FORM OF SUBSIDIARY GUARANTEE
SUBSIDIARY
GUARANTEE, dated as of February 9, 2007 (as the same may be
supplemented, modified, amended, restated or replaced from time to
time in the
manner provided herein, (this "Guarantee"), made by each of the
signatories
hereto (together with any other entity that may become a party
hereto as
provided herein, (each a "Guarantor" and collectively the
"Guarantors"), in
favor of the "Purchasers" signatory thereto (as such term is
defined therein) to
that certain Securities Purchase Agreement, dated as of the date
hereof, between
Star Energy Corporation, a Nevada corporation (the "Company") and
the Purchasers
(as the same may be supplemented, modified, amended, restated or
replaced from
time to time in the manner provided herein, the "Purchase
Agreement"). Each of
the Guarantors and each of the Purchasers may be referred to herein
as a "party"
and collectively as the "parties".
WITNESSETH:
WHEREAS,
pursuant to the Purchase Agreement, the Company has agreed to
sell and issue to the Purchasers (together with their respective
successors and
permitted assigns under the following Debentures, each a "Holder"
and
collectively, the "Holders"), and the Purchasers have severally
agreed to extend
the loans to the Company evidenced by the Company's 8% Secured
Convertible
Debentures, due February __, 2010 in the original aggregate maximum
principal
amount of $[_______] and severally issued by the Company to the
Holders on
February __, 2007 (as the same may be supplemented, modified,
amended, restated
or replaced from time to time in the manner provided herein, each a
"Debenture"
and collectively, the "Debentures"), subject to the terms and
conditions set
forth therein; and
WHEREAS,
each Guarantor will directly benefit from the extension of
credit
to the Company represented by the issuance of the Debentures;
and
NOW,
THEREFORE, in consideration of the premises and to induce the
Purchasers to enter into the Purchase Agreement and to carry out
the
transactions contemplated thereby, each Guarantor hereby agrees
with the
Purchasers as follows:
1.
Definitions. Unless otherwise defined herein, capitalized terms
not
otherwise defined herein shall have the meanings set forth in the
Purchase
Agreement or other applicable Transaction Document (as such term is
defined in
the Purchase Agreement. The words "hereof," "herein," "hereto" and
"hereunder"
and words of similar import when used in this Guarantee shall refer
to this
Guarantee as a whole and not to any particular provision of this
Guarantee, and
Section and Schedule references are to this Guarantee unless
otherwise
specified. The meanings given to terms defined herein shall be
equally
applicable to both the singular and plural forms of such terms. The
following
terms shall have the following meanings:
<PAGE>
"Guarantee" shall have the meaning set forth in the first
paragraph
above.
"Indebtedness" means (a) any liabilities for borrowed money or
similar
amounts owed in excess of $50,000 (other than trade accounts
payable
incurred in the ordinary course of business and inter-company
advances
among the Company and the Guarantors), (b) all guaranties,
endorsements and other contingent obligations in respect of
indebtedness
of others,
whether or not the same are or should be reflected in the
Guarantors' balance sheet (or the notes thereto), except for
(i)
guaranties
by endorsement of negotiable instruments for deposit or
collection
or similar transactions in the ordinary course of business and
(ii)
guaranties of the indebtedness or other obligations of the Company
or
any
Guarantor or the Company; and (c) the present value of any
lease
payments
in excess of $50,000 due under leases required to be
capitalized
in
accordance with GAAP.
"Obligations" means in addition to all other costs and expenses
of
collection
incurred by Purchasers in enforcing any of such Obligations
and/or
this Guarantee, all of the liabilities and obligations
(primary,
secondary,
direct, contingent, sole, joint or several) due or to become
due, or
that are now or may be hereafter contracted or acquired, or
owing
from any
Debtor to the Secured Parties, including, without limitation,
all
obligations under the Security Agreement, the Purchase Agreement,
the
Debentures, this Guarantee and any other instruments, agreements or
other
documents
executed and/or delivered in connection herewith or therewith,
in each
case, whether now or hereafter existing, voluntary or
involuntary,
direct or
indirect, absolute or contingent, liquidated or unliquidated,
whether or
not jointly owed with others, and whether or not from time to
time
decreased or extinguished and later increased, created or
incurred,
and all or
any portion of such obligations or liabilities that are paid,
to the
extent all or any part of such payment is avoided or recovered
directly
or indirectly from any of the Secured Parties as a preference,
fraudulent
transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time.
Without
limiting the
generality of the foregoing, the term "Obligations" shall
include,
without limitation: (i) principal of, and interest on the
Debentures
and the loans extended pursuant thereto; (ii) any and all other
fees,
indemnities, costs, obligations and liabilities of the Debtors
from
time to
time under or in connection with the Security Agreement, the
Debentures, this Guarantee and any other instruments, agreements or
other
documents
executed and/or delivered in connection herewith or therewith;
and (iii)
all amounts (including but not limited to post-petition
interest)
in respect of the foregoing that would be payable but for the
fact that
the obligations to pay such amounts are unenforceable or not
allowable
due to the existence of a bankruptcy, reorganization or similar
proceeding
involving any Debtor.
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<PAGE>
. "Permitted Indebtedness" means (a) the Indebtedness existing
on
the date
hereof and set forth on Schedule 3.1(aa) attached to the
Purchase
Agreement,
(b) capital lease obligations, construction or improvement
financing
and purchase money indebtedness incurred in connection with the
acquisition, construction or improvement of capital assets and
capital
lease
obligations with respect to newly acquired, improved or leased
assets
(provided, that immediately following any such transaction, the
pro
forma
consolidated total Indebtedness of the Company and its
subsidiaries
to their
consolidated Total Asset ratio is not more than 0.75 to 1); (c)
up to
$[___________ of additional Indebtedness, in the aggregate,
incurred
by the
Company and the Guarantors in connection with raising capital
for
the
acquisition of another entity which is, itself or through its
subsidiaries, an operating company in a business synergistic with
the
business
of the Company (by merger, consolidation, the acquisition of
all
or
substantially of the assets of such entity or similar
transaction)
provided
that any Indebtedness incurred under this clause (c) is
expressly
subordinate to the Debentures pursuant to a written
subordination
agreement
with the Holders that is acceptable to each Holder; (d) the
Indebtedness evidenced by other Debentures, provided that the
aggregate
original
principal amount of all Debentures (whenever issued) shall not
exceed
$___________; (e) up to $ _________ of additional senior
Indebtedness, in the aggregate, incurred by the Guarantors from
a
strategic
commercial lender pursuant to a strategic commercial agreement;
or (f) any
continuation, extension, renewal, modification, refinancing or
replacement of any such Permitted Indebtedness on overall terms
that are
generally
no less favorable than those applicable to the existing
Permitted
Indebtedness.
"Permitted Lien" means the individual and collective reference
to
the
following: (a) Liens (as defined in the Purchase Agreement) for
taxes,
assessments and other governmental charges or levies not yet due or
Liens
for taxes,
assessments and other governmental charges or levies being
contested
in good faith and by appropriate proceedings for which adequate
reserves
(in the good faith judgment of the management of the applicable
Guarantor)
have been established in accordance with GAAP; (b) Liens
imposed by
law and incurred in the ordinary course of the applicable
Guarantor's business, such as carriers', warehousemen's and
mechanics'
Liens,
statutory landlords' Liens, Liens consisting of easements,
right-of-way, restrictions, covenants or other agreements of record
or
similar
charges or encumbrances, and other similar Liens arising in the
ordinary
course of the applicable Guarantor's business, and which (x) do
not
individually or in the aggregate materially detract from the value
of
such
property or assets or materially impair the use thereof in the
operation
of the business of such Guarantor and its consolidated
Subsidiaries or (y) are being contested in good faith by
appropriate
proceedings, which proceedings have the effect of preventing for
the
foreseeable future the forfeiture or sale of the property or asset
subject
to such
Lien; and (c) Liens incurred in connection with Permitted
Indebtedness under clause (b) thereunder, provided that such Liens
are not
secured by
assets of the any of the Guarantors other than the assets so
acquired,
constructed, improved or leased (and the products and proceeds
thereof,
insurance therefor and warranty and other contract rights
related
thereto);
(d) Liens incurred in respect of judgments and awards
discharged
within 30
days from the making thereof; (e) any cash deposits made or
bonds or
letters of credit posted in the ordinary course to secure
performance under any contract or applicable law; (f) in the case
of any
account,
intangible, instrument, lease, agreement or document, any
contractual right, power, privilege, remedy, interest, defect,
restriction, covenant, claim, counterclaim, right of
recoupment,
abatement,
reduction or setoff, or defense of any account debtor or other
party
thereto, whether now existing or hereafter arising, and whether
pursuant
to the applicable contractual provisions or applicable law; (g)
Liens
existing on the Original Issue Date and set forth on Schedule
3.1(n)
attached
to the Purchase Agreement; or (h) any renewal, continuation,
extension
or replacement of any such Permitted Lien, provided that the
scope of
the assets encumbered thereby shall not be thereby increased.
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<PAGE>
"Security Agreement" shall mean that certain Security
Agreement,
dated as
of February __, 2007, by and among the Company, the Guarantors,
the
Holders, and the Agent (as defined therein) as the same may be
supplemented, modified, amended, restated or replaced from time to
time in
the manner
provided herein.
"Secured Party" and "Secured Parties" shall mean each of the
Holders
and the
Agent (as defined in the Security Agreement).
2.
Guarantee.
(a) Guarantee.
(i) The
Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantee to the
Purchasers and their
respective successors, indorsees,
transferees and assigns, the prompt and complete payment
and performance by the Company when due (whether at the
stated maturity, by acceleration or otherwise) of the
Obligations.
(ii) The Purchasers in
their sole and absolute discretion
shall be entitled to demand payment of the Obligations
(in whole at any time,
or in part from time to time)
from the Guarantors (or any of them) under this
Guarantee upon the occurrence and continuation of any
Event of Default that is not waived by the Holder or
cured by the Company. If the Purchasers make such a
demand: (a) any and all principal, interest and other
Obligations outstanding or accrued under any Debenture
and/or any other Transaction Document shall be deemed to
be immediately due and payable in full (or for the
item(s) in the amount(s) demanded if a partial demand
was
made), all without presentment, protest, demand or
notice of any kind, all of which are hereby absolutely,
unconditionally, irrevocably and expressly waived
forever by each Guarantor (and in the case of a partial
demand, without in any way affecting any of the
Guarantors' Obligations with respect to the balance of
the Obligations not demanded); and (b) each Guarantor
(on a joint and several basis with the other Guarantors)
shall immediately pay to the Lender the amount demanded
in full.
4
<PAGE>
(iii) Anything herein or in any other Transaction Document to
the contrary notwithstanding, the maximum liability of
each Guarantor hereunder and under the other Transaction
Documents shall in no event exceed the amount which can
be guaranteed by such Guarantor under applicable federal
and state laws, including laws relating to the
insolvency of debtors, fraudulent conveyance or transfer
or laws affecting the rights of creditors generally
(after giving effect to the right of contribution
established in Section 2(b)).
(iv) Each Guarantor
agrees that the Obligations may at any
time and from time to time exceed the amount of the
liability of such Guarantor hereunder without impairing
the guarantee contained in this Section 2 or affecting
the rights and remedies of the Purchasers hereunder.
(v) The
guarantee contained in this Section 2 shall remain
in full force and effect until all the Obligations and
the obligations of each Guarantor under the guarantee
contained in this Section 2 shall have been satisfied by
payment in full.
(vi) No payment made
by the Company, any of the Guarantors,
any other guarantor or any other Person or received or
collected by the Purchasers from the Company, any of the
Guarantors, any other guarantor or any other Person by
virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to
time in reduction of or in payment of the Obligations
shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment (other than any
payment made by such Guarantor in respect of the
Obligations or any payment received or collected from
such Guarantor in respect of the Obligations), remain
liable for the Obligations up to the maximum liability
of such Guarantor hereunder until the Obligations are
paid in full.
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<PAGE>
(vii) Notwithstanding anything to the contrary in Guarantee,
with respect to any defaulted non-monetary Obligations
the specific performance of which by the Guarantors is
not reasonably possible (e.g. the issuance of the
Company's Common Stock), the Guarantors shall only be
liable for making the Purchasers whole on a monetary
basis for the Company's failure to perform such
Obligations in accordance with the Transaction
Documents.
(b) Right of Contribution. Each Guarantor hereby agrees that to
the
extent
that a Guarantor shall have paid more than its proportionate
share
of any payment made
hereunder, such Guarantor shall be entitled to seek
and
receive contribution from and against any other Guarantor
hereunder
which has
not paid its proportionate share of such payment. Each
Guarantor's right of contribution shall be subject to the terms
and
conditions
of Section 2(c). The provisions of this Section 2(b) shall in
no respect
limit the obligations and liabilities of any Guarantor to the
Purchasers, and each Guarantor shall remain liable to the
Purchasers for
the full
amount guaranteed by such Guarantor hereunder.
(c) Subordination of Subrogation Rights. Notwithstanding any
payment
made by
any Guarantor hereunder or any set-off or application of funds
of
any
Guarantor by the Purchasers, no Guarantor shall be entitled to
exercise
or enforce any rights of subrogation against the Company or any
other
Guarantor or any collateral security or guarantee or right of
offset
held by
the Purchasers for the payment of the Obligations, nor shall
any
Guarantor
seek or be entitled to seek any contribution or reimbursement
from the
Company or any other Guarantor in respect of payments made by
such
Guarantor hereunder, until all amounts owing to the Purchasers by
the
Company on
account of the Obligations are paid in full. If any amount
shall be
paid to any Guarantor on account of such subrogation rights at
any time
when all of the Obligations shall not have been paid in full,
such
amount shall be held by such Guarantor in trust for the
Purchasers,
segregated
from other funds of such Guarantor, and shall, forthwith upon
receipt by
such Guarantor, be turned over to the Purchasers in the exact
form
received by such Guarantor (duly indorsed by such Guarantor to
the
Purchasers, if required), to be applied against the Obligations,
whether
matured or
unmatured, in such order as the Purchasers may determine.
(d) Amendments, Etc. With Respect to the Obligations. Each
Guarantor
shall
remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to
or
further
assent by any Guarantor, any demand for payment of any of the
Obligations made by the Purchasers may be rescinded by the
Purchasers and
any of the
Obligations continued, and the Obligations, or the liability of
any other
Person upon or for any part thereof, or any collateral security
or
guarantee therefor or right of offset with respect thereto, may,
from
time to
time, in whole or in part, be renewed, extended, amended,
modified,
accelerated, compromised, waived, surrendered or released by
the
Purchasers, and the Purchase Agreement and the other Transaction
Documents
and any
other documents executed and delivered in connection therewith
may
be
amended, modified, supplemented or terminated, in whole or in part,
as
the
Purchasers may deem advisable from time to time, and any
collateral
security,
guarantee or right of offset at any time held by the Purchasers
for the
payment of the Obligations may be sold, exchanged, waived,
surrendered or released. The Purchasers shall have no obligation
to
protect,
secure, perfect or insure any Lien at any time held by them as
security
for the Obligations or for the guarantee contained in this
Section 2
or any property subject thereto.
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<PAGE>
(e) Guarantee Absolute and Unconditional. Each Guarantor waives
any
and all
notice of (i) the creation, renewal, extension or accrual of
any
of the
Obligations, (ii) the execution and delivery of this Guarantee
or
any
Transaction Document, (iii) the performance or non-performance of
the
Obligations under any Transaction Document, (iv) any change in or
making,
repayment
or remaking or remaking of any loan, advance or other extension
of credit
at any time under this Guarantee or any other Transaction
Document,
(v) any Material Adverse Effect with respect to the Company,
any
Obligor or
any Collateral, (vi) any extension, stay, moratorium or statute
of
limitations or similar time constraint under any applicable law,
(vii)
any
investigation, analysis or evaluation by the Purchasers or
their
respective
designees of the assets, business, cash flow, expenses, income,
liabilities, operations, properties, prospects, reputation or
condition
(financial
or otherwise) of the Company or any Guarantor or any other
person,
(viii) any application to the Obligations of any payments from
any
person not
specifically designated for application to the Obligations or
any
proceeds of collateral from such person other than from the
Collateral, (ix) any sale, conveyance, assignment, participation or
other
transfer
by the Purchasers (in whole or in part) to any other person of
any one or
more of this Guarantee or any of the Transaction Documents, or
any one
ore more of the rights, powers, privileges, remedies or
interests
of the
Purchasers herein or therein, (x) notice of or proof of reliance
by
the
Purchasers upon the guarantee contained in this Section 2 or
acceptance
of the guarantee contained in this Section 2, and (xi) any
other
proof, notice or demand of any kind whatsoever with respect to
any
or all of
the Obligations or promptness in making any claim or demand
under this
Guarantee or any other Transaction Document. The Obligations,
and any of
them, shall conclu
