Exhibit 10.3
 
LIMITED GUARANTEE
 
This Limited Guarantee (this "Guarantee") is made as of April 11, 2013, by
Daniel G. Keane ("Guarantor"), in favor of Mod-Pac Corp., a New York corporation
(the "Company").
 
WHEREAS, reference is made herein to that certain Agreement and Plan of Merger,
dated as of the date hereof, (the "Merger Agreement"), by and among the Company,
Rosalia Capital LLC, a Delaware limited liability company ("Parent"), and Mandan
Acquisition Corp., a New York corporation and wholly owned subsidiary of Parent
("Merger Sub").  Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Merger Agreement.
 
NOW, THEREFORE, as an inducement to the Company to enter into the Merger
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the Guarantor
undertakes and agrees for the benefit of the Company as follows:
 
1.           Subject to the limitations set forth in Section 7.03(c) of the
Merger Agreement and Section 2 below, the Guarantor hereby absolutely,
unconditionally and irrevocably guarantees to the Company the due and punctual
observance, performance and discharge when due of the obligations of Parent
under Section 7.03(c) of the Merger Agreement (each, an "Obligation" and,
collectively, the "Obligations").  The Guarantor shall make prompt payment to
the Company of the amount of any such Obligation if and when due under the
Merger Agreement.
 
2.           Notwithstanding any of the terms or conditions of this Guarantee,
under no circumstance shall the maximum liability of the Guarantor to the
Company under this Guarantee exceed in the aggregate $500,000 (the "Cap") for
any reason (it being understood that this Guarantee may not be enforced without
giving effect to the Cap).
 
3.           The Guarantor represents and warrants to the Company that:
 
(a)           This Guarantee constitutes the legal, valid and binding obligation
of the Guarantor, enforceable against the Guarantor in accordance with its
terms, subject to applicable bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and similar laws now or hereafter in effect relating
to or affecting creditors' rights and remedies generally and to general
principles of equity.  Neither the execution and delivery of this Guarantee by
the Guarantor, nor compliance by the Guarantor with any of the terms or
provisions of the Guarantee will (x) violate any law, judgment, writ,
stipulation or injunction of any governmental authority applicable to the
Guarantor, or (y) violate or constitute a default under any of the terms,
conditions or provisions of any contract to which the Guarantor is a party.
 
(b)           All consents, approvals, authorizations and permits of, filings
with and notifications to, any governmental authority necessary for the due
execution, delivery and performance of this Guarantee by the Guarantor have been
obtained or made and all conditions thereof have been duly complied with, and no
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required in connection with the execution, delivery or
performance by the Guarantor of this Guarantee.
 
 
 

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4.           The Company shall not be obligated to file any claim relating to
the Obligations in the event that Parent becomes subject to a bankruptcy,
reorganization or similar proceeding, and the failure of the Company to so file
shall not affect the Guarantor’s obligations hereunder.  In the event that any
payment to the Company in respect of any Obligations is rescinded or must
otherwise be returned for any reason whatsoever, the Guarantor shall remain
liable hereunder with respect to such Obligations as if such payment had not
been made.  This is an unconditional guarantee of payment and not of collection,
and a separate action or actions may be brought and prosecuted against the
Guarantor to enforce this Guarantee, irrespective of whether any action is
brought against Parent or any other person or whether Parent or any other person
is joined in any such action or actions.
 
5.           The Guarantor agrees that the Company may at any time and from time
to time, without notice to or further consent of the Guarantor, extend the time
of payment of any of the Obligations, and may also make any agreement with
Parent for the creation, extension, renewal, accrual, payment, compromise,
discharge or release thereof, in whole or in part, or for any modification of
the terms thereof or of any agreement between the Company and Parent without in
any way impairing or affecting this Guarantee.  The Guarantor agrees that the
obligations of the Guarantor hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by (a) the failure of the Company to
assert any claim or demand or to enforce any right or remedy against Parent; (b)
any change in the time, place, manner or terms of payment of any of the
Obligations or any rescission, waiver, compromise, consolidation or any change
or extension of the time of payment or performance of, renewal or alteration of,
any Obligation, any escrow arrangement or other security therefor, any liability
incurred directly or indirectly in respect thereof, or other amendment or
modification or waiver of or consent to any departure from any of the terms or
provisions of the Merger Agreement made in accordance with the terms thereof or
any other agreement evidencing, securing or otherwise executed in connection
with any of the Obligations; (c) the addition, substitution or release of any
other entity or person liable with respect to the Obligations; (d) any change in
the corporate existence, structure or ownership of Parent or any other entity or
person interested in the transactions contemplated by the Merger Agreement; (e)
any insolvency, bankruptcy, reorganization or other similar proceeding affecting
Parent or any other entity or person interested in the transactions contemplated
in the Merger Agreement; (f) the existence of any claim, set-off or other rights
which the Guarantor may have at any time against Parent or the Company, whether
in connection with the Obligations or otherwise; or (g) the adequacy of any
other means the Company may have of obtaining payment of the Obligations.
 
6.           To the fullest extent permitted by law, the Guarantor hereby
expressly waives any and all rights or defenses arising by reason of any law
which would otherwise require any election of remedies by the Company.  The
Guarantor waives promptness, diligence, notice of the acceptance of this
Guarantee and of the Obligations, presentment, demand for payment, notice of
non-performance, default, dishonor and protest, notice of any Obligations
incurred and all other notices of any kind (except for notices to be provided in
accordance with the Merger Agreement), all defenses which may be available by
virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of Parent or
any other entity or other person interested in the transactions contemplated by
the Merger Agreement, and all suretyship defenses generally (other than fraud or
willful misconduct by the Company or any of its subsidiaries or defenses to the
payment of the Obligations that are available to Parent under the Merger
Agreement or breach by the Company of this Guarantee).  The Guarantor
acknowledges that he will receive substantial direct and indirect benefits from
the transactions contemplated by the Merger Agreement and that the waivers set
forth in this Guarantee are knowingly made in contemplation of such benefits.
 
 
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7.           No failure on the part of the Company to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Company of any right,
remedy or power hereunder preclude any other or future exercise of any right,
remedy or power.  Each and every right, remedy and power hereby granted to the
Company or allowed it by law or other agreement shall be cumulative and not
exclusive of any other and may be exercised by the Company at any time or from
time to time.
 
8.           This Guarantee is a continuing Guarantee and shall be binding upon
the Guarantor until all the Obligations have been finally satisfied and paid in
full.  This Guarantee is a guarantee of payment and performance of the
Obligations; provided that the Guarantor shall be entitled to raise as a defense
to the Obligations any and all defenses available to be raised by Parent.
 
9.           The Guarantor hereby agrees that the Obligations shall not be
deemed to have been released, dismissed, impaired, reduced, discharged, paid,
observed or performed or affected as the result of the bankruptcy, insolvency,
disability, dissolution, termination, receivership, reorganization or lack of
corporate or other power of Parent, and the Guarantor's liability in respect
thereof shall continue and not be discharged, including the case where any
payment or performance thereof by Parent is recovered from or paid over by or on
behalf of the Company by reason of a fraudulent transfer by Parent, or as a
preference in any bankruptcy of Parent.  The Guarantor will not exercise any
rights of subrogation or contribution, whether arising by contract or operation
of law (including without limitation any such right arising under bankruptcy or
insolvency laws) or otherwise, by reason of any payment by the Guarantor
pursuant to the provisions of Section 1 hereof unless and until the Obligations
have been indefeasibly paid in full.
 
10.           No waiver, modification or amendment of any provisions of this
Guarantee shall be effective except pursuant to a written agreement signed by
the Company and the Guarantor, and then such waiver shall be effective only in
the specific instance and for the purpose for which given.  This Guarantee shall
be binding upon and inure to the benefit of the successors-in-interest and
permitted assigns of each party hereto.  No rights or obligations hereunder
shall be assignable (by operation of law or otherwise) by the Guarantor or the
Company without the prior written consent of the Company or the Guarantor, as
the case may be.
 
11.           This Guarantee may be executed and delivered (including by
facsimile or other electronic transmission) in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
 
12.           This Guarantee shall be governed by, and construed in accordance
with, the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof,
except to the extent that mandatory provisions of federal law apply.
 
 
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13.           Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself or himself and its or his property, to the exclusive
jurisdiction of the courts of the State of New York and any appellate court
thereof and the United States District Court for the Western District of New
York and any appellate court thereof, in any action or proceeding arising out of
or relating to this Guarantee or the transactions contemplated hereby or for
recognition or enforcement of any judgment relating thereto, and each of the
parties hereby irrevocably and unconditionally (a) agrees not to commence any
such action except in such courts, (b) agrees that any claim in respect of any
such action or proceeding may be heard and determined in such courts, (c)
waives, to the fullest extent it or he may legally and effectively do so any
objection which it or he may now or hereafter have to venue of any such action
or proceeding in any such courts, and (d) waives, to the fullest extent
permitted by law, the defense of any inconvenient forum to the maintenance of
such action or proceeding in any such courts.
 
14.           The Company acknowledges and agrees that the sole asset of Parent
and Merger Sub is cash in a de minimis amount and that no additional funds are
expected to be contributed to Parent or Merger Sub unless and until the Closing
occurs.  Notwithstanding anything that may be expressed or implied in this
Guarantee or any document or instrument delivered contemporaneously herewith,
and, by its acceptance of the benefits of this Guarantee, the Company
acknowledges and agrees that it has no right of recovery against, and no
personal liability shall attach to, the Guarantor or any of his former, current
or future affiliates or assignees or any former, current or future director,
officer, employee, agent, manager, equityholder, affiliate or assignee of any of
the foregoing (collectively, but not including Parent or Merger Sub, each a
"Non-Recourse Party") through Parent or Merger Sub or otherwise, whether by or
through attempted piercing of the corporate veil, by or through a claim by or on
behalf of Parent or Merger Sub against any Non-Recourse Party, by the
enforcement of any assessment or by any legal or equitable proceeding, by virtue
of any statute, regulation or applicable law, or otherwise, except for its
rights to recover from the Guarantor under and to the extent provided in this
Guarantee and subject to the Cap and the other limitations described
herein.  The Company further agrees and acknowledges that recourse against the
Guarantor under and pursuant to the terms of this Guarantee shall be the sole
and exclusive remedy of the Company and its affiliates against the Guarantor and
the Non-Recourse Parties in respect of any liabilities or obligations arising
under, or in connection with, the Merger Agreement or the transactions
contemplated thereby, including by piercing of the corporate veil or by or
through a claim by or on behalf of Parent or Merger Sub.  Nothing set forth in
this Guarantee shall affect or be construed to affect any liability of Parent or
Merger Sub to the Company or shall confer or give or be construed to confer or
give to any Person other than the Company (including any person acting in a
representative capacity) any rights or remedies against any Person, including
the Guarantor, except as expressly set forth herein.
 
15.           All notices, requests, claims, demands and other communications
hereunder shall be given by the means specified in the Merger Agreement (and
shall be deemed given as specified therein), as follows:
 
If to the Guarantor:
 
 
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Daniel G. Keane
c/o LeCaron Enterprises Corp.
P. O. Box 754
Buffalo, New York 14207-0754
 
with a copy to (which shall not constitute notice):
 
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Telecopier:  (212) 935-9935
Attention:  Peter J. Halasz
 
If to the Company, as provided in the Merger Agreement.
 
16.           EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT OR HE MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS GUARANTEE OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
 
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IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this Limited
Guarantee as of the day first written above.
 
 

 
GUARANTOR:
         
/s/ Daniel G. Keane
 
Daniel G. Keane

 
 

Agreed to and accepted by:

THE COMPANY:

MOD-PAC CORP.

By /s/ David B. Lupp
     Name: David B. Lupp
Title: Chief Operating Officer and Chief Financial Officer