merger Payment shall not
exceed 62.5% of (a) the Contingent Merger Payment less (b) any reduction to the
Contingent Merger Payment pursuant to the Indemnification Agreement (the
"Obligations"). Such guaranty will not terminate until the Obligations have been
performed in full by Merger Sub or performance has been waived by the
Counterparty.
2. OBLIGATIONS ABSOLUTE
The obligations of the Guarantor hereunder are primary and not as surety only,
and the Guarantor expressly waives any legal obligation, duty or necessity for
the Counterparty to proceed first against Merger Sub or to exhaust any remedy it
may have against Merger Sub, provided, however, that the Counterparty agrees
that it will not proceed to enforce this guaranty directly against the Guarantor
until after first making written demand for performance on Merger Sub, unless
such written demand would violate any automatic stay applicable to Merger Sub
pursuant to any bankruptcy proceeding relating to Merger Sub.
Upon the failure by Merger Sub to fulfill any of the Obligations, the Guarantor
shall forthwith assume and fulfill such Obligations. The Obligations of the
Guarantor hereunder: (i) shall not be extinguished as a result of any change in
the existence, structure or ownership of Merger Sub; (ii) shall continue to be
effective or be reinstated, as the case may be, if, at any time, any of Merger
Sub's payments must be restored or returned by the Counterparty to Merger Sub or
its successors or to a custodian, receiver or a trustee in bankruptcy as a
result of any insolvency, bankruptcy, reorganization or other similar proceeding
affecting Merger Sub or its assets; and (iii) shall not be extinguished by an
assignment by Merger Sub of the Agreement to an affiliate of Merger Sub.
The obligations of the Guarantor hereunder shall not be subject to any
counterclaim, set off, deduction or defense based upon any claim the Guarantor
or Merger Sub may have against the Counterparty or any of its affiliates, except
for those arising under the Agreement or the Indemnification Agreement or any
one or more of the foregoing, and shall remain in full force and effect until
the Obligations of Merger Sub have been performed in full, without regard to,
and shall not be released, discharged or in any way affected by, any
circumstance or condition, except as set forth herein. All of the Obligations
shall conclusively be deemed to have been created, contracted or incurred in
reliance upon this Guaranty.
3. REPRESENTATIONS AND WARRANTIES OF GUARANTOR
The Guarantor hereby covenants, represents and warrants to the Counterparty as
follows:
a. The Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power to
enter into this Guaranty and to perform its obligations
hereunder.
b. The execution, delivery and performance by the Guarantor of
this Guaranty are within the corporate power of the Guarantor
and have been duly authorized by all necessary corporate
action of the Guarantor.
c. The execution, delivery and performance by the Guarantor of
this Guaranty does not and will not conflict with or violate
any law, judgment, order or decree binding on the Guarantor or
the Certificate of Incorporation or Bylaws of the Guarantor or
any contract or agreement to which the Guarantor is a party or
by which it is bound.
d. No additional consent of any person, and no notice to, filing
or registration with, or authorization, consent or approval
of, any governmental, regulatory or self-regulatory agency is
necessary or required to be made or obtained by the Guarantor
in connection with the execution and delivery by the Guarantor
of this Guaranty or the performance by the Guarantor of its
obligations hereunder.
e. This Guaranty constitutes a valid and binding obligation of
the Guarantor, enforceable against the Guarantor in accordance
with its terms.
f. There is no litigation, arbitration proceeding, governmental
investigation, citation or action of any kind pending or, to
the knowledge or the Guarantor, proposed or threatened against
the Guarantor or relating to the business, assets or
properties of the Guarantor which, if adversely determined,
would materially and adversely affect the ability of the
Guarantor to perform its obligations hereunder.
4. NOTICES
All notices and other communications about this Guaranty must be in writing,
must be given by facsimile, hand delivery or overnight courier service and must
be addressed or directed to the party at the following address (or other such
address as a party may designate from time to time by notice given pursuant
hereto):
If to the Representative:
AJG Financial Services, Inc.
x/x Xxxxxx X. Xxxxxxxxx & Xx.
Xxxxxxxxx Xxxxxx
2 Xxxxxx Place
Itasca, Illinois
Attention: Vice President and General Counsel
Facsimile No. 000-000-0000
If to the Guarantor or Merger Sub:
U.S. Energy Systems, Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx, President and Chief Operating Officer
Facsimile No. 000-000-0000
With a copy to:
Xxxxxxxx Brog Leinwand Xxxxxx
Xxxxxxxx & Xxxxx P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile No. 000-000-0000
Notices are effective when actually received by the party to which they are
given, as evidenced by facsimile transmission report, written acknowledgment or
affidavit of hand delivery or courier receipt.
5. MISCELLANEOUS
This Guaranty shall be governed by and construed in accordance with the laws of
the State of Delaware without regard to the conflicts of law provisions thereof.
To the extent permitted by applicable law, the Guarantor hereby waives any
provision of law that renders any provision hereof invalid, prohibited or
unenforceable in any respect and agrees that if any provision of this Guaranty
is invalid, prohibited or unenforceable in any jurisdiction such invalidity,
prohibition or unenforceability shall not invalidate or render unenforceable
such provision in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
6. SUCCESSORS AND ASSIGNS
All rights under this Guaranty shall inure to the benefit of the successors and
assigns of the Counterparty. The Guarantor may not assign or delegate its
obligations hereunder without the express written consent of the Counterparty.
7. NO WAIVER OR AMENDMENT
No failure to exercise and no delay in exercising, on the part of the
Counterparty, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or the exercise of any
other power or right. The rights and remedies herein provided are cumulative and
not exclusive or any rights or remedies provided by law. No provision of this
Guaranty shall be waived, amended or supplemented except by a written instrument
executed by Merger Sub, Guarantor and the Counterparty.
8. ENTIRE AGREEMENT
This Guaranty is the entire and only agreement between the Guarantor and the
Counterparty with respect to the guaranty of the Obligations. All
representations, warranties, agreements, or undertakings heretofore or
contemporaneously made, which are not set forth herein, are superseded hereby.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered as of the date first written above.
U.S. ENERGY SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: President & Chief Operating Officer
