EXHIBIT 10.7
SUBSIDIARY GUARANTY
1. Identification
.
This
Guaranty (the “Guaranty”), dated as of May 7,
2009, is entered into by Converted Organics of California LLC, a
California limited liability company, Converted Organics of
Woodbridge LLC, a New Jersey limited liability company (each a
“Guarantor” and collectively,
“Guarantors”), for the benefit of Iroquois Master Fund
Ltd. (“Lender”).
2. Recitals
.
2.1
Guarantors are direct or indirect subsidiaries of Converted
Organics Inc., a Delaware corporation (“Parent”). The
Lender has made and/or is making a loan to Parent (the
“Loan”). Guarantor has or will obtain substantial
benefit from the proceeds of the Loan.
2.2
The Loan is and will be evidenced by a certain secured promissory
Note issued by Parent on or about the date of this Guaranty
(“Note”) in the principal amount of $1,320,000 pursuant
to a subscription agreement dated at or about the date hereof
(“Subscription Agreement”). The Note was or will be
executed by Parent as “Borrower” or
“Debtor” for the benefit of Lender as the
“Holder” or “Lender” thereof.
2.3 In
consideration of the Loan and for other good and valuable
consideration, and as security for the performance by Parent of its
obligations under the Note and as security for the repayment of the
Loan and all other sums due from Parent to Lender arising under the
Note, Transaction Documents (as defined in the Subscription
Agreement) and any other agreement to which the Lender and Parent
are parties (collectively, the “Obligations”),
Guarantor, for good and valuable consideration, receipt of which is
acknowledged, has agreed to enter into this Guaranty.
2.4
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Subscription Agreement and the
Security Agreement dated of even date herewith between the Parent
and the Lender (the “Security Agreement”).
3. Guaranty
.
3.1
Guaranty . Guarantor hereby unconditionally and irrevocably
guarantees, jointly and severally with any other Guarantor, the
punctual payment, performance and observance when due, whether at
stated maturity, by acceleration or otherwise, of all of the
Secured Obligations now or hereafter existing, whether for
principal, interest (including, without limitation, all interest
that accrues after the commencement of any insolvency, bankruptcy
or reorganization of Parent, whether or not constituting an allowed
claim in such proceeding), fees, commissions, expense
reimbursements, liquidated damages, indemnifications or otherwise
(such obligations, to the extent not paid by Parent being the parts
of and components of the “Secured Obligations”),, and
agrees to pay any and all reasonable costs, fees and expenses
(including reasonable counsel fees and expenses) incurred by Lender
in enforcing any rights under the guaranty set forth herein.
Without limiting the generality of the foregoing, Guarantor’s
liability shall extend to all amounts that constitute part of the
Secured Obligations and would be owed by Parent to Lender, but for
the fact that they are unenforceable or not allowable due to the
existence of an insolvency, bankruptcy or reorganization involving
Parent.
3.2
Guaranty Absolute . Guarantor guarantees that the Secured
Obligations will be paid strictly in accordance with the terms of
the Note, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms
or the rights of Lender with respect thereto. The obligations of
Guarantor under this Guaranty are independent of the Secured
Obligations, and a separate action or actions may be brought and
prosecuted against Guarantor to enforce such obligations,
irrespective of whether any action is brought against Parent or any
other Guarantor or whether Parent or any other Guarantor is joined
in any such action or actions. The liability of Guarantor under
this Guaranty constitutes a primary obligation, and not a contract
of surety, and to the extent permitted by law, shall be
irrevocable, absolute and unconditional irrespective of, and
Guarantor hereby irrevocably waives any defenses it may now or
hereafter have in any way relating to, any or all of the
following:
(a) any lack of validity of the Note or any
agreement or instrument relating thereto;
(b) any change in the time, manner or place
of payment of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or any consent to
departure from the Note, including, without limitation, any
increase in the Secured Obligations resulting from the extension of
additional credit to Parent or otherwise;
(c) any taking, exchange, release,
subordination or non-perfection of any Collateral, or any taking,
release or amendment or waiver of or consent to departure from any
other guaranty, for all or any of the Secured
Obligations;
(d) any change, restructuring or
termination of the corporate, limited liability company or
partnership structure or existence of Parent; or
(e) any other circumstance (including,
without limitation, any statute of limitations) or any existence of
or reliance on any representation by Lender that might otherwise
constitute a defense available to, or a discharge of, Parent or any
other guarantor or surety.
This
Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Secured
Obligations is rescinded or must otherwise be returned by Lender,
the Lender or any other entity upon the insolvency, bankruptcy or
reorganization of the Parent or otherwise (and whether as a result
of any demand, settlement, litigation or otherwise), all as though
such payment had not been made.
3.3
Waiver . Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of
the Secured Obligations and this Guaranty and any requirement that
Lender exhaust any right or take any action against any Borrower or
any other person or entity or any Collateral. Guarantor
acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated herein and that the waiver
set forth in this Section 3.3 is knowingly made in
contemplation of such benefits. Guarantor hereby waives any right
to revoke this G
