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EXHIBIT 10.7 – FORM OF SUBSIDIARY GUARANTY
 
 
SUBSIDIARY GUARANTY

THIS SUBSIDIARY GUARANTY (this “Subsidiary Guaranty”), dated as of February 25,
2008, among Admiralty Holding Company, a Colorado corporation (the “Company”),
Admiralty Corporation, a Georgia corporation and Admiralty Marine Operations,
Ltd., a Bahamas corporation (individually a “Subsidiary Guarantor” and
collectively, the “Subsidiary Guarantors”), for the benefit of the secured
parties signatory hereto and their respective endorsees, transferees and assigns
(individually a “Secured Party” and collectively, the “Secured Parties”).

W I T N E S S E T H:

WHEREAS, pursuant to a Securities Purchase Agreement, dated the date hereof,
between Company and the Secured Parties (the “Purchase Agreement”), Company has
agreed to issue to the Secured Parties and the Secured Parties have agreed to
purchase from Company certain of Company’s 8% Callable Secured Convertible
Notes, due three years from the date of issue (the “Notes”), which are
convertible into shares of Company’s Common Stock, par value $.001 per share
(the “Common Stock”).  In connection therewith, Company shall issue the Secured
Parties certain Common Stock purchase warrants (the “Warrants”); and

WHEREAS, the Company and the Subsidiary Guarantors have been, and are now,
engaged principally in the business of locating and recovering valuable cargoes
from historic shipwrecks. The company also continues to evaluate the technology
for assisting domestic governmental agencies in locating and retrieving
unexploded marine ordinances and weapons. Operating business is principally
conducted through Admiralty Corporation. It has undertaken to fund and conduct
research to develop ATLIS, a remote sensing nonferrous metal detection device.
Admiralty Marine Operations, Ltd. is the title and registration holder of the
ship, the M. V. New World Legacy.  In the past, as now, the Company has provided
financing for the Subsidiary Guarantors, and the Subsidiary Guarantors have
relied upon the Company to provide such financing.  In addition, it is
anticipated that, if the Subsidiary Guarantors execute and deliver this
Subsidiary Guaranty, the Company will continue to provide such financing to the
Subsidiary Guarantors, and that the proceeds of the Purchase Agreement and
Notes will be used, in part, for the general working capital purposes of the
Subsidiary Guarantors; and

WHEREAS, the Subsidiary Guarantors constitute all of the subsidiaries of the
Company and it is in the best interest of the Subsidiary Guarantors as
subsidiaries of the Company and the indirect beneficiaries of the Purchase
Agreement and Notes, that the Secured Parties enter into the Purchase Agreement
and purchase the Notes to the Company; and

WHEREAS, as a material inducement to the Secured Parties to enter into the
Purchase Agreement and Notes, the Secured Parties have required and the
Subsidiary Guarantors have agreed to unconditionally guarantee the timely and
full satisfaction of all obligations of the Company, whether matured or
unmatured, now or hereafter existing or created and becoming due and payable
(the “Obligations”) to the Secured Parties, their successors, endorsees,
transferees or assigns under the Transaction Documents (as defined in the
Purchase Agreement); and

 
 

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WHEREAS, in light of the foregoing, each Subsidiary Guarantor expects to derive
substantial benefit from the Purchase Agreement and sale of the Notes and the
transactions contemplated thereby and, in furtherance thereof, has agreed to
execute and deliver this Subsidiary Guaranty.

NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual
covenants contained herein, the parties hereby agree as follows:

1.             Guaranty.  The Subsidiary Guarantors, jointly and severally,
hereby absolutely, unconditionally and irrevocably guarantee to the Secured
Parties, their successors, endorsees, transferees and assigns the due and
punctual performance and payment of the Obligations owing to the Secured
Parties, their successors, endorsees, transferees or assigns when due, all at
the time and place and in the amount and manner prescribed in, and otherwise in
accordance with, the Transaction Documents, regardless of any defense or set-off
counterclaim which the Company or any other person may have or assert, and
regardless of whether or not the Secured Parties or anyone on behalf of the
Secured Parties shall have instituted any suit, action or proceeding or
exhausted its remedies or taken any steps to enforce any rights against the
Company or any other person to compel any such performance or observance or to
collect all or part of any such amount, either pursuant to the provisions of the
Transaction Documents or at law or in equity, and regardless of any other
condition or contingency.

2.             Waiver of Demand.  The Subsidiary Guarantors hereby
unconditionally:  (i) waives any requirement that the Secured Parties, in the
event of a breach in any material respect by the Company of any of its
representations or warranties in the Transaction Documents, first make demand
upon, or seek to enforce remedies against, the Company or any other person
before demanding payment of enforcement hereunder; (ii) covenants that this
Subsidiary Guaranty will not be discharged except by complete performance of all
the Obligations; (iii) agrees that this Subsidiary Guaranty shall remain in full
force and effect without regard to, and shall not be affected or impaired,
without limitation, by, any invalidity, irregularity or unenforceability in
whole or in part of the Transaction Documents or any limitation on the liability
of the Company thereunder, or any limitation on the method or terms of payment
thereunder which may now or hereafter be caused or imposed in any manner
whatsoever; and (iv) waives diligence, presentment and protest with respect to,
and notice of default in the performance or payment of any Obligation by the
Company under or in connection with the Transaction Documents.
 
 
 

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3.             Absolute Obligation.  Each Subsidiary Guarantor acknowledges and
agrees that (i) no Secured Party has made any representation or warranty to such
Subsidiary Guarantor with respect to the Company, any of its subsidiaries, any
Transaction Documents or any agreement, instrument or document executed or
delivered in connection therewith, or any other matter whatsoever, and (ii) such
Subsidiary Guarantor shall be liable hereunder, and such liability shall not be
affected or impaired, irrespective of (A) the validity or enforceability of any
Transaction Documents, or any agreement, instrument or document executed or
delivered in connection therewith, or the collectability of any of the
Obligations, (B) the preference or priority ranking with respect to any of the
Obligations, (C) the existence, validity, enforceability or perfection of any
security interest or collateral security under any Transaction Documents, or the
release, exchange, substitution or loss or impairment of any such security
interest or collateral security, (D) any failure, delay, neglect or omission by
any Secured Party to realize upon or protect any direct or indirect collateral
security, indebtedness, liability or obligation, any Transaction Documents, or
any agreement, instrument or document executed or delivered in connection
therewith, or any of the Obligations, (E) the existence or exercise of any right
of set-off by any Secured Party, (F) the existence, validity or enforceability
of any other guaranty with respect to any of the Obligations, the liability of
any other person in respect of any of the Obligations, or the release of any
such person or any other guarantor of any of the Obligations, (G) any act or
omission of any Secured Party in connection with the administration of any
Transaction Documents or any of the Obligations, (H) the bankruptcy, insolvency,
reorganization or receivership of, or any other proceeding for the relief of
debtors commenced by or against, any person, (I) the disaffirmance or rejection,
or the purported disaffirmance or purported rejection, of any of the
Obligations, any Transaction Documents, or any agreement, instrument or document
executed or delivered in connection therewith, in any bankruptcy, insolvency,
reorganization or receivership, or any other proceeding for the relief of
debtor, relating to any person, (J) any law, regulation or decree now or
hereafter in effect which might in any manner affect any of the terms or
provisions of any Transaction Documents, or any agreement, instrument or
document executed or delivered in connection therewith or any of the
Obligations, or which might cause or permit to be invoked any alteration in the
time, amount, manner or payment or performance of any of the Company's
obligations and liabilities (including the Obligations), (K) the merger or
consolidation of the Company into or with any person, (L) the sale by the
Comapny of all or any part of its assets, (M) the fact that at any time and from
time to time none of the Obligations may be outstanding or owing to any Secured
Party, (N) any amendment or modification of, or supplement to, any Transaction
Documents, or (O) any other reason or circumstance which might otherwise
constitute a defense available to or a discharge of the Comapny in respect of
its obligations or liabilities (including the Obligations) or of such Subsidiary
Guarantor in respect of any of the Obligations (other than by the performance in
full thereof).

4.             Release.  The obligations, covenants, agreements and duties of
the Subsidiary Guarantors hereunder shall not be released, affected or impaired
by any assignment or transfer, in whole or in part, of the Transaction Documents
or any Obligation, although made without notice to or the consent of the
Subsidiary Guarantors, or any waiver by the Secured Parties, or by any other
person, of the performance or observance by the Company or the Subsidiary
Guarantors of any of the agreements, covenants, terms or conditions contained in
the Transaction Documents, or any indulgence in or the extension of the time or
renewal thereof, or the modification or amendment (whether material or
otherwise), or the voluntary or involuntary liquidation, sale or other
disposition of all or any portion of the stock or assets of the Company or the
Subsidiary Guarantors, or any receivership, insolvency, bankruptcy,
reorganization, or other similar proceedings, affecting the Company or the
Subsidiary Guarantors or any assets of the Company or the Subsidiary Guarantors,
or the release of any proper from any security for any Obligation, or the
impairment of any such property or security, or the release or discharge of the
Company or the Subsidiary Guarantors from the performance or observance of any
agreement, covenant, term or condition contained in or arising out of the
Transaction Documents by operation of law, or the merger or consolidation of the
Company, or any other cause, whether similar or dissimilar to the foregoing.

 
 

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5.             Subrogation.

(a)            Unless and until complete performance of all the Obligations, the
Subsidiary Guarantors shall not be entitled to exercise any right of subrogation
to any of the rights of the Secured Parties against the Company or any
collateral security or guaranty held by the Secured Parties for the payment or
performance of the Obligations, nor shall the Subsidiary Guarantors seek any
reimbursement from the Company in respect of payments made by the Subsidiary
Guarantors hereunder.

(b)            In the extent that the Subsidiary Guarantors shall become
obligated to perform or pay any sums hereunder, or in the event that for any
reason the Company is now or shall hereafter become indebted to the Subsidiary
Guarantors, the amount of such sum shall at all times be subordinate as to lien,
time of payment and in all other respects, to the amounts owing to the Secured
Parties under the Transaction Documents and the Subsidiary Guarantors shall not
enforce or receive payment thereof until all Obligations due to the Secured
Parties under the Transaction have been performed or paid.  Nothing herein
contained is intended or shall be construed to give to the Subsidiary Guarantors
any right of subrogation in or under the Transaction Documents, or any right to
participate in any way therein, or in any right, title or interest in the assets
of the Secured Parties.

6.             Application of Proceeds; Release.  The proceeds of any sale or
enforcement of or against all or any part of the cash or collateral at the time
held by the Secured Parties hereunder, shall be applied by the Secured Parties
first to the payment of the reasonable costs of any such sale or enforcement,
then to the payment of the principal amount or stated valued (as applicable) of,
and interest or dividends (as applicable) and any other payments due in respect
of, the Obligations.  The remainder, if any, shall be paid to the Subsidiary
Guarantors.  As used in this Subsidiary Guaranty, “proceeds” shall mean cash,
securities and other property realized in respect of.

7.             Representations and Warranties.

(a)            The Subsidiary Guarantors hereby represent and warrant to the
Secured Parties that:

(i)             this Subsidiary Guaranty constitutes a legal, valid and binding
obligation of the Subsidiary Guarantors, enforceable in accordance with its
terms.

(ii)            the execution, delivery and performance of this Subsidiary
Guaranty and other instruments contemplated herein will not violate any
provision of any order or decree of any court or governmental instrumentality or
of any mortgage, indenture, contract or other agreement to which the Subsidiary
Guarantors are a party or by which the Subsidiary Guarantors may be bound, and
will not result in the creation or imposition of any lien, charge or encumbrance
on, or security interest in, any of the Subsidiary Guarantors’ properties
pursuant to the provisions of such mortgage, indenture, contract or other
agreement.

 
 

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(iii)           all representations and warranties relating to it contained in
the Purchase Agreement are true and correct.

(b)           The Company represents and warrants to the Secured Parties that it
has no knowledge that any of the representations or warranties of the Subsidiary
Guarantors herein are incorrect or false in any material respect.

8.             No Waiver; No Election of Remedies.  No failure on the part of
the Secured Parties to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Secured Parties of any right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy.  The remedies herein provided are cumulative and are not exclusive of
any remedies provided by law.  In addition, the exercise of any right or remedy
of the Secured Parties at law or equity or under this Subsidiary Guaranty or any
of the documents shall not be deemed to be an election of Pledgee’s rights or
remedies under such documents or at law or equity.

9.              Termination.  This Subsidiary Guaranty shall terminate on the
date on which all Obligations have been performed, satisfied, paid or discharged
in full.

10.            Further Assurances.  The parties hereto agree that, from time to
time upon the written request of any party hereto, they will execute and deliver
such further documents and do such other acts and things as such party may
reasonably request in order fully to effect the purposes of this Subsidiary
Guaranty.

11.            Miscellaneous.

(a)             Payment of Fees.  The Subsidiary Guarantors and the Company
jointly and severally agree to pay all costs including all reasonable attorneys’
fees and disbursements incurred by the Secured Parties in enforcing this
Subsidiary Guaranty in accordance with its terms.

(b)            Modification.  This Subsidiary Guaranty contains the entire
understanding between the parties with respect to the subject matter hereof and
specifically incorporates all prior oral and written agreements relating to the
subject matter hereof.  No portion or provision of this Subsidiary Guaranty may
be changed, modified, amended, waived, supplemented, discharged, canceled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged.

(c)            Notice.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time) on a Business Day (as defined in the Purchase Agreement), (ii)
the Business Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Subsidiary Guaranty later than 6:30 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier services, or (iv) upon actual receipt by the party to whom such notice
is required to be given.  The address for such notices and communications shall
be as follows:

 
 

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If to the Company:
Admiralty Holding Company
 
3455 Peachtree Road, Suite 560
 
Atlanta, GA 30326
 
Attention: Chief Executive Officer
 
Telephone:  (404) 995-7010
 
Facsimile:  (404) 995-7001
   
If to the Subsidiary Guarantors:
Admiralty Corporation
 
_____________________
 
_____________________
 
Attention:_____________
 
Telephone: ____________
 
Facsimile: _____________
     
Admiralty Marine Operations, Ltd.
 
_____________________
 
_____________________
 
Attention:_____________
 
Telephone: ____________
 
Facsimile: _____________
   
If to the Secured Parties:
AJW Partners, LLC
 
AJW Master Fund, Ltd.
 
New Millennium Capital Partners II, LLC
 
1044 Northern Boulevard
 
Suite 302
 
Roslyn, New York 11576
 
Attention:  Corey Ribotsky
 
Facsimile:  516-739-7115
   
With copies to:
Ballard Spahr Andrews & Ingersoll, LLP
 
1735 Market Street
 
51st Floor
 
Philadelphia, Pennsylvania  19103
 
Attention:  Gerald J. Guarcini, Esq.
 
Telephone:  215-865-8625
 
Facsimile:  215-864-8999

 
 

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(d)            Invalidity.  If any part of this Subsidiary Guaranty is contrary
to, prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.

(e)            Benefit of Agreement.  This Subsidiary Guaranty shall be binding
upon and inure to the parties hereto and their respective successors and
assigns.

(f)             Mutual Agreement.  This Subsidiary Guaranty embodies the arm’s
length negotiation and mutual agreement between the parties hereto and shall not
be construed against either party as having been drafted by it.

(g)            New York Law to Govern.  This Subsidiary Guaranty shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York without regard to the principals of conflicts of law
thereof.  Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and Federal courts sitting in the city of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court or that such suit, action or proceeding is improper.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law.

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IN WITNESS WHEREOF, the parties hereto have caused this Guaranty and Pledge
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

 
COMPANY
       
ADMIRALTY HOLDING COMPANY
             
By:
_____________________________________
   
Herbert C. Leeming
   
Chief Executive Officer
                   
SUBSIDIARY GUARANTORS:
             
ADMIRALTY CORPORATION
             
By:
_____________________________________
   
Herbert C. Leeming
   
CEO
             
ADMIRALTY MARINE OPERATIONS, LTD.
       
By:
_____________________________________
   
Herbert C. Leeming
   
CEO

 
 

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SECURED PARTIES:
             
AJW PARTNERS, LLC
 
By: SMS Group, LLC
             
By:
_____________________________________
   
Corey S. Ribotsky
   
Manager
             
AJW MASTER FUND, LTD.
 
By:  First Street Manager II, LLC
             
By:
_____________________________________
   
Corey S. Ribotsky
   
Manager
             
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
 
By:  First Street Manager II, LLC
             
By:
_____________________________________
   
Corey S. Ribotsky
   
Manager

 
 

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