Document:

Exhibit 10(j)

 

EXECUTION VERSION 

 

PROMISSORY NOTE

 

	
  US $5,600,000

  	
   

  	
  May 12, 2005

  

 

FOR VALUE RECEIVED, Commodore Resources, Inc.,
a Delaware corporation (“Maker”), promises to pay to the order of The John
Buckman and Jan Hanford Trust (“Payee”), at the address for Payee set forth in Section 10
or at such address as the holder of this Promissory Note (this “Note”) may
designate from time to time in writing to Maker, the principal amount of FIVE
MILLION SIX HUNDRED THOUSAND DOLLARS (US$5,600,000.00).

 

1.                                       Interest.  Interest on the principal balance hereof
shall accrue at the lesser of ten percent (10%) per annum or the Maximum Lawful
Rate (as hereinafter defined).  Interest
shall be calculated hereunder on the basis of actual days elapsed and computed
as if each calendar year consisted of 365 days.

 

2.                                       Payment
Schedule.  Subject to Section 5,
Section 6 and Section 7 of this Note, the outstanding principal
balance of this Note and interest thereon shall be paid on May 12, 2007.

 

3.                                       Prepayment
Option.  Maker shall have the right
to prepay this Note in whole or in part at any time without penalty or
premium.  The payments on this Note shall
be applied first to accrued but unpaid interest, if any, and then to principal.

 

4.                                       Related
Agreements.  This Note is being entered
into in connection with that certain Stock Purchase Agreement, dated as of May 6,
2005 (the “Purchase Agreement”), by and among Maker, Payee, Lyris Technologies, Inc.,
a Delaware corporation (the “Company”), John Buckman, Jan Hanford and J.L.
Halsey Corporation (for certain limited purposes contained therein), pursuant
to which, among other things, Maker is purchasing all of the outstanding
capital stock of the Company from Payee. 
This Note and the Purchase Agreement are collectively referred to herein
as the “Transaction Documents.”  Terms
having their initial letters capitalized and not defined herein have the
meanings ascribed to them in the Purchase Agreement.

 

5.                                       Condition
to Payment.

 

(a)                                  Except
in the event of prepayment pursuant to Section 3, it shall be a condition
to payment of all amounts of interest and principal hereunder that the Total
Revenues of the Company for the twelve month periods ended March 31, 2006
and 2007, taken in the aggregate, be equal to or greater than $24,000,000; provided
that, the amounts of interest and principal due hereunder shall be ratably
reduced to the extent that such Total Revenues for the twelve month periods
ended March 31, 2006 and 2007 are less than $24,000,000 but greater than
or equal to $16,000,000.  By way of
example, if Total Revenues for the twelve month periods ended March 31,
2006 and 2007 are $20,000,000, then the amounts of interest and principal
otherwise due hereunder shall be reduced by 50%, and if Total Revenues are
$15,000,000, then no amounts of interest and principal shall be due
hereunder.  Maker shall deliver or cause
to be delivered to Payee the Financial Statements for each of the twelve month
periods ended March 31, 2006 and 2007 within 10 days after completion of
each such Financial Statements by the Company.

 

 

(b)                                 In
the event the Company elects for any reason to divest itself of a business
division or product line, including by licensing any entire product line to a
third party, during the twelve month periods ended March 31, 2006 and
2007, Total Revenues for purposes of Section 3(a) shall deemed to
include the greater of: (i) the
consideration received by the Company as a result of the sale or divestiture
transaction or (ii) the revenue that would have been received by the
Company from such division or product line for the remainder of the two year
period based upon average monthly revenue for (y) the six months immediately
preceding the sale or divestiture transaction or (z) the year ended December 31,
2004, whichever shall be greater.

 

(c)                                  If
Payee disagrees with the Total Revenues reflected in the Financial Statements
for a particular year, then within 30 days (the “Notice Period”) after Payee’s
receipt of such Financial Statements, Payee shall notify Maker of such
disagreement in writing (the “Notice of Disagreement”), setting forth in
reasonable detail the particulars of any such disagreement; provided, however,
that the basis for any such disagreement shall be limited to an objection on
the basis that the Total Revenues reflected in the Financial Statements were
not determined in accordance with GAAP or that GAAP was not applied in the
Financial Statements in a manner consistent with the audited financial
statements of the Company for the year ended December 31, 2004.  Unless the Financial Statements reflect that
Total Revenues exceed $24,000,000 for
the applicable two-year period, during the
Notice Period, Payee (either directly or through its representative(s)) shall
have full access to all books and records of the Company and its affiliates
reflecting the computation of Total Revenues, and all supporting information
related thereto, including but not limited to books and records necessary to
compute any adjustments pursuant to Section 5(b) immediately above; provided
that Payee and its representatives and affiliates shall keep all such
information confidential. In the event that Payee does not provide a Notice of
Disagreement within the Notice Period, Payee shall be deemed to have accepted
in full the amount of Total Revenues reflected in the Financial Statements as
prepared by Maker, which shall be final, binding and conclusive for all
purposes hereunder.  In the event that
any Notice of Disagreement is timely provided, Maker and Payee shall use
commercially reasonable efforts for a period of 30 days (or such longer period
as they may mutually agree) to resolve any disagreements.  If, at the end of such period, Maker and
Payee are unable to resolve such disagreements, then the San Francisco, California
office of Deloitte & Touche or, failing such accounting firm’s
willingness to so serve, such other independent accounting firm of recognized
national standing as may be mutually selected by Maker and Payee shall resolve
any remaining disagreements; provided, however, if Maker and
Payee are unable to so agree within 5 days after Deloitte & Touche
informs either Maker or Payee of its unwillingness to so serve (the “Decline
Date”), then within 10 days after the Decline Date, each of Maker and Payee
shall select an office of an independent accounting firm of recognized national
standing and such two firms shall, within 15 days after the Decline Date, then
select a third independent accounting firm of recognized national standing to
resolve any remaining disagreements (any such accountants selected pursuant to
this Section 5(c), the “Dispute Resolution Accounting Firm”).  Maker and Payee will enter into reasonable
and customary arrangements for the services to be rendered by the Dispute
Resolution Accounting Firm under this Section 5(c).  The Dispute Resolution Accounting Firm shall
determine as promptly as practicable (and in any event within 30 days from the
date that the dispute is submitted to it), to what extent (if any) the Total
Revenues reflected in the Financial Statements require adjustment, limiting its
review, however, only to the disagreements submitted in the Notice of
Disagreement.

 

2

 

The Dispute Resolution Accounting Firm shall only resolve each
disagreement by choosing an amount within the range of the amounts submitted by
Maker and Payee for such disagreement. 
The determination by the Dispute Resolution Accounting Firm shall be
final, binding and conclusive on the parties. 
The costs, fees and expenses of the Dispute Resolution Accounting Firm
shall be borne proportionately by Maker and Payee to the extent that Maker’s
and Payee’s determination differs from the Dispute Resolution Accounting Firm’s
determination (e.g., if Payee’s determination were 200, Maker’s determination
were 100 and the Dispute Resolution Accounting Firm’s determination were 160,
Payee would pay 40% of the Dispute Resolution Accounting Firm’s costs, fees and
expenses and Maker would pay 60% of such costs, fees and expenses).

 

(d)                                 As
used in this Note, the following terms shall have the meanings provided below:

 

(i)                                     “Financial
Statements” means the consolidated income statement of the Company for the
years ended March 31, 2006 and 2007, prepared in accordance with GAAP.

 

(ii)                                  “GAAP”
means the United States generally accepted accounting principles and practices
as in effect from time to time, applied in a manner consistent with the
application of GAAP to the audited financial statements of the Company for the
year ended December 31, 2004 (subject, in the case of financial statements
measuring a period ending on a date other than a fiscal year-end, to normal
year-end adjustments and the absence of footnote disclosures).

 

(iii)                               “Total
Revenues” means the revenues of the Company as set forth in the line item
entitled Total Revenues in the Financial Statements during the applicable year.

 

6.                                       Subordination.

 

(a)                                  Payee
(by its acceptance hereof) acknowledges and agrees that the indebtedness
evidenced by this Note is subordinate and subject in right of payment, priority
and collection to any secured indebtedness of Maker (the “Senior Indebtedness”).  Notwithstanding the immediately preceding
sentence, Payee shall be entitled to
receive the payment of principal and interest under and in strict accordance
with the terms and conditions of this Note, provided that no Event of Default
(as defined in the agreements governing the Senior Indebtedness) has occurred
under the agreements governing the Senior Indebtedness which is continuing or
would exist immediately after giving effect to such payment.  Maker agrees promptly to notify Payee of the
occurrence of any Event of Default upon receipt of notice of the Event of
Default from the lender under the Senior Indebtedness.

 

(b)                                 Maker
covenants and agrees that it will not incur Senior Indebtedness that exceeds
3.5 times the trailing twelve month EBITDA of the Company.  As used in this Note, “EBITDA” means the
consolidated earnings of the Company before interest, taxes, depreciation and
amortization, as derived from the Financial Statements; provided, that any
calculation of EBITDA for purposes of this Note shall exclude (without
duplication):  (i) any expenses
incurred in connection with the transactions contemplated by the Purchase
Agreement; (ii) any payments

 

3

 

(whether in the form of principal, interest or otherwise) to any
provider to the Company of financing in connection with (A) the
consummation of the transactions contemplated by the Purchase Agreement, (B) any
recapitalization or reorganization of the Company, (C) any merger or
acquisition transaction, or (D) providing working capital following the
closing of the transactions contemplated by the Purchase Agreement (the “Closing”),
and any expenses incurred in connection with any of the foregoing; (iii) any
extraordinary expenses and losses; (iv) if, after the Closing, new
accounting, computer or other office information technology systems, or major
changes in any existing information technology systems or operations, are
introduced, the cost of such systems or changes and any expenses associated
therewith; (v) any net losses in respect of asset dispositions other than
sales of inventory in the ordinary course of business; (vi) any charges
for equity-based compensation (including, without limitation, for employee
stock options); and (vii) any Indemnifiable Losses incurred by Purchaser
pursuant to Article 11 of the Purchase Agreement and any indemnification
payments received related thereto.  As
used in this Note, “incur” means, with respect to any debt or other obligation
of any Person, to create, issue, incur (by merger, conversion, exchange or
otherwise), extend, assume, guarantee or become liable in respect of such debt
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such debt or obligation on the balance sheet of such Person;
provided, however, that a change in GAAP that results in an obligation of such
Person that exists at such time, and is not theretofore classified as debt,
becoming debt shall not be deemed an incurrence of such debt.

 

7.                                       Right
of Offset.  Payee (by its acceptance
hereof) acknowledges and agrees that Maker shall have the right at any time and
from time to time to set-off any and all indebtedness owing to Payee then
outstanding under this Note against, and reduce the amount of indebtedness
owing to Payee then outstanding under this Note by, (a) upon written
notice to Payee, any amount of Purchaser Indemnifiable Losses to which Maker is
entitled pursuant to Article 11 of the Purchase Agreement or pursuant to
paragraph (j) of Schedule I to the Purchase Agreement and (b) any
amounts paid by the Company through the period ended March 31, 2007
pursuant to that certain License Agreement between Digital Impact, Inc.
and Maker dated May 6, 2005.

 

8.                                       Unsecured
Note.  Maker and Payee (by its
acceptance hereof) acknowledge and agree that this Note is not secured by any
mortgage, lien, pledge, charge, financing statement, security interests,
hypothecation, or other security device of any type, other than the Guaranty of
Payment executed as of the date hereof by J.L. Halsey Corporation.

 

9.                                       Assignment
Prohibited.  Payee may not assign its
interest in this Note; provided, however, that Payee may assign its interest in
this Note to John Buckman or Jan Hanford.

 

10.                                 Notices.  All notices and other communications required
or permitted hereunder will be in writing and will be deemed to have been duly
given when delivered in person or when dispatched by electronic facsimile
transfer or one business day after having been dispatched by an internationally
recognized overnight courier service to the appropriate person at the address
specified below:

 

	
  If to Payee:

  	
   

  	
  c/o John
  Buckman

  
	
   

  	
   

  	
  2735 Fulton
  Street

  
	
   

  	
   

  	
  Berkeley,
  California 94705-1031

  

 

4

 

	
  with a copy
  to:

  	
   

  	
  Higham,
  McConnell & Dunning LLP

  
	
   

  	
   

  	
  15 Enterprise, Suite 360

  
	
   

  	
   

  	
  Aliso Viejo, CA 92656

  
	
   

  	
   

  	
  Attention:   Curt
  C. Barwick

  
	
   

  	
   

  	
  Telecopy
  No.: 949-900-4403

  
	
   

  	
   

  	
   

  
	
  If to Maker:

  	
   

  	
  J. L. Halsey Corporation

  
	
   

  	
   

  	
  103 Foulk Road, Suite 205-Q

  
	
   

  	
   

  	
  Wilmington, Delaware 19803

  
	
   

  	
   

  	
  Attention: David Burt

  
	
   

  	
   

  	
  Telecopy
  No.: (978) 945-5992

  
	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  	
  Vinson &
  Elkins L.L.P.

  
	
   

  	
   

  	
  3700
  Trammell Crow Center

  
	
   

  	
   

  	
  2001 Ross
  Avenue

  
	
   

  	
   

  	
  Dallas,
  Texas 75201

  
	
   

  	
   

  	
  Attention:   Michael
  D. Wortley

  
	
   

  	
   

  	
  Telecopy
  No.: (214) 999-7732

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Admiral Management Company

  
	
   

  	
   

  	
  790 Turnpike Street, Suite 202

  
	
   

  	
   

  	
  North Andover, Massachusetts 01845

  
	
   

  	
   

  	
  Attention: David Burt

  
	
   

  	
   

  	
  Telecopy No.: (978) 945-5992

  

 

or to such other address or
addresses as any such Person may from time to time designate as to itself by
like notice to the other party.

 

11.                                 Governing
Law; Jurisdiction.  This Note shall
be governed by and construed in accordance with the laws of the State of
Delaware without regard to the conflicts of laws provisions thereof.  Maker hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State of
California and the courts of the United States of America located in Alameda
County, State of California for any litigation arising out of or relating to
this Note or the transactions contemplated hereby or any of the other
transactions contemplated hereby (and agrees not to commence any litigation
relating hereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail to its respective
address set forth in Section 10 shall be effective service of process for
any litigation brought against it in any such court.  Maker hereby irrevocably and unconditionally
waives any objection to the laying of venue of any litigation arising out of
this Note or the transactions contemplated hereby or any of the other
transactions contemplated hereby in the courts of the State of California or
the courts of the United States of America located in Alameda County, State of
California and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such litigation brought in any
such court has been brought in an inconvenient forum.  Each of Maker and Payer hereby irrevocably
and unconditionally waives any right it may have to trial by jury in

 

5

 

connection with any litigation arising out of or relating to this Note,
the transactions contemplated hereby or any of the other transactions
contemplated hereby.  Reasonable
attorneys’ fees and out-of-pocket costs incurred by Payee in the event of the
initiation of any suit by Payee under or in connection with this Note shall be
paid by Maker if such action is successful; provided that, if such
action is not successful, reasonable attorneys’ fees and out-of-pocket costs
incurred by Maker in connection therewith shall be paid by Payee.

 

12.                                 Compliance
with Laws.  It is expressly
stipulated and agreed to be the intent of Maker and Payee to at all times
comply with the usury and other laws applicable to the Transaction Documents
and any subsequent revisions, repeals, or judicial interpretations thereof, to
the extent any of the same are applicable hereto.  If such laws are ever revised, repealed, or
judicially interpreted so as to render usurious any amount called for under the
Transaction Documents, or contracted for, charged, or received with respect to
the indebtedness evidenced by this Note, then it is Maker’s and Payee’s express
intent that all excess amounts theretofore collected by Payee be credited on
the principal balance of this Note (or, if this Note has been paid in full,
refunded to Maker), and the provisions of the Transaction Documents immediately
be deemed reformed and the amounts thereafter collectable hereunder and
thereunder reduced, without the necessity of the execution of any new document,
so as to comply with the then applicable law, but so as to permit the recovery
of the fullest amount otherwise called for hereunder and thereunder.  As used herein, “Maximum Lawful Rate” means
the maximum rate (or, if the context so permits or requires, an amount
calculated at such rate) of interest which, at the time in question would not
cause the interest charged on this Note at such time to exceed the maximum
amount which the Payee would be allowed to contract for, charge, take, reserve,
or receive under applicable law (including the “Cost of Money” limitations
pursuant to Section 107.855 of Title 13 of the United States Code of
Federal Regulations) after taking into account, to the extent required by
applicable law, any and all relevant payments or charges under the Transaction
Documents.

 

[Remainder of Page Intentionally Left Blank]

 

6

 

EXECUTED as of the date first written above.

 

	
   

  	
  MAKER:

  
	
   

  	
   

  
	
   

  	
  COMMODORE RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

S-1Exhibit 10(k)

 

EXECUTION VERSION

 

GUARANTY

 

THIS GUARANTY OF PAYMENT
(as amended, modified and restated from time to time, the “Guaranty”)
is made and entered into as of the 12th day of May, 2005, by J.L. Halsey
Corporation, a Delaware corporation (the “Guarantor”), in favor of
The John Buckman and Jan Hanford Trust (“Payee”):

 

W I T N E S S E T H:

 

WHEREAS, Commodore
Resources, Inc., a Delaware corporation (“Maker”), has entered into
that certain Stock Purchase Agreement dated as of May 6, 2005 (the “Agreement”) whereby Maker is acquiring
all of the issued and outstanding shares of capital stock of Lyris Technologies, Inc.,
a Delaware corporation (the “Company”)
from Payee;

 

WHEREAS, Guarantor
directly or indirectly owns equity interests in Maker and will obtain certain
direct and indirect benefits from the Agreement and the transactions related
thereto;

 

WHEREAS, the Agreement
contemplates that a portion of the purchase consideration under the Agreement
will be paid pursuant to the terms of a Promissory Note dated the date hereof
(said Promissory Note, together with any amendments, modifications,
supplements, renewals, extensions and restatements thereto or thereof, being
hereinafter collectively referred to as the “Promissory Note”),
pursuant to which Maker promises to pay the principal sum of $5,600,000,
subject to the terms of the Promissory Note (the “Note Amount”); and

 

WHEREAS, concurrently
with the execution and delivery hereof and as a material inducement to Payee’s
execution of the Agreement, Guarantor has agreed to execute and deliver this
Guaranty.

 

NOW, THEREFORE, Guarantor
does hereby covenant and agree with Payee as follows:

 

ARTICLE 1

COVENANTS, AGREEMENTS AND REPRESENTATIONS

 

Section 1.1                                   Guaranteed
Obligations.  Guarantor hereby
absolutely, irrevocably and unconditionally guarantees to Payee, subject to the
terms and provisions of Section 2.10, the full and prompt payment of (a) the
Note Amount when and as the same shall become due under the terms of the
Promissory Note, together with all accrued and unpaid interest thereon under
the terms of the Promissory Note, (b) the Cash Purchase Price (as defined
in the Agreement) when due pursuant to the terms of the Agreement and (c) any
amounts payable by Maker pursuant to Article 11 of the Agreement when due
and payable by Maker pursuant to Article 11 of the Agreement
(collectively, the “Guaranteed Obligations”);
provided  that, until a period of 30 days after any Guaranteed
Obligation becomes due and payable has elapsed, Payee shall refrain from making
demand upon Guarantor for payment of such Guaranteed Obligation; provided,
further, that, during such 30 day period, Payee shall exercise
commercially reasonable efforts to pursue and collect the Guaranteed Obligation
from the Maker.  If at the end of such 30
day

 

 

period, any of such Guaranteed Obligation remains uncollected,
Guarantor shall promptly pay the uncollected amount due thereon to Payee upon
demand.

 

Section 1.2                                   Absolute,
Unconditional Guaranty.  The
Guaranteed Obligations shall remain in full force and effect until the earliest
to occur of:  (i) the Note Amount
having been fully and indefeasibly repaid in full with applicable interest; (ii) Guarantor
having fully and indefeasibly paid in full or otherwise satisfied the
Guaranteed Obligations; or (iii) the Note Amount having been reduced to
zero pursuant to the terms of the Note; at which time, on such earlier to occur
date, this Guaranty shall terminate.

 

Section 1.3                                   Representations
and Warranties.  Guarantor hereby
represents and warrants as follows:

 

(a)                                  Guarantor
is a corporation duly incorporated and validly existing under the laws of the
State of Delaware;

 

(b)                                 Guarantor
has duly executed and delivered this Guaranty. This Guaranty is a legal, valid
and binding obligation of Guarantor enforceable against Guarantor in accordance
with the terms of this Guaranty, subject to bankruptcy or other similar laws
affecting creditors’ rights generally and general equitable principles;

 

(c)                                  Guarantor
is not a party to, or otherwise bound by or subject to, any agreements or
instrument, the observance of the terms and provisions of which would
materially impair Guarantor’s ability to perform its obligations under, and to
be bound by, this Guaranty.  Neither
execution and delivery of this Guaranty nor the consummation of the
transactions herein contemplated, nor compliance with the terms and provisions
hereof, will to Guarantor’s knowledge contravene any provision of applicable
law, statute, rule or regulation or any judgment, decree, franchise, order
or permit applicable to Guarantor or will conflict or be inconsistent with, or
will result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or, except as contemplated
hereby, result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the property or assets of Guarantor pursuant
to the terms of any indenture, mortgage, deed of trust or other material
agreement or instrument to which Guarantor is a party or by which Guarantor or
any of its property may be bound;

 

(d)                                 There
is no action, suit, proceeding or investigation pending, or to the best of the
knowledge of Guarantor, threatened, against or affecting Guarantor at law, in
equity, in admiralty or before any arbitrator of any kind or before any
governmental department, commission, board, bureau, agency or instrumentality
(domestic or foreign) which, in the opinion of Guarantor, is likely to result
in any material adverse change in the property or assets, or in the condition
(financial or otherwise) of Guarantor, or materially impair its ability to
perform its obligations under this Guaranty; and

 

(e)                                  Guarantor
has received, or will receive, direct or indirect benefit from the making of
this Guaranty and the making of the Note;

 

Section 1.4                                   Subordination.  This Guaranty is subordinate and subject in
right of payment, priority and collection to any secured indebtedness of
Guarantor.

 

2

 

ARTICLE 2

MISCELLANEOUS

 

Section 2.1                                   Actions
Against Guarantor.  In the event
of a default in the payment of all or any part of the Guaranteed Obligations
when such Guaranteed Obligations become due and payable pursuant to the terms
of the Promissory Note or the Agreement, as applicable, Guarantor shall,
subject to the terms and provisions of Section 1.1 hereof, upon receipt of
notice of demand, promptly pay the amount due thereon to Payee, in lawful money
of the United States.

 

Section 2.2                                   Entire
Agreement.  This Guaranty,
together with the Agreement, constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.

 

Section 2.3                                   Governing
Law.  This Guaranty shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to the conflicts of laws provisions thereof.  Guarantor hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of California and the courts of the United States of America
located in the State of California for any litigation arising out of or
relating to this Guaranty or the transactions contemplated hereby or any of the
other transactions contemplated hereby (and agrees not to commence any
litigation relating hereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
its respective address set forth in Section 2.7 shall be effective service
of process for any litigation brought against it in any such court.  Guarantor hereby irrevocably and
unconditionally waives any objection to the laying of venue of any litigation
arising out of this Guaranty or any of the transactions contemplated hereby in
the courts of the State of California or the courts of the United States of
America located in Alameda County, the State of California and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such litigation brought in any such court has been brought
in an inconvenient forum.  Guarantor
hereby irrevocably and unconditionally waives any right it may have to trial by
jury in connection with any litigation arising out of or relating to this Note
or any of the transactions contemplated hereby. 
Reasonable attorneys’ fees and out-of-pocket costs incurred by Payee in
the event of the initiation by Payee of any suit under or in connection with
this Note shall be paid by Guarantor if such action is successful; provided
that, if such action is not successful, reasonable attorneys’ fees and
out-of-pocket costs incurred by Guarantor in connection therewith shall be paid
by Payee.

 

Section 2.4                                   Benefit.  This Guaranty is for the benefit of Payee.

 

Section 2.5                                   Reinstatement;
No Release if Preference, Refund, Etc. 
This Guaranty shall remain in full force and effect and continue to be
effective should any petition be filed by or against Maker under the United
States Bankruptcy Code, as at any time amended, for liquidation or
reorganization, should Maker become insolvent or make an assignment for the
benefit of creditors or a receiver or trustee be appointed for all or any
significant part of Maker’s assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment of the Guaranteed
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by Payee whether
as a “preferential transfer”, “voidable preference”, “fraudulent conveyance”,
or otherwise, all as though such

 

3

 

reduction, repayment or restoration by Payee had not been made.  In the event any payment by Maker to Payee is
determined to be a preferential payment, or if for any reason Payee is required
to refund part or all of any payment or pay the amount thereof to any other
party, such repayment by Payee to Maker or to such other party shall not
constitute a release of Guarantor from any liability hereunder, and Guarantor
agrees to pay such amount to Payee upon demand to the extent such amount
constitutes a Guaranteed Obligation.

 

Section 2.6                                   Notices.

 

All notices and other
communications required or permitted hereunder will be in writing and will be
deemed to have been duly given when delivered in person or when dispatched by
electronic facsimile transfer or one business day after having been dispatched
by an internationally recognized overnight courier service to the appropriate
person at the address specified below:

 

	
  If to Payee:

  	
   

  	
  The John
  Buckman and Jan Hanford Trust

  
	
   

  	
   

  	
  2735 Fulton
  Street

  
	
   

  	
   

  	
  Berkeley,
  California  94705-1031

  
	
   

  	
   

  	
  Attention:   John
  Buckman

  
	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  	
  Higham,
  McConnell & Dunning LLP

  
	
   

  	
   

  	
  15 Enterprise, Suite 360

  
	
   

  	
   

  	
  Aliso Viejo, California  92656

  
	
   

  	
   

  	
  Attention:   Curt
  C. Barwick

  
	
   

  	
   

  	
  Telecopy
  No.:  (949) 900-4403

  
	
   

  	
   

  	
   

  
	
  If to Guarantor:

  	
   

  	
  J. L. Halsey Corporation

  
	
   

  	
   

  	
  103 Foulk Road, Suite 205-Q

  
	
   

  	
   

  	
  Wilmington, Delaware  19803

  
	
   

  	
   

  	
  Attention:  David Burt

  
	
   

  	
   

  	
  Telecopy
  No.:  (978) 945-5992

  
	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  	
  Vinson &
  Elkins L.L.P.

  
	
   

  	
   

  	
  3700
  Trammell Crow Center

  
	
   

  	
   

  	
  2001 Ross
  Avenue

  
	
   

  	
   

  	
  Dallas,
  Texas  75201

  
	
   

  	
   

  	
  Attention:   Michael
  D. Wortley

  
	
   

  	
   

  	
  Telecopy
  No.:  (214) 999-7732

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Admiral Management Company

  
	
   

  	
   

  	
  790 Turnpike Street, Suite 202

  
	
   

  	
   

  	
  North Andover, Massachusetts 
  01845

  
	
   

  	
   

  	
  Attention:  David Burt

  
	
   

  	
   

  	
  Telecopy No.:  (978) 945-5992

  

 

or to such other address or addresses as any such party may from time
to time designate as to itself by like notice to the other party.

 

4

 

Section 2.7                                   Further
Assurances.  Guarantor agrees,
upon the written request of Payee, to execute and deliver to Payee from time to
time any additional instruments or documents reasonably considered necessary by
Payee or its counsel to cause this Guaranty to be, become or remain valid and
effective in accordance with its terms.

 

Section 2.8                                   Severability.  In the event that any one or more of the
provisions contained in this Guaranty shall be determined to be invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision or provisions in every other respect
and of the remaining provisions of this Guaranty shall not be in any way
impaired.

 

Section 2.9                                   Permitted
Assignment by Payee.  Payee may
freely assign its rights and delegate its duties under this Guaranty to John
Buckman, Jan Hanford or any entity affiliated with John Buckman and/or Jan
Hanford, but no such assignment or delegation shall increase Guarantor’s
obligations or diminish its rights hereunder. 
In the event of any such assignment or delegation, Payee will give
Guarantor prompt notice of such assignment or delegation and agrees to use its
best efforts to give such notice at least 10 days prior to such assignment or
delegation, but the consent of Guarantor shall not be required for any such
assignment or delegation and failure to give such notice shall not affect the
validity or enforceability of any such assignment or delegation or subject Payee
to any liability.

 

Section 2.10                            Limitation
of Liability.  Notwithstanding
any provisions contained herein to the contrary, the maximum liability of
Guarantor hereunder for the Guaranteed Obligations shall not exceed, in the
case of payment with respect to the Note, the Note Amount plus applicable
interest thereon in accordance with the terms of the Note and, in the case of
payment with respect to the Agreement, the Cash Purchase Price (as defined in
the Agreement) and any amounts payable by Maker pursuant to Article 11 of
the Agreement.

 

[EXECUTION
PAGE FOLLOWS.]

 

5

 

IN WITNESS WHEREOF,
Guarantor has executed this Guaranty as of the day and year first above
written.

 

 

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  J.L. HALSEY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David R. Burt

  	
   

  
	
   

  	
  Name:

  	
   David R. Burt

  	
   

  
	
   

  	
  Title:

  	
   Chief Executive
  Officer

  	
   

  
						

 

 

[SIGNATURE PAGE TO GUARANTY]

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