Schedule 13D/A

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A8f4g3EFkEOcJNDyx56/8uFc1LD9ghFfmeWwiud21wJeOZDzvJ1akPkafdojY56D fZGSw4TMdlsiZitDr8Q1TA== 0001193125-06-177928.txt : 20060823 0001193125-06-177928.hdr.sgml : 20060823 20060822214649 ACCESSION NUMBER: 0001193125-06-177928 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20060823 DATE AS OF CHANGE: 20060822 GROUP MEMBERS: LDN STUYVIE PARTNERSHIP FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COMFORT WILLIAM T III CENTRAL INDEX KEY: 0001211531 FILING VALUES: FORM TYPE: SC 13D/A MAIL ADDRESS: STREET 1: 2325-B RENAISSANCE DR STREET 2: SUITE 21 CITY: LAS VEGAS STATE: NV ZIP: 89119 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: JL HALSEY CORP CENTRAL INDEX KEY: 0001166220 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-78509 FILM NUMBER: 061049765 BUSINESS ADDRESS: STREET 1: 103 FOULK ROAD STREET 2: SUITE 205Q CITY: WILMINGTON STATE: DE ZIP: 19803 BUSINESS PHONE: 302 691-6189 MAIL ADDRESS: STREET 1: 103 FOULK ROAD STREET 2: SUITE 205Q CITY: WILMINGTON STATE: DE ZIP: 19803 SC 13D/A 1 dsc13da.htm SCHEDULE 13D/A Schedule 13D/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a)

AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)

(Amendment No. 2 as to Mr. William T. Comfort, III and

Amendment No. 8 as to LDN Stuyvie Partnership)

J.L. Halsey Corporation (JLHY.OB)

(Name of Issuer)

Common Stock, Par Value $0.01 per share

(Title of Class of Securities)

46622H 10 3

(CUSIP Number)

William T. Comfort, III

30 Cheyne Walk

London, SW3 5HH, United Kingdom

44-207-986-5969

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

With a Copy to:

G. Daniel O’Donnell, Esq.

Dechert LLP

Cira Centre

2929 Arch Street

Philadelphia, Pennsylvania 19104-2808

Ph. (215) 994-4000

August 16, 2006

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 240.13d-1(b)(e), 240.13d-1(f) or 240.13d-1(g) check the following box ¨.

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7(b) for other parties to whom copies are to be sent

The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP NO. 4662HH 10.3		SCHEDULE 13D


1.	NAME OF REPORTING PERSON/S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)

	LDN Stuyvie Partnership / 73-1526937
2.	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
	(a) ¨
	(b) x
3.	SEC USE ONLY

4.	SOURCE OF FUNDS

	WC
5.	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)	¨

6.	CITIZENSHIP OR PLACE OF ORGANIZATION

	Oklahoma


NUMBER OF SHARES BENEFICIALLY OWNED BY EACH PERSON WITH		7. SOLE VOTING POWER


		8. SHARED VOTING POWER

		15,216,955
		9. SOLE DISPOSITIVE POWER


		10. SHARED DISPOSITIVE POWER

		15,216,955


11.	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	15,216,955
12.	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨

13.	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	18.3%
14.	TYPE OF REPORTING PERSON

	PN

*	The reporting person expressly disclaims (i) the existence of any group and (ii) beneficial ownership with respect to any shares other than the shares owned of record by such reporting person.


CUSIP NO. 4662HH 10.3		SCHEDULE 13D


1.	NAME OF REPORTING PERSON/S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)

	Mr. William T. Comfort, III
2.	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
	(a) ¨
	(b) x
3.	SEC USE ONLY

4.	SOURCE OF FUNDS

	WC
5.	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)	¨

6.	CITIZENSHIP OR PLACE OF ORGANIZATION

	United States of America


NUMBER OF SHARES BENEFICIALLY OWNED BY EACH PERSON WITH		7. SOLE VOTING POWER

		4,170,000
		8. SHARED VOTING POWER

		15,216,955
		9. SOLE DISPOSITIVE POWER

		4,170,000
		10. SHARED DISPOSITIVE POWER

		15,216,955


11.	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	19,386,955
12.	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨

13.	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	23.3%
14.	TYPE OF REPORTING PERSON

	IN

This Amendment No. 2 to Schedule 13D amends and supplements Items 4-7 contained in the Schedule 13D initially filed on or about January 3, 2003 by William T. Comfort, III and subsequently amended on January 13, 2003. This Amendment No. 8 to Schedule 13D amends and supplements Items 4-7 contained in the Schedule 13D initially filed on or about October 6, 1999 by LDN Stuyvie Partnership (the “Partnership”) and subsequently amended on October 18, 1999, November 8, 1999, December 17, 1999, December 29, 1999, January 6, 2000, January 12, 2000 and January 13, 2003. Mr. Comfort and the Partnership are referred to herein as the “Reporting Persons.” Each Reporting Person disclaims responsibility for the completeness and accuracy of the information contained in this Schedule 13D concerning the other Reporting Person.

ITEM 4. PURPOSE OF TRANSACTION.

On August 16, 2006, the Partnership and J.L. Halsey Corporation (the “Company”) entered into a Backstop Agreement. The Backstop Agreement provides that the Company has determined to conduct a rights offering (the “Rights Offering”) to allow its stockholders the right to purchase (“Rights”) shares of its Common Stock, par value $0.01 per share (“Common Stock”). As announced by the Company, the per share price in the Rights Offering will be $0.85 (the “Subscription Price”) and the aggregate offering price will be $20,000,000. Therefore, the number of offered shares will be 23,529,412.

Pursuant to the Backstop Agreement and subject to the terms and conditions thereof, the Company has offered, and the Partnership has agreed (the “Backstop Commitment”) to purchase a number of shares of the Company’s Common Stock equal to the Backstop Amount at a price per share equal to the Subscription Price. The “Backstop Amount” is a number of shares of Common Stock that, together with all Rights subscribed for and exercised in the Rights Offering (including any rights subscribed for by the Partnership), results in the Company receiving gross proceeds in the Rights Offering of at least $10,000,000 at the Subscription Price.

On August 16, 2006, the Partnership loaned $10,000,000 to the Company and, in connection therewith, the Company issued to the Partnership a promissory note in the principal amount of $10,000,000 (the “Promissory Note”). The Promissory Note is subject to the terms of a Subordination Agreement, dated as of August 16, 2006, between the Partnership and Comerica Bank. In connection with the foregoing transactions and pursuant to the Backstop Agreement, the Company has granted the Partnership the right to purchase a number of shares of Common Stock equal to the Option Amount at the Subscription Price. The “Option Amount” is a number of shares of Common Stock equal to the number of shares of Common Stock purchasable pursuant to any Rights that remain unsubscribed for in the Rights Offering after the Partnership has fulfilled its Backstop Commitment. The Backstop Agreement provides that other stockholders of the Company will not be offered the right to purchase Common Stock in respect of any Rights that go unsubscribed for in the Rights Offering.

The closing of the transactions contemplated by the Backstop Agreement is subject to a number of conditions, including the filing by the Company of, and declaration by the Securities and Exchange Commission of the effectiveness of, a Registration Statement relating to the Rights Offering.

ITEM 5. INTEREST IN SECURITIES OF THE COMPANY

(a)

(1) Mr. Comfort may be deemed to beneficially own in the aggregate 19,386,955 shares of Common Stock of the Company, representing approximately

23.3% of the outstanding shares of Common Stock of the Company. Of such shares, Mr. Comfort has sole voting and dispositive power with respect to 4,170,000 shares, and shared voting and dispositive power with respect to 15,216,955 shares as the general partner of the Partnership.

(2) The Partnership may be deemed to beneficially own in the aggregate 15,216,955 shares of Common Stock of the Company, representing approximately 18.3% of the outstanding shares of Common Stock of the Company. Of such shares, the Partnership has sole voting and dispositive power with respect to no shares, and shared voting and dispositive power with respect to 15,216,955 shares.

(b)

(1) Of the 4,170,000 shares of Common Stock of the Company for which Mr. Comfort has sole voting and dispositive power, all such shares are held of record by Mr. Comfort. Of the 15,216,955 shares of Common Stock of the Company over which Mr. Comfort has shared voting and dispositive power, all such shares are held of record by the Partnership.

(2) Of the 15,216,955 shares of Common Stock of the Company of which the Partnership has shared voting and dispositive power, all such shares are held of record by the Partnership.

ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE COMPANY.

See Item 4 above.

ITEM 7. MATERIAL TO BE FILED AS EXHIBITS

(1) Backstop Agreement, dated as of August 16, 2006, by and between LDN Stuyvie Partnership and the Company.

(2) Promissory Note, dated as of August 16, 2006, issued to LDN Stuyvie Partnership.

(3) Subordination Agreement, dated as of August 16, 2006, by and between LDN Stuyvie Partnership and Comerica Bank.

EXHIBIT INDEX


(1)		Backstop Agreement dated as of August 16, 2006, by and between LDN Stuyvie Partnership and the Company.

(2)		Promissory Note, dated as of August 16, 2006, issued to LDN Stuyvie Partnership.

(3)		Subordination Agreement, dated as of August 16, 2006, by and between LDN Stuyvie Partnership and Comerica Bank.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


	LDN STUYVIE PARTNERSHIP

	By:	/s/ William T. Comfort, III
Dated: August 22, 2006		William T. Comfort, III, General Partner

	WILLIAM T. COMFORT, III

	/s/ William T. Comfort, III

Dated: August 22, 2006

EX-99.1 2 dex991.htm BACKSTOP AGREEMENT Backstop Agreement

Exhibit 1

BACKSTOP AGREEMENT

This Backstop Agreement (the “Agreement”) is made as of August 16, 2006 by and between J. L. Halsey Corporation (the “Company”) and LDN Stuyvie Partnership (“LDN”). Except as otherwise indicated herein, capitalized terms used herein are defined in Section 8 hereof.

WHEREAS, the Company has determined to conduct a rights offering (the “Rights Offering”) to allow its stockholders (as of a record date to be determined) the right to purchase that number of shares (or fraction of a share, as the case may be) of its common stock, par value $0.01 per share (the “Common Stock”), to be set forth in a registration statement to be filed by the Company with the Commission (the “Registration Statement”) for each share of Common Stock that each stockholder of the Company owns as of the record date established for the Rights Offering (each a “Right” and, collectively, the “Rights”), at a price of $0.85 per share (the “Subscription Price”);

WHEREAS, LDN has committed (the “Backstop Commitment”) to purchase such number of shares of Company Common Stock so that, together with all Rights subscribed for and exercised in the Rights Offering (including any Rights subscribed for by LDN), the Company will receive gross proceeds (including offsets of principal amount of the Promissory Note, as hereinafter defined, as set forth in Section 2) in the Rights Offering of at least $10,000,000 (the “Backstop Amount”) at the Subscription Price (it being understood that other stockholders of the Company will not be offered the right to purchase Common Stock in respect of any Rights that go unsubscribed in the Rights Offering); and

WHEREAS, in consideration of LDN’s agreeing to provide the Backstop Commitment, the Company has agreed to grant LDN the option (the “Option”) to purchase an additional number of shares of Common Stock equal to the number of shares of Common Stock purchasable pursuant to any Rights that remain unsubscribed for in the Rights Offering after LDN has fulfilled its Backstop Commitment (the “Option Amount”) at the Subscription Price (it being understood that other stockholders of the Company will not be offered the right to purchase Common Stock in respect of any Rights that go unsubscribed in the Rights Offering).

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

Section 1. Material Terms; Backstop; and Option.

(a) Material Terms of the Rights Offering. The material terms of the Rights Offering shall be as set forth on Exhibit A hereto. The Company shall not alter the terms of the Rights Offering set forth on Exhibit A hereto without the prior consent of LDN.

(b) Backstop. Pursuant to the terms and subject to the conditions of this Agreement, in connection with the Rights Offering, the Company hereby offers LDN the right to purchase that number of shares of Company Common Stock having an aggregate value equal to the Backstop Amount at a price per share equal to the Subscription Price. As soon as reasonably practicable following the expiration date of the Rights Offering as

set forth in the Registration Statement (the “Expiration Date”), the Company and the subscription agent for the Rights Offering shall determine the Backstop Amount and provide notice thereof to LDN (the “Notice Date”). At the Closing (as hereinafter defined), LDN hereby agrees to purchase that number of shares of Company Common Stock having an aggregate value equal to the Backstop Amount at a price per share equal to the Subscription Price (it being understood that other stockholders of the Company will not be offered the right to purchase Common Stock in respect of any Rights that go unsubscribed in the Rights Offering).

(c) Option. Pursuant to the terms and subject to the conditions of this Agreement, the Company hereby grants LDN the right, in connection with the Rights Offering, to purchase up to that number of shares of Company Common Stock having an aggregate value equal to the Option Amount at a price per share equal to the Subscription Price. As soon as reasonably practicable following the Expiration Date, the Company and the subscription agent for the Rights Offering shall determine the Option Amount. On the Notice Date, the Company shall provide notice of the Option Amount to LDN. If LDN determines to exercise the Option, it shall give the Company written notice (the “LDN Notice”) of such exercise (including the number of shares of Company Common Stock within the Option Amount that LDN elects to purchase) within two business days after receipt by LDN of notice of the Option Amount (the “Option Expiration Date”). The number of shares of Company Common Stock that LDN elects to purchase pursuant to the LDN Notice is hereinafter referred to as the “LDN Option Amount.” At the Closing, LDN agrees to purchase that number of shares of Company Common Stock equal to the LDN Option Amount at a price per share equal to the Subscription Price (it being understood that other stockholders of the Company will not be offered the right to purchase Common Stock in respect of any Rights that go unexercised in the Rights Offering).

Section 2. The Closing. LDN’s subscription for the Backstop Amount, if applicable, and the LDN Option Amount, if applicable, hereunder shall take place as soon as reasonably practicable following the Option Expiration Date at a place mutually agreeable to the Company and LDN (the “Closing”). At the Closing, the Company shall deliver to LDN the certificates evidencing the shares of Common Stock subscribed for pursuant to Section 1, and LDN shall deliver to the Company the Promissory Note, the principal amount of which shall be offset by the amount of the Subscription Price multiplied by the sum of the LDN Option Amount and the number of shares of Company Common Stock included in the Backstop Amount (such aggregate amount is referred to herein as the “Total Price”), with any remainder of the amount of the Total Price above the principal amount of the Promissory Note being paid by LDN by delivering to the Company a cashier’s check or wire transfer of immediately available funds to a bank designated by the Company. In the event that the Total Price is less than the outstanding principal amount of the Promissory Note and all accrued but unpaid interest thereon, at the Closing the Company shall pay such remaining balance in cash or additional shares of Company Common Stock (as provided in the Promissory Note) and cancel the Promissory Note.

Section 3. Representations and Warranties of the Company. As a material inducement to LDN to enter into this Agreement and subscribe for the Rights, the Company hereby represents and warrants that:

(a) Organization and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. The Company has all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties and to carry on its business as now conducted and presently proposed to be conducted, and all requisite corporate power and authority to carry out the transactions contemplated by this Agreement, including, without limitation, the Rights Offering.

(b) Capital Stock. All of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued. The Company has reserved sufficient authorized but unissued shares of Common Stock to consummate the Rights Offering on the terms set forth on Exhibit A hereto and the transactions contemplated hereby. All shares of Common Stock to be purchased by LDN from the Company pursuant to this Agreement have been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment therefor, will be validly issued, fully paid and nonassessable.

(c) Authorization; No Breach; Compliance with Laws. The execution, delivery and performance of this Agreement and any other agreement contemplated hereby to which the Company is a party (including the Promissory Note) have been duly authorized by the Company. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, (ii) result in any violation of the provisions of the charter or by-laws of the Company or (iii) result in any violation of any statute, including, without limitation, the Delaware General Corporation Law, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its properties or assets. Except for the registration of the Rights under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the Rights Offering, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby.

(d) Broker’s Fees. There is no investment banker, broker, finder or other intermediary or advisor that has been retained by or is authorized to act on behalf of the

Company or any of its Affiliates who might be entitled to any fee, commission or reimbursement of expenses from LDN as a result of consummation of the transactions contemplated hereby (including, without limitation, the Rights Offering).

Section 4. Representations and Warranties of LDN. As a material inducement to the Company to enter into this Agreement, LDN hereby represents and warrants that:

(a) Organization and Corporate Power. LDN is a partnership duly organized, validly existing and in good standing and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. LDN has all requisite partnership power and authority and all material licenses, permits and authorizations necessary to own and operate its properties and to carry on its business as now conducted and presently proposed to be conducted.

(b) Authorization; No Breach. The execution of this Agreement by LDN and the consummation by LDN of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which LDN is a party or by which LDN is bound or to which any of its property or assets is subject, nor will such actions result in any violation of the provisions of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over LDN or its property or assets in each case in a manner that would adversely impact LDN’s ability to subscribe for the Rights hereunder; and, except for the registration of the Rights under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the Rights Offering, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by LDN and the consummation by LDN of the transactions contemplated hereby in each case in a manner that would adversely impact LDN’s ability to subscribe for the Rights and perform its obligations hereunder.

(c) Investment Representations. LDN hereby represents that it is acquiring the Company Common Stock included in the Backstop Amount and the LDN Option Amount (the “Restricted Securities”) and the Rights purchased hereunder or acquired pursuant hereto and for its own account with the present intention of holding such securities for purposes of investment, and that it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws. In addition, LDN hereby represents that it is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Rights and the Restricted Securities.

(d) Accredited Investor Status. LDN is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

(e) Reliance on Exemptions. LDN understands that the Restricted Securities are being offered and sold to it in reliance on specific exemptions from the registration

requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and LDN’s compliance with, the representations and warranties of LDN set forth herein in order to determine the availability of such exemptions and the eligibility of LDN to acquire the Restricted Securities hereunder.

(f) Transfer or Resale. LDN understands that (i) the Restricted Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) LDN shall have delivered to the Company an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that the Restricted Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) LDN provides the Company with reasonable assurance that the Restricted Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the Securities Act or a successor rule thereto (“Rule 144”); (ii) any sale of Restricted Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of Restricted Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the Commission thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Restricted Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

(g) Legends. LDN understands that the certificates representing the Restricted Securities shall initially bear a restrictive legend in customary form (and a stop-transfer order may be placed against the transfer of such stock certificates).

(h) Broker’s Fees. There is no investment banker, broker, finder or other intermediary or advisor that has been retained by or is authorized to act on behalf of LDN who might be entitled to any fee, commission or reimbursement of expenses from either the Company or any of its Affiliates as a result of consummation of the transactions contemplated hereby (including, without limitation, the Rights Offering).

(i) Shares of Common Stock Beneficially Owned. As of the date hereof, LDN is the beneficial owner of 15,216,955 shares of Common Stock.

Section 5. Conditions to Obligations of Each Party to Effect the Closing. The respective obligations of each party to consummate the transactions contemplated hereby are subject to the satisfaction on or prior to the Closing of each of the following conditions:

(a) All consents by third parties (government or otherwise) that are required for the consummation of the transactions contemplated hereby (including, without limitation, the consummation of the Rights Offering) have been obtained on terms mutually agreeable to each party.

(b) The Registration Statement shall have been filed with the Commission and declared effective; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or otherwise shall have been complied with.

(c) No action, suit or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any jurisdiction or before any arbitrator wherein an unfavorable judgment, decree, injunction, order or ruling would prevent the performance of this agreement or any of the transactions contemplated hereby (including, without limitation, the Rights Offering), declare unlawful the transactions contemplated by this Agreement (including, without limitation, the Rights Offering) or cause such transactions to be rescinded.

(d) The Rights Offering shall have been consummated in conformity with the requirements and conditions set forth in the Registration Statement.

Section 6. Conditions to Obligations of the Company to Effect the Closing. Subject to Section 5 above, the obligations of the Company to consummate the transactions contemplated hereby are subject to each of the representations and warranties of LDN contained in this Agreement being true and correct in all material respects as of the date hereof and at and as of the date of the Closing as if made at and as of such time, except that, to the extent such representations and warranties address matters only as of a particular date, such representations and warranties shall, to such extent, be true and correct in all material respects at and as of such particular date as if made at and as of such particular date.

Section 7. Conditions to Obligations of LDN to Effect the Closing. Subject to Section 5 above, the obligations of LDN to consummate the transactions contemplated hereby and to purchase the Backstop Amount are subject to each of the representations and warranties of the Company contained in this Agreement being true and correct in all material respects as of the date hereof and at and as of the date of the Closing as if made at and as of such time, except that, to the extent such representations and warranties address matters only as of a particular date, such representations and warranties shall, to such extent, be true and correct in all material respects at and as of such particular date as if made at and as of such particular date.

Section 8. Definitions. For the purposes of this Agreement, the following terms have the meanings set forth below:

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. For purposes of this definition, “control” when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by Contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative of the foregoing.

“Commission” means the Securities and Exchange Commission or any governmental body or agency succeeding to the functions thereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Person” means an individual, a partnership, a corporation, a limited liability company, association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Securities Act” means the Securities Act of 1933, as amended, or any similar federal law then in force.

Section 9. Termination. This Agreement may be terminated at any time prior to the Closing, as follows:

(a) by mutual written consent of the Company and LDN;

(b) by either the Company or LDN if any governmental entity shall institute any suit or action challenging the validity or legality of, or seeking to restrain the consummation of, the transactions contemplated by this Agreement (including, without limitation, the issuance of Rights pursuant to the Rights Offering);

(c) by the Company, in the event LDN has breached any representation, warranty, or covenant contained in this Agreement, in any material respect, provided that the Company has notified LDN of the breach, and the breach has continued without cure for a period of 15 days after the notice of such breach or for such longer period so long as such breach is curable by LDN through the exercise of its reasonable efforts, and LDN continues to exercise such reasonable efforts;

(d) by LDN, in the event that the Company has breached any representation, warranty, or covenant contained in this Agreement, in any material respect, provided that LDN has notified the Company of the breach, and the breach has continued without cure for a period of 15 days after the notice of such breach or for such longer period so long as such breach is curable by the Company through the exercise of its reasonable efforts, and the Company continues to exercise such reasonable efforts; and

(e) automatically and without any action on the part of either of the parties hereto if the Registration Statement has not been declared effective by the Commission by 5:30 p.m. ET on January 1, 2007; and

(f) automatically and without any action on the part of either of the parties hereto if the Registration Statement has been declared effective by the Commission by 5:30 p.m. ET on January 31, 2007, but the Rights offered in the Rights Offering have not expired by 11:59 p.m. ET on March 31, 2007.

Section 10. Miscellaneous.

(a) Successors and Assigns. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not; provided that neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned by any party without the prior written consent of the other party.

(b) Survival of Representations and Warranties. All representations and warranties contained herein or made in writing by any party in connection herewith shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

(c) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(d) Construction. Whenever the context requires, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine and neuter. All references to Sections and Paragraphs refer to sections and paragraphs of this Agreement. The use of the word “including” in this Agreement shall be by way of example rather than limitation.

(e) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the parties hereto.

(f) Counterparts; Facsimile Signature. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement. This Agreement may be executed by facsimile signature.

(g) Governing Law. This Agreement will be governed in all respects by the laws of the State of Delaware, without regard to the principles of conflicts of law of such state.

(h) Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid.

(i) Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and, upon written request therefor, to reimburse LDN for all reasonable documented attorneys’ fees and expenses incurred by LDN in connection with the transactions contemplated hereby and in the Promissory Note up to an amount not to exceed $25,000 (the “Expense Cap”), it being acknowledged and agreed, however, that the Company shall be reasonable and consider in good faith increasing the Expense Cap by a reasonable amount if warranted in light of the circumstances. Except as provided in this Section (i), LDN shall pay its own expenses, including the fees and disbursements of its counsel.

IN WITNESS WHEREOF, the parties hereto have executed this Backstop Agreement on the date first written above.


J. L. HALSEY CORPORATION

By:		/s/ David R. Burt
Name:		David Burt
Its:		Chief Executive Officer

LDN STUYVIE PARTNERSHIP

By:		/s/ William T. Comfort, III
Name:		William T. Comfort, III
Its:		General Partner

S-1

EXHIBIT A

Material Terms of Rights Offering



Issuer		J.L. Halsey Corporation

Rights		Pro rata rights to Purchase Halsey Common Stock distributed to existing stockholders

Transferability		Non-transferable and non-assignable

Aggregate Offering Price		$20,000,000

Offering Price		$0.85/share

Offered Shares		23,529,412 common shares (=$20M/$0.85)

Standby Underwriter		LDN

Standby Commitment		LDN commitment to purchase the Backstop Amount

Option		LDN option to purchase the Option Amount

S-1

EX-99.2 3 dex992.htm PROMISSORY NOTE Promissory Note

Exhibit 2

THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT, DATED AS OF THE DATE HEREOF, BY AND BETWEEN THE PAYEE AND COMERICA BANK, N.A., A COPY OF WHICH IS ON FILE AT THE CORPORATE OFFICES OF THE MAKER.

PROMISSORY NOTE


US $10,000,000		August 16, 2006

FOR VALUE RECEIVED, J. L. Halsey Corporation (“Maker”) promises to pay to the order of LDN Stuyvie Partnership (“Payee”), at the address for Payee set forth in Section 11 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 TEN MILLION DOLLARS (US$10,000,000.00).

1. Interest. Interest on the principal balance hereof shall accrue at the lesser of nine and one-half percent (9.5%) 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. Default; Default Rate. It shall be a “Default” hereunder if the principal balance of this Note and all accrued but unpaid interest thereon shall not be paid at maturity. In the event of a Default, interest on the principal balance hereof shall accrue from the date of maturity until paid at the lesser of the rate stated above plus two percent (2%) per annum or the Maximum Lawful Rate (“Default Interest”).

3. Payment Schedule; Maturity. Subject to Section 4 and 5 of this Note, the outstanding principal balance of this Note and interest thereon shall be paid on the earliest to occur of (i) the Closing (as defined in the Backstop Agreement, as hereinafter defined), (ii) the date on which the Board of Directors of Maker resolves to abandon the Rights Offering (as hereinafter defined), (iii) the date on which any temporary restraining order, preliminary or permanent injunction or other order issued by any governmental entity of competent jurisdiction, or any other legal restraint or prohibition prevents the consummation of the Rights Offering, (iv) the date on which any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Rights Offering by any governmental entity of competent jurisdiction makes the consummation of the Rights Offering illegal, (v) February 1, 2007, if the Registration Statement (as defined in the Backstop Agreement) has not been declared effective by the Securities and Exchange Commission by 5:30 p.m. ET on January 31, 2007, or (vi) April 1, 2007, if the Registration Statement has been declared effective by the Securities and Exchange Commission by 5:30 p.m. on January 31, 2007, but the Rights (as defined in the Backstop Agreement) offered in the Rights Offering have not expired by 11:59 p.m. on March 31, 2007.

4. Rights Offering; Cancellation of Principal Amounts Due. This Note is being entered into in connection with that certain Backstop Agreement entered into contemporaneously herewith by and between Maker and Payee (the “Backstop Agreement”) pursuant to which the Payee has agreed to purchase common stock of Maker in connection with a proposed rights offering by Maker (the “Rights Offering”), all as more fully described in the Backstop

Agreement. In the event that Maker consummates the Rights Offering, and in the event Payee elects to subscribe for and exercise rights in the Rights Offering, all amounts due Maker from Payee in connection with Payee’s subscription for and exercise of rights in the Rights Offering shall be offset against the principal amount (and, as provided in Section 6 and Section 7, any accrued but unpaid interest) owing under this Note in lieu of Payee’s payment therefor automatically at the consummation of the Rights Offering without any action on the part of the Maker or the Payee. In addition, in the event that Maker consummates the Rights Offering, all amounts due Maker from Payee in connection with Payee’s purchase of shares of Maker’s common stock pursuant to the Backstop Agreement shall be offset against the principal amount (and, as provided in Section 6 and Section 7, any accrued but unpaid interest) owing under this Note in lieu of Payee’s payment therefor at the Closing (as defined in the Backstop Agreement) as provided in Section 2 of the Backstop Agreement. In the event that the Total Price (as defined in the Backstop Agreement) is less than the outstanding principal amount owing under this Note and all accrued but unpaid interest thereon, at the Closing (as defined in the Backstop Agreement), but subject to Section 7, Maker shall pay such remaining balance in cash and cancel the Promissory Note. Notwithstanding the foregoing, except as otherwise provided in Section 6 and Section 7, all interest due hereunder shall be paid in cash and may not be offset against amounts due Maker from the Payee in connection with the exercise of rights in the Rights Offering.

5. Failure of Rights Offering; Cancellation of Principal Amounts Due. At any time that Maker pays all or any portion of the outstanding principal balance of this Note pursuant to Section 3(ii), Section 3(iii), Section 3(iv), Section 3(v), or Section 3(vi), Maker shall pay the amount of such principal balance in authorized shares of common stock of Maker. Each share of common stock issued to Payee shall reduce the principal balance of this Note by $0.85. Notwithstanding the foregoing, except as otherwise provided in Section 6 and Section 7, all interest due hereunder shall be paid in cash and may not be paid in shares of common stock of Maker.

6. Payment of Interest in Cash or Stock upon Default. In the event of a Default, all accrued but unpaid interest shall be paid in cash or in authorized shares of Maker’s common stock at Payee’s election. Each share of common stock issued to Payee shall reduce any accrued but unpaid interest under this Note by $0.85.

7. Payment of Principal and Interest in Stock in Certain Circumstances. Notwithstanding anything to the contrary in this Note, in the event that Maker is prevented from paying any required cash payment of principal or accrued but unpaid interest under this Note when due pursuant to the terms of any agreement governing Maker’s senior indebtedness, Maker shall pay all such amounts in authorized shares of Maker’s common stock. In such a case, each share of common stock issued to Payee shall reduce the principal amount and any accrued but unpaid interest under this Note by $0.85.

8. 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 senior 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. Notwithstanding anything in this Note to the contrary, LDN shall be entitled to receive payment of principal of this Note in shares of common stock of Halsey, whether or not an Event of Default has occurred under the agreements governing the Senior Indebtedness.

(b) Maker covenants and agrees that Maker and its subsidiaries (on a consolidated basis) will not incur Senior Indebtedness that exceeds 3.5 times the trailing twelve month EBITDA of Maker and its subsidiaries (on a consolidated basis). As used in this Note, “EBITDA” means the consolidated earnings of Maker before interest, taxes, depreciation and amortization, as derived from Maker’s 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 Backstop Agreement; (ii) any payments (whether in the form of principal, interest or otherwise) to any provider to Maker or its affiliates of financing in connection with (A) any recapitalization or reorganization of Maker (or its subsidiaries) or, (B) any merger or acquisition transaction of Maker (or its subsidiaries), or (C) providing working capital to Maker or its subsidiaries, and any expenses incurred in connection with any of the foregoing; (iii) any extraordinary expenses and losses; (iv) if 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 Maker or its subsidiaries under any acquisition 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 generally accepted accounting principles or otherwise, of any such debt or obligation on the balance sheet of such person; provided, however, that a change in generally accepted accounting principles 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.

9. 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.

10. Assignment Prohibited. Payee may not assign its interest in this Note.

11. 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:		LDN Stuyvie Partnership
		30 Cheyne Walk
		SW3 5HH London
		United Kingdom
		Attention: William T. Comfort III
		Telecopy No.: +44 (0) 20-7808-4781

If to Maker:		J. L. Halsey Corporation
		103 Foulk Road, Suite 205-Q
		Wilmington, Delaware 19803
		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.

12. 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 Delaware and the courts of the United States of America located in Delaware for any litigation arising out of or relating to this Note or the 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 11 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 Delaware or the courts of the United States of America located in Delaware 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 connection with any litigation arising out of or relating to this Note or the 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.

13. 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 applicable laws 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, 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 this Note immediately be deemed reformed and the amounts thereafter collectable hereunder 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 this Note.

[Remainder of Page Intentionally Left Blank]

EXECUTED as of the date first written above.


MAKER:

J. L. HALSEY CORPORATION

By:		/s/ David R. Burt
Name:		David R. Burt
Title:		Chief Executive Officer

EX-99.3 4 dex993.htm SUBORDINATE AGREEMENT Subordinate Agreement

Exhibit 3

SUBORDINATION AGREEMENT

This Subordination Agreement is made as of August 16, 2006 by and between the undersigned (“Creditor”), and Comerica Bank (“Bank”).

Recitals

A. Commodore Resources (Nevada), Inc. (“Commodore”), Lyris Technologies Inc. (“Lyris”), Uptilt Inc. (“Uptilt”), MCC Nevada, Inc. (“MCC”) and Halsey Acquisition California, Inc. (“ClickTracks Merger Sub”) (each of Commodore, Lyris, Uptilt, MCC and ClickTracks Merger Sub are each referred to herein as a “Borrower” and collectively, “Borrowers”), have requested and/or obtained certain loans or other credit accommodations from Bank which are or may be from time to time secured by all assets and property of Borrowers. J. L. Halsey Corporation (“Halsey”) and Admiral Management Company (collectively, the “Guarantors”) have agreed to guarantee all of Borrowers’ obligations to Bank pursuant to one or more Guaranties dated as of October 4, 2005, as amended and affirmed from time to time (collectively, the “Guaranty”) and the Guaranty is and may be from time to time secured by all assets and property of the Guarantors pursuant to one or more Third Party Security Agreements (as defined below). Borrowers and Guarantors are each referred to herein as a “Loan Party” and are collectively referred to herein as the “Loan Parties”. Upon consummation of the ClickTracks Acquisition (as defined in the Loan Agreement) Halsey Acquisition California, Inc. will merge with and into ClickTracks Analytics, Inc. and thereafter, all references in the Loan Documents (including this Subordination Agreement) to “Halsey Acquisition California, Inc.” shall mean and refer to “ClickTracks Analytics, Inc.”

B. Creditor has extended loans or other credit accommodations to Halsey, and/or may extend loans or other credit accommodations to the Halsey from time to time.

C. In order to induce Bank to extend credit to the Loan Parties and, at any time or from time to time, at Bank’s option, to make such further loans, extensions of credit, or other accommodations to or for the account of the Loan Parties, or to purchase or extend credit upon any instrument or writing in respect of which the Loan Parties may be liable in any capacity, or to grant such renewals or extension of any such loan, extension of credit, purchase, or other accommodation as Bank may deem advisable, Creditor is willing to subordinate: (i) all of the Loan Parties’ indebtedness and obligations to Creditor, whether presently existing or arising in the future (the “Subordinated Debt”) to all of the Loan Parties’ indebtedness and obligations to Bank; and (ii) all of Creditor’s security interests, if any, in the Loan Parties’ property, to all of Bank’s security interests in the Loan Parties’ property.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. Creditor subordinates to Bank any security interest or lien that Creditor may have in any property of the Loan Parties. Notwithstanding the respective dates of attachment or perfection of the security interest of Creditor and the security interest of Bank, the security interest of Bank in the Collateral, as defined in that certain Loan and Security Agreement between Borrowers and Bank, dated as of October 4, 2005, as may subsequently be amended from time to time, including but not limited to by that certain First Amendment to Loan and Security Agreement dated as of April 25, 2006 and that proposed certain Second Amendment to Loan and Security Agreement that will be dated as of August 18, 2006 (the “Loan Agreement”) and as defined in one or more certain Third Party Security Agreements between Guarantors and Bank dated as of October 4, 2005, as amended from time to time (the “Third Party Security Agreements” and together with the Loan Agreement, the “Security Agreements”), shall at all times be prior to the security interest of Creditor.

2. All Subordinated Debt is subordinated in right of payment to (i) all obligations of the Loan Parties to Bank now existing or hereafter arising, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation, all interest accruing after the commencement by or against a Loan Party of any bankruptcy, reorganization or similar proceeding, and all obligations under the Security Agreements, and (ii) all increases, amendments and modifications thereto from time to time, and all refinancings of all or any part thereof (collectively, the “Senior Debt”).

3. Creditor will not demand or receive from any Loan Party (and no Loan Party will pay to Creditor) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will Creditor exercise any remedy with respect to the Collateral, nor will Creditor commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against the Loan Parties, for so long as any portion of the Senior Debt remains outstanding. Notwithstanding the foregoing, Creditor shall be entitled to receive (i) each regularly scheduled payment of interest and principal under that certain Backstop Agreement between Creditor and Halsey dated as of August 16, 2006 (the “Backstop Agreement”) and that certain Promissory Note made by Halsey in favor of Borrower in the original principal amount of Ten Million Dollars ($10,000,000) dated as of August 16, 2006 (the “Promissory Note”), provided that no Event of Default (as defined in the Loan Agreement) has occurred under the Loan Agreement which is continuing or would exist immediately after giving effect to such payment. Notwithstanding anything in this Agreement to the contrary, Creditor shall be entitled to receive payments of principal and accrued interest in shares of common stock of Halsey under and in strict accordance with the terms of the Promissory Note whether or not an Event of Default has occurred under the Loan Agreement.

4. Creditor shall promptly deliver to Bank in the form received (except for endorsement or assignment by Creditor where required by Bank) for application to the Senior Debt any payment, distribution, security or proceeds received by Creditor with respect to the Subordinated Debt other than in accordance with this Agreement.

5. In the event of a Loan Party’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and Bank’s claims against the Loan Parties and the estate of the Loan Parties shall be paid in full before any payment is made to Creditor.

6. For so long as any of the Senior Debt remains unpaid, Creditor irrevocably appoints Bank as Creditor’s attorney in fact, and grants to Bank a power of attorney with full power of substitution, in the name of Creditor or in the name of Bank, for the use and benefit of Bank, without notice to Creditor, to perform at Bank’s option the following acts in any bankruptcy, insolvency or similar proceeding involving the Loan Parties:

(i) To file the appropriate claim or claims in respect of the Subordinated Debt on behalf of Creditor if Creditor does not do so prior to 30 days before the expiration of the time to file claims in such proceeding and if Bank elects, in its sole discretion, to file such claim or claims; and

(ii) To accept or reject any plan of reorganization or arrangement on behalf of Creditor and to otherwise vote Creditor’s claims in respect of any Subordinated Debt in any manner that Bank deems appropriate for the enforcement of its rights hereunder.

7. Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Agreement. No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the security interest or lien that Creditor may have in any property of the Loan Parties. By way of example, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt.

8. This Agreement shall remain effective for so long as the Bank has any obligation to make credit extensions to the Loan Parties, any Senior Debt is outstanding or the Loan Parties owe any amounts to Bank under the Loan Documents or otherwise. If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by Bank for any reason (including, without limitation, the bankruptcy of the Loan Parties), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and Creditor shall immediately pay over to Bank all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder. At any time and from time to time, without notice to Creditor, Bank may take such actions with respect to the Senior Debt as Bank, in its sole discretion, may deem appropriate, including, without limitation, terminating advances to the Loan Parties, increasing the principal amount, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the

Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against the Loan Parties or any other person. No such action or inaction shall impair or otherwise affect Bank’s rights hereunder. Creditor waives the benefits, if any, of Civil Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433.

9. This Agreement shall bind any successors or assignees of each Creditor and shall benefit any successors or assigns of Bank. This Agreement is solely for the benefit of the Creditors, Bank and any lender that refinances all or any portion of the Senior Debt and is and not for the benefit of the Loan Parties or any other party. Each Creditor further agrees that if a Loan Party is in the process of refinancing a portion of the Senior Debt with a new lender, and if Bank or any new lender of Senior Debt makes a request of such Creditor, such Creditor shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.

10. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California, without regard to principles of conflicts of law. Each of Creditor and Bank hereby submits to the exclusive jurisdiction of the state and Federal courts located in the County of Santa Clara, State of California. THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.

12. REFERENCE PROVISION.

In the event the Jury Trial Waiver set forth above is not enforceable, the parties elect to proceed under this Judicial Reference Provision.

12.1 Mechanics.

(a) With the exception of the items specified in clause (c), below, any controversy, dispute or claim (each, a “Claim”) between the parties arising out of or relating to this Agreement or any other document, instrument or agreement between the undersigned parties (collectively in this Section, the “Comerica Documents”), will be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to the reference proceeding. Except as otherwise provided in the Comerica Documents, venue for the reference proceeding will be in the state or federal court in the county or district where the real property involved in the action, if any, is located or in the state or federal court in the county or district where venue is otherwise appropriate under applicable law (the “Court”).

(b) The matters that shall not be subject to a reference are the following: (i) nonjudicial foreclosure of any security interests in real or personal property, (ii) exercise of self-help remedies (including, without limitation, set-off), (iii) appointment of a receiver and (iv) temporary, provisional or ancillary remedies (including, without limitation, writs of attachment, writs of possession, temporary restraining orders or preliminary injunctions). This reference provision does not limit the right of any party to exercise or oppose any of the rights and remedies described in clauses (i) and (ii) or to seek or oppose from a court of competent jurisdiction any of the items described in clauses (iii) and (iv). The exercise of, or opposition to, any of those items does not waive the right of any party to a reference pursuant to this reference provision as provided herein.

(c) The referee shall be a retired judge or justice selected by mutual written agreement of the parties. If the parties do not agree within ten (10) days of a written request to do so by any party, then, upon request of any party, the referee shall be selected by the Presiding Judge of the Court (or his or her representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP § 170.6, each party shall have one peremptory challenge to the referee selected by the Presiding Judge of the Court (or his or her representative).

(d) The parties agree that time is of the essence in conducting the reference proceedings. Accordingly, the referee shall be requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within fifteen (15) days after the date of selection of the referee, (ii) if practicable, try all issues of law or fact within one hundred twenty (120) days after the date of the conference and (iii) report a statement of decision within twenty (20) days after the matter has been submitted for decision.

(e) The referee will have power to expand or limit the amount and duration of discovery. The referee may set or extend discovery deadlines or cutoffs for good cause, including a party’s failure to provide requested discovery for any reason whatsoever. Unless otherwise ordered based upon good cause shown, no party shall be entitled to “priority” in conducting discovery, depositions may be taken by either party upon seven (7) days written notice, and all other discovery shall be responded to within fifteen (15) days after service. All disputes relating to discovery which cannot be resolved by the parties shall be submitted to the referee whose decision shall be final and binding.

12.2 Procedures. Except as expressly set forth herein, the referee shall determine the manner in which the reference proceeding is conducted including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding. All proceedings and hearings conducted before the referee, except for trial, shall be conducted without a court reporter, except that when any party so requests, a court reporter will be used at any hearing conducted before the referee, and the referee will be provided a courtesy copy of the transcript. The party making such a request shall have the obligation to arrange for and pay the court reporter. Subject to the referee’s power to award costs to the prevailing party, the parties will equally share the cost of the referee and the court reporter at trial.

12.3 Application of Law. The referee shall be required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a court proceeding, including without limitation motions for summary judgment or summary adjudication. The referee shall issue a decision at the close of the reference proceeding which disposes of all claims of the parties that are the subject of the reference. Pursuant to CCP § 644, such decision shall be entered by the Court as a judgment or an order in the same manner as if the action had been tried by the Court and any such decision will be final, binding and conclusive. The parties reserve the right to appeal from the final judgment or order or from any appealable decision or order entered by the referee. The parties reserve the right to findings of fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision.

12.4 Repeal. If the enabling legislation which provides for appointment of a referee is repealed (and no successor statute is enacted), any dispute between the parties that would otherwise be determined by reference procedure will be resolved and determined by arbitration. The arbitration will be conducted by a retired judge or justice, in accordance with the California Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time. The limitations with respect to discovery set forth above shall apply to any such arbitration proceeding.

12.5 THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO

CONSULT) WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER COMERICA DOCUMENTS.

13. This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments. Creditor is not relying on any representations by Bank or the Loan Parties in entering into this Agreement, and Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of the Loan Parties. This Agreement may be amended only by written instrument signed by Creditor and Bank.

14. In the event of any legal action to enforce the rights of a party under this Agreement, the party prevailing in such action shall be entitled, in addition to such other relief as may be granted, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in such action.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.


“Bank”

COMERICA BANK

/s/ Philip Koblis
By:		Philip Koblis
Title:		First Vice President

“Creditor”

LDN STUYVIE PARTNERSHIP

/s/ William T. Comfort, III
By:		William T. Comfort
Title:		General Partner

The undersigned approve of the terms of this Agreement.


“Loan Parties”

COMMODORE RESOURCES (NEVADA), INC.

/s/ David R. Burt
By:		David R. Burt
Title:

LYRIS TECHNOLOGIES INC.

/s/ David R. Burt
By:		David R. Burt
Title:

UPTILT INC.

/s/ David R. Burt
By:		David R. Burt
Title:

MCC NEVADA, INC.

/s/ David R. Burt
By:		David R. Burt
Title:

J.L. HALSEY CORPORATION

/s/ David R. Burt
By:		David R. Burt
Title:

HALSEY ACQUISITION CALIFORNIA, INC.

/s/ David R. Burt
By:		David R. Burt
Title:

ADMIRAL MANAGEMENT CORPORATION

/s/ David R. Burt
By:		David R. Burt
Title:

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