Document:

DiaSys Corporation - Exhibit 10.9

 Exhibit 10.9

CONVERTIBLE PROMISSORY NOTE 

  

  	$120,316.47	 	
        September 9, 2004

      

                
FOR VALUE RECEIVED, the undersigned, DIASYS CORPORATION, a Delaware
Corporation, with an address at 81 West Main Street, Waterbury, Connecticut 06702
(the "Company"), promises to pay to the order of MORRIS SILVERMAN, an individual
with a place of business at 790 Estate Drive, Suite 100, Deerfield, Illinois 60015,
("Payee"), or any subsequent assignee or holder hereof (Payee or any subsequent
assignee or holder hereof sometimes being hereinafter referred to as "Holder"),
the principal sum of ONE HUNDRED TWENTY THOUSAND THREE HUNDRED SIXTEEN AND
47/100 DOLLARS ($120,316.47), together with: (i) interest on the unpaid principal
balance of this Note, from the date hereof until said balance shall have been
paid in full, at the rate or rates and in the manner hereinafter provided; (ii)
all costs and expenses, including reasonable attorneys' fees, incurred in collecting
or attempting to collect the indebtedness evidenced by this Note, or in enforcing
that certain Loan and Security Agreement of even date herewith by and between
Company and Payee (said agreement, as the same may be amended or modified from
time to time, hereinafter referred to as the "Loan Agreement") or any of the other
Security Documents (as hereinafter defined) or protecting or sustaining the lien
thereof or in any litigation or controversy arising from or connected with this
Note or any of the Security Documents; and (iii) all taxes or duties assessed
upon the indebtedness evidenced by this Note or by any of the Security Documents
or upon the Collateral (as hereinafter defined). All amounts owing under this
Note shall be payable in legal tender of the United States of America. This Note
is issued pursuant to the Loan and Security Agreement, dated as of the date hereof
(the "Loan Agreement"), between the Company and the Payee. 

ARTICLE I 

  

  Payment Provisions 

                
Section 1.1- Interest. The principal balance of the indebtedness evidenced
by this Note outstanding from time to time shall bear interest, from the date
hereof until said indebtedness shall have been paid in full, at the rate of six
percent (6%) per annum. Interest shall be calculated on the daily unpaid principal
balance of the indebtedness evidenced by this Note based on a 360-day year, provided
that interest shall be due for the actual number of days elapsed during each period
for which interest is being charged. Installments of accrued interest shall be
due and payable commencing on the last day of September, 2004, and continuing
on the last day of each December, March, June and September thereafter so long
as any of the indebtedness evidenced by this Note is outstanding. 

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Section 1.2- Principal. The principal amount hereof and all accrued interest
shall be due and payable on August 13, 2007. 

                
Section 1.3- Payment Days. Any payment under this Note which is stated
to be due on a day other than a "Business Day" (a day on which banks are open
for business in Waterbury, Connecticut) shall be made on the next succeeding Business
Day, and any such extension of time shall be included in the computation of the
amount of interest to be paid. 

                
Section 1.4- Prepayment. Company shall have the right to prepay the indebtedness
evidenced by this Note at, in whole or in part, at any time, without prepayment
premium or penalty. 

                
Section 1.5- Events of Default. It shall be an Event of Default hereunder
if Company shall fail to make any payment under this Note when due or if any other
Event of Default (as defined in the Loan Agreement) shall occur. Any failure by
Holder to exercise any right under this Note or under the Loan Agreement arising
or existing as a result of such Event of Default, or any delay in such exercise,
shall not constitute a waiver of the right to exercise such right at a later time
so long as such Event of Default shall remain uncured, and shall not constitute
a waiver of the right to exercise such right if any other Event of Default shall
occur. The acceptance by Holder of payment of any sum payable under this Note
after the due date of such payment shall not be a waiver of Holder's right to
require prompt payment when due of all other sums payable under this Note. 

                
Section 1.6- Remedies. Upon the occurrence of any Event of Default or upon
maturity hereof, the outstanding principal balance of the indebtedness evidenced
by this Note shall, at the option of Holder, bear interest from the date of occurrence
of such Event of Default or such maturity until collection (including any period
of time occurring after judgment), at the "Default Rate", being the lower of (a)
the highest rate allowed by applicable law, or (b) a rate per annum equal to two
percentage points (2.0%) above the higher of (A) the rate or rates that otherwise
would have been in effect under this Note, or (B) the prime rate of LaSalle Bank
as the same may vary from time to time. If the Holder shall not receive the full
amount of any installment of interest or principal due under the terms of this
Note within ten (10) days after the due date of such payment, then Company shall
pay to Holder, upon demand, a late charge equal to five percent (5%) of such installment,
to cover the additional expenses involved in handling such overdue payment. Such
charge shall be in addition to, and not in lieu of, any other remedy Holder may
have and shall be in addition to, and not in lieu of, Company's obligation to
pay any reasonable fees and charges of any agents or attorneys employed in the
event of any default hereunder. 

                
Section 1.7- Acceleration. Upon the occurrence of any Event of Default,
the indebtedness evidenced by this Note shall, at the option of and without notice
or demand by the Holder, become at once due and payable. Company shall then pay
the Holder, in addition to any and all other sums and charges due, the entire
principal of and interest accrued on this Note. 

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Section 1.8- Waivers. Company and each endorser, guarantor and surety
of this Note, and each other person liable or who shall become liable for all
or any part of the indebtedness evidenced by this Note, hereby: 

		(a)		waive demand, presentment, protest, notice
      of protest, notice of dishonor, diligence in collection, notice of nonpayment
      and all notices of a like nature; and
				
		(b)		 to (i) the release, surrender, exchange or
      substitution of all or any part of the security for the indebtedness evidenced
      by this Note, or the taking of any additional security, (ii) the release
      of any or all other persons from liability, whether primary or contingent,
      for the indebtedness evidenced by this Note or for any related obligations,
      and (iii) the granting of any other indulgences to any such person.

 

                
Each endorser, guarantor and surety of this Note, and each other person liable
or who shall become liable for all or any part of the indebtedness evidenced by
this Note, consent to (i) all renewals, extensions or modifications of this Note
or the Security Documents (including any affecting the time of payment), and (ii)
all advances under this Note or the Security Documents. Any such renewal, extension,
modification, advance, release, surrender, exchange, substitution, taking or indulgence
may take place without notice to any such person, and, whether or not any such
notice is given, shall not impair the liability of any such person. 

                
Section 1.9- Commercial Transaction. COMPANY AND EACH ENDORSER, GUARANTOR
AND SURETY OF THIS NOTE, AND EACH OTHER PERSON LIABLE OR WHO SHALL BECOME LIABLE
FOR ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE, HEREBY ACKNOWLEDGE
THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION,
AND TO THE EXTENT ALLOWED UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-a TO
52-278n, INCLUSIVE, OR BY OTHER APPLICABLE LAW, HEREBY WAIVE THEIR RIGHT TO NOTICE
AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH HOLDER OR ITS SUCCESSORS
OR ASSIGNS MAY DESIRE TO USE. 

                
Section 1.10- Severability. If any one or more of the provisions of this
Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part, or in any respect, or if any one or more of the provisions of
this Note shall operate, or would prospectively operate, to invalidate this Note,
then such provision or provisions only shall be deemed to be null and void and
of no force or effect and shall not affect any other provision of this Note, and
the remaining provisions of this Note shall remain operative and in full force
and effect, shall be valid, legal and enforceable, and shall in no way be affected:
prejudiced or disturbed thereby. 

                
Section 1.11- Amendments. This Note may not be modified or terminated orally,
but only by a written instrument signed by the party against whom enforcement
of any such modification or termination is sought. Time is and shall be of the
essence in the performance of all obligations under this Note. This Note shall
be governed by and construed in accordance with the laws of the State of Connecticut.

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Section 1.12- Gender. As used in this Note, words of any gender shall be
deemed to apply equally to any other gender, the plural shall include the singular
and the singular shall include the plural (as the context shall require), and
the word "person" shall refer to individuals, entities, authorities and other
natural and juridical persons of every type.

                
Section 1.13- Assignment. If this Note is now, or hereafter shall be, signed
by more than one person, it shall be the joint and several obligation of all such
persons (including, without limitation, all makers, endorsers, guarantors and
sureties, if any) and shall be binding on all such persons and their respective
heirs, executors, administrators, legal representatives, successors and assigns.
This Note and all covenants, agreements and provisions set forth in this Note
shall inure to the benefit of Holder and its successors and assigns. 

                
Section 1.14- Submission to Jurisdiction. The Company hereby consents and
submits to the jurisdiction of any state or Federal court located within the state
of Illinois and waives statutory service of any and all process upon the Company
and consents to the fullest extent permitted by applicable law that all such service
of process be made by registered mail or actual delivery to the Borrower at the
address stated at the beginning of this Promissory Note and service so made shall
be deemed to be completed upon the earlier of mailing or actual delivery thereof.
Without limiting the generality of the foregoing, the Company specifically waives
any defense of lack of jurisdiction, improper venue or forum non conveniens. 

ARTICLE II 

  

  Conversion Right

                
Section 2.1- Conversion. At the election of the Holder, this Note and accrued
interest thereon may be converted, in whole or in part, at any time, into shares
of the Common Stock, $.001 par value (the "Common Stock") of the Company at a
conversion price equal to Thirty Eight Cents ($.38) per share, subject to adjustment
as hereinafter provided, by surrender of this Note to the Company together with
a notice of conversion executed by the Holder specifying the amount hereof to
be so converted.

                
                
The Company shall, as promptly as practicable and in any event within seven days
after receipt of such notice and payment, execute and deliver or cause to be executed
and delivered, in accordance with such notice, a certificate or certificates representing
the aggregate number of a share of Common Stock specified in said notice. The
certificate or certificates so delivered shall be in such denominations as may
be specified in such notice, and shall be issued in the name of the Holder or
such other name or names as shall be designated in such notice. This Note shall
be deemed to have been converted and such certificate or certificates shall be
deemed to have been issued, and such Holder or any 

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other person so designated to be named therein shall be deemed
for all purposes to have become a holder of record of Common Stock, as of the
date the aforementioned notice is received by the Company. If this Note shall
have been converted only in part, the Company shall, at the time of delivery of
such certificate or certificates, deliver to the Holder a new Note evidencing
the balance of the unconverted indebtedness represented by this Note as hereinabove
provided, which new Note shall in all other respects be identical with this Note,
or, at the request of the Holder, appropriate notation may be made on this Note
which shall then be returned to the Holder. The Company shall pay all expenses,
stamp, documentary and similar taxes and other charges payable in connection with
the preparation, issuance and delivery of share certificates and any new Note
under this provision. 

                
Section 2.2- When Conversion Effective. The conversion of this Note
shall be deemed to have been effected immediately prior to the close of business
on the business day on which the Company shall have received a completed notice
of conversion as hereinabove provided, and at such time the person in whose name
any certificate for shares of Common Stock shall be issuable upon such conversion,
as provided in Section 3.3, shall be deemed to have become the Holder of record
of such Common Stock.

                
Section 2.3- Shares to Be Fully Paid and Nonassessable. All shares of Common
Stock issued upon the conversion of this Note shall be validly issued, fully paid
and nonassessable and, if such Common Stock is then quoted on NASDAQ or listed
on any national securities exchange (as defined in the Exchange Act), such Common
Stock shall, to the extent permitted under the applicable rules of such exchange
or NASDAQ), be duly quoted or listed thereon, as the case may be. 

                
Section 2.4- No Fractional Shares Required to Be Issued. The Company shall
not be required to issue fractional shares of Common Stock upon conversion of
this Note. If any fraction of a share of Common Stock would, but for this Section
1.3, be issuable upon final conversion of this Note, in lieu of such fractional
share of Common Stock, the Company shall pay to the Holder in cash an amount equal
to the same fraction of the Fair Market Value of the Company per share of Common
Stock outstanding on the Business Day immediately prior to the date of such conversion..

                
Section 2.5- Reservation of Stock, Etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of this
Note, all shares of Common Stock issuable upon the conversion of this Note. All
shares of Common Stock issued upon the conversion of this Note shall be duly authorized,
validly issued, fully paid and non-assessable. 

                
Section 2.6- Adjustments for Consolidation, Merger, Sale of Assets, Reorganization,
Etc. In case the Company, after the date hereof, (a) shall effect a capital
reorganization or reclassification of any or all of its capital stock, or (b)
shall consolidate with or merge into any other organization, company, corporation,
partnership, trust, business organization, individual, or group of individuals
(a "Person") and shall not be the continuing or surviving corporation of such
consolidation or merger, or (c) shall permit any other Person to consolidate with
or merge into the Company, and the Company shall be the continuing or surviving
Person but, in connection with such consolidation or merger, the Common Stock
shall be changed into or exchanged for 

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stock or the securities or property of any other Person, or (d)
shall transfer all or substantially all of its properties and assets to any other
Person; then proper provision shall be made so that the Holder of this Note, upon
the conversion hereof at any time after the consummation of such consolidation,
merger, transfer, reorganization or reclassification, shall be entitled to receive
the stock and other securities and property to which such Holder would have been
entitled to, as if such Holder had so converted this Note immediately prior to
the consummation of any such transaction.

                
Section 2.7- Adjustments for Stock Dividends; Combinations. In the event
that the Company, at any time or from time to time hereafter, shall (i) declare
or pay any dividend on its capital stock payable in Common Stock; (ii) effect
a subdivision of its outstanding shares into a greater number of shares of Common
Stock or any equity securities convertible into Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock); or (iii) combine
or consolidate its outstanding shares of Common Stock, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then, upon the conversion
hereof, at any time after the occurrence of any event described above, the Holder
shall be entitled to receive the Common Stock to which such Holder would have
been entitled if such Holder had converted this Note immediately prior to the
occurrence of such event. 

                
Section 2.8- No Impairment. The Company will not, by any means, avoid or
seek to avoid the observance or performance of any of the terms of this Note.
Without limiting the foregoing, the Company (a) will not permit the par value,
if any, of any shares of stock receivable upon the conversion of this Note to
exceed the amount payable therefore upon such conversion, (b) will take such action
as may be necessary in order that the Company may validly and legally issue fully
paid and non-assessable shares of Common Stock upon the conversion of this Note,
and (c) will not (i) transfer all or substantially all of its assets to any other
Person, or (ii) consolidate with or merge into any other Person where the Company
is not the surviving Person, unless the other Person acquiring such properties
and assets or surviving after such consolidation or merger shall expressly assume
in writing all the terms of this Note. 

                
Section 2.9- Transfer Without Registration. Neither this Note nor the shares
of Common Stock issuable hereunder have been registered under the Securities Act
of 1933, as amended (the "1933 Act"), or any state securities laws. Until such
time, if any, as such shares shall have been so registered neither this Note nor
any shares of Common Stock issued upon the conversion of this Note shall be transferred,
sold or assigned, except upon delivery of (a) an opinion (in form and substance
satisfactory to the Company) of counsel satisfactory to the Company to the effect
that such registration is not required or (b) such information as, in the reasonable
opinion of the Company, is necessary in order to establish that such transfer
may be made without registration. Each certificate for shares of Common Stock
issued upon conversion of this Note, unless at the time of conversion such shares
are registered under the 1933 Act, shall bear a legend to such effect. Any certificate
issued at any time in exchange or substitution for any certificate bearing such
legend (except a new certificate issued upon completion of a public offering pursuant
to a registration statement under the 1933 Act) shall also bear such legend unless,
in the opinion of counsel selected by the Holder of such certificate (who may
be an employee of such Holder) and 

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reasonably acceptable to the Company, the
securities represented thereby need no longer be subject to restrictions on resale
under the Securities Act.

                
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
its authorized officer as of the day and year first above written. 

	 	DIASYS CORPORATION
	 	 
	 	 
	 	 
	
       

    	By: S/ JEFFREY B. AARONSON 

             Jeffrey B. Aaronson 
	
       

    	 
	
       

    	 

 

- 7 -DiaSys Corporation - Exhibit 10.10

 Exhibit 10.10

PERSONAL GUARANTY AGREEMENT 

  (Witchel)

                
This PERSONAL GUARANTY AGREEMENT (this "Agreement"), is made and entered
into as of the 13th day of August 2004, by GREGORY WITCHEL, an individual,
(the "Guarantor"), in favor of MORRIS SILVERMAN, an individual (the "Lender").

RECITALS

                
The Lender is the Chairman of the Board of Directors of DiaSys Corporation, a
Delaware corporation (the "Borrower"), and the Guarantor is an officer/and or
director of the Borrower. 

                
The Borrower has entered into a Settlement and General Release Agreement with
Todd M. DeMatteo pursuant to which the Borrower is obliged to make certain payments
on or before August 16, 2004 and certain additional payments on or before September
16, 2004 (the "Settlement Payments"). The Borrower will suffer severe adverse
effects if it does not make the Settlement Payments at the times required. 

                
The Borrower does not have funds to make such Settlement Payments and is in urgent
need of additional working capital. 

                
The Borrower has used its best efforts to borrow necessary funds from a commercial
lending institution but has been unable to do so because it lacks the cash flow
and tangible assets necessary to support such borrowing. 

                
As an accommodation to the Borrower and to enable it to avoid default under the
terms of the DeMatteo settlement, the Lender is willing to make a personal loan
or loans to the Borrower in the amount of up to $600,000 (collectively, the "Loan"),
but only on the condition, among others, that the Guarantor execute and deliver
this Guaranty Agreement. 

                
The Loan is made pursuant to a Loan and Security Agreement between the Lender
and the Borrower being executed and delivered concurrently herewith (the "Loan
Agreement"). All terms used herein and not defined herein shall have the meanings
ascribed to them in the Loan Agreement. 

                
This Personal Guaranty Agreement is delivered pursuant to an Indemnification and
Mutual Contribution Agreement among the Lender, the Borrower, the Guarantor and
certain other officers and/or directors of the Borrower. 

AGREEMENT

                
NOW THEREFORE, in consideration of the foregoing premises, and for other good
and 

- 1 -

 valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Guarantor hereby agrees with Lender as follows: 

                
1. Guarantor hereby unconditionally and irrevocably guarantees directly to Lender
the due and punctual payment of the principal of, and all interest and other amounts
accruing under, the Note, and all of Borrower's obligations and indebtedness at
any time owing thereunder, under the Loan Agreement and under any other document
or agreement executed or entered into by Borrower in connection with the Loans
(hereinafter collectively referred to as the "Indebtedness"), when the same shall
become due and payable, whether at maturity, by acceleration or otherwise, including
any portion of the Indebtedness nominally held by Lender on behalf of others who
have participations or interests therein granted or created by Lender, whether
direct or contingent, due or to become due, now existing or hereafter arising,
and whether created directly or acquired by assignment or otherwise by Lender,
all subject to the limitation hereinafter set forth. 

                
2. Guarantor does hereby waive: notice of acceptance hereof; notice of the extension
of credit from time to time by Lender to Borrower and the creation, existence
or acquisition of any Indebtedness hereby guaranteed, including, without limitation,
notice of advances of loan amounts; notice of the amount of Indebtedness or any
other indebtedness of Borrower to Lender from time to time, subject, however,
to Guarantor's right to make inquiry of Lender to ascertain the amount of Indebtedness
at any reasonable time; notice of adverse change in Borrower's financial condition
or of any other fact which might increase Guarantor's risk; notice of presentment
for payment, demand, protest and notice thereof as to any instrument; notice of
default; and all other notices and demands to which Guarantor might otherwise
be entitled. Guarantor further waives the right to a jury trial in any action
hereunder and rights by statute or otherwise to require Lender to institute suit
against Borrower or any other guarantor of the obligations guaranteed hereby or
to exhaust its rights and remedies against Borrower or any other such guarantor,
Guarantor being bound to the payment of all Indebtedness hereby guaranteed as
fully as if such Indebtedness were directly owing to Lender by Guarantor. Guarantor
further waives any defense arising by reason of any disability or other defense
of Borrower or by reason of the cessation from any cause whatsoever of the liability
of Borrower. Until all of the Indebtedness shall have been paid in full, Guarantor
shall have no right of subrogation, reimbursement or indemnity whatsoever and
no right of recourse to or with respect to any assets or property of Borrower
or to any collateral for the Indebtedness. Nothing shall discharge or satisfy
the liability of Guarantor hereunder except the full payment of the Indebtedness.
All of the Indebtedness shall, at the option of Lender, forthwith become due and
payable if there shall be filed against Borrower or Guarantor a petition in bankruptcy
or for insolvency proceedings or for reorganization or arrangement or for appointment
of a receiver or trustee, if Borrower or Guarantor makes an assignment for the
benefit of creditors, or if an Event of Default shall exist under (and as defined
in) the Loan Agreement. 

                
3. Guarantor consents and agrees that, without notice to Guarantor and without

- 2 -

affecting or impairing the obligations of Guarantor hereunder,
Lender may, by action or inaction: compromise, settle, extend the time for payment
of the Indebtedness with Borrower or any party liable therefor; release Borrower
or any party from its liability for the Indebtedness; release all or any part
of the security for the Indebtedness; modify any instruments or agreements relating
to the Indebtedness (except this Agreement); extend the time for making any deposit
or granting a security interest in property securing the Indebtedness; or refuse
or fail to enforce its rights under any agreement or instrument evidencing or
securing the Indebtedness. 

                
4. Guarantor consents and agrees that Lender shall be under no obligation to marshal
any assets in favor of Guarantor, or against or in payment of any or all of the
Indebtedness. Guarantor agrees to pay all expenses incurred by Lender in connection
with the protection, assertion or enforcement of its rights under this Agreement,
including, without limitation, court costs, collection charges and attorneys'
fees and disbursements. Guarantor further agrees that to the extent Borrower makes
a payment or payments to Lender, which payment or payments or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set aside
or required, for any of the foregoing reasons or for any other reason, to be repaid
or paid over to a trustee, receiver or any other party under any bankruptcy act,
state or federal law, common law or rule of equity, then, to the extent of such
payment or repayment, the Indebtedness or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said payment had
not been made and Guarantor shall be primarily liable for such obligation. 

                
5. Guarantor agrees that the liability of Guarantor under this Agreement shall
be immediate and shall not be contingent upon the exercise or enforcement by Lender
of whatever remedies it may have against Borrower, any other guarantor or others,
or the enforcement of any lien or realization upon any security Lender may at
any time possess. 

                
6. Guarantor represents, warrants and covenants to Lender as an inducement to
Lender to grant credit to Borrower as follows: as of the date of this Agreement,
the financial statements of Guarantor, if any, furnished Lender are true and correct
and include in the footnotes thereto all contingent liabilities of Guarantor;
since the date of said financial statements, there has been no material adverse
change in the financial condition of Guarantor; Guarantor shall immediately give
Lender written notice of any material adverse change in Guarantor's financial
condition, including but not limited to litigation commenced, tax liens filed,
defaults claimed under Guarantor's indebtedness for borrowed money or bankruptcy
proceedings commenced with respect to Guarantor by Guarantor or any third party;
Guarantor shall at such reasonable times as Lender requests furnish its current
financial statements to Lender and permit Lender or its representatives to inspect
his financial records and properties and make extracts therefrom in order to evaluate
the financial condition of Guarantor. 

                
7. This guaranty is a primary and original obligation of Guarantor and is an absolute,
unconditional, continuing and irrevocable guaranty of payment and performance
and shall remain in full force and effect without respect to future changes in
conditions, including change of law or any invalidity or irregularity with respect
to the issuance of any obligations of Borrower to Lender or with respect to the
execution and delivery of any agreement between Borrower and Lender. 

- 3 -

 This guaranty is in addition to, and not in substitution for or
in reduction of, any other guaranty by Guarantor or any other guarantor in favor
of Lender. 

                
8. Lender shall have the right to seek recourse against Guarantor to the full
extent provided for herein and in any other document or instrument evidencing
obligations of Guarantor to Lender, and against Borrower to the full extent provided
for in the instruments and agreements evidencing or securing the Indebtedness,
which right shall be absolute and shall not in any way be impaired, deferred or
otherwise diminished by reason of any inability of Lender to claim any amount
of interest, fees, costs, or charges from Borrower pursuant to ' 506(b) of the
United States Bankruptcy Code, as amended (11 U.S.C. ' 506(b)). No election to
proceed in one form of action or proceeding, or against any party, or on any obligation,
shall constitute a waiver of Lender's right to proceed in any other form of action
or proceeding or against other parties unless Lender has expressly waived such
right in writing. Specifically, but without limiting the generality of the foregoing,
no action or proceeding by Lender against Borrower, any other guarantor of the
obligations guaranteed hereby or any other party, under any document or instrument
evidencing or securing the Indebtedness of Borrower to Lender shall serve to diminish
the liability of Guarantor except to the extent Lender fully and unconditionally
realizes payment of the Indebtedness by such action or proceeding, notwithstanding
the effect of any such action or proceeding upon Guarantor's right of subrogation
or contribution against Borrower or any other party. Guarantor is fully aware
of the financial condition of Borrower. Guarantor delivers this guaranty based
solely upon Guarantor's own independent investigation and in no part upon any
representation or statement of Lender with respect thereto. Guarantor is in a
position to and hereby assumes full responsibility for obtaining any additional
information concerning Borrower's financial condition as Guarantor may deem material
to his obligations hereunder and Guarantor is not relying upon, nor expecting
Lender to furnish Guarantor any information in Lender's possession concerning
Borrower's financial condition. By acceptance hereof, Lender and Guarantor agree
that Guarantor hereby knowingly accepts the full range of risk encompassed within
a contract of "continuing guaranty", which risk includes, without limitation,
the possibility that Borrower will contract additional indebtedness for which
Guarantor will be liable hereunder after Borrower's financial condition or ability
to pay its lawful debts when they fall due has deteriorated. 

                
9. Guarantor agrees that all the rights, benefits and privileges herein and hereby
conferred upon Lender shall vest in, and be enforceable by Lender, its successors
and assigns. Guarantor agrees that this Agreement shall bind Guarantor's heirs,
executors, administrators, personal representatives, successors and assigns. 

                
10. This Agreement, all acts and transactions hereunder and the rights and obligations
of the parties hereto shall be governed by, and construed and enforced in accordance
with, the laws of the State of Connecticut. Notwithstanding the foregoing, as
part of the consideration for Lender's granting or continuing outstanding credit
to Borrower, Guarantor hereby agrees that all actions or proceedings arising directly
or indirectly hereunder may, at the option of Lender, be 

- 4 -

litigated in courts having situs within the State of Illinois,
and Guarantor hereby expressly consents to the jurisdiction of any local, state
or federal court located within the State of Illinois, and consents that any service
of process in such action or proceeding may be made by personal service upon Guarantor
wherever Guarantor may be then located, or by certified or registered mail directed
to Guarantor at Guarantor's last known personal address which, until written notice
to the contrary is received by Lender, shall be deemed to be the address for Guarantor
set forth above. 

                
11. GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS AGREEMENT IS A PART
IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER CONNECTICUT GENERAL
STATUTES SECTIONS 52-278a TO 52-278n, INCLUSIVE, OR BY OTHER APPLICABLE LAW HEREBY
WAIVES HIS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH Lender MAY DESIRE TO USE. 

                
13. This Agreement is for the exclusive benefit of the Lender, its heirs, successors
and assigns, and may not be enforced by any other person. 

                
14. Anything in this Agreement to the contrary notwithstanding, the obligations
of the Guarantor hereunder shall be limited to an amount equal to the sum of (i)
Fifty Thousand Dollars ($50,000), (ii) accrued interest on such amount under the
terms of the Note, and (iii) Eight and One-Third Percent (8.33%) of all additional
costs and expenses payable by the Borrower under the Note or the Loan Agreement.

                
IN WITNESS WHEREOF, Guarantor has hereunto subscribed his or her name as
of the date first written above. 

	
       

    	S/ GREGORY WITCHEL 

      Gregory Witchel 
	
       

    	 
	
       

    	 

 

- 5 -

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