EHHIBIT 10.1          LYRIS, INC.   LYRIS TECHNOLOGIES INC.   COMMODORE
RESOURCES (NEVADA), INC.   AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT    
  

 

 

 

 

 

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     This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as of
March 6, 2008, by and between COMERICA BANK (“Bank”) and LYRIS, INC., LYRIS
TECHNOLOGIES INC. and COMMODORE RESOURCES (NEVADA), INC. (each a “Borrower” and
collectively, “Borrowers”).

RECITALS

     Bank and certain of Borrowers have entered into that certain Loan and
Security Agreement dated as of October 4, 2005, as amended from time to time
(the “Original Agreement”). Borrowers and Bank wish to amend and restate the
terms of the Original Agreement in accordance with the terms hereof. This
Agreement sets forth the terms on which Bank will advance credit to Borrowers,
and Borrowers will repay the amounts owing to Bank.

AGREEMENT

     The parties agree as follows:

     1. DEFINITIONS AND CONSTRUCTION.

          1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:

          “ACH Sublimit” means a sublimit for Automated Clearing House
transactions under the Revolving Line not to exceed Five Hundred Thousand
Dollars ($500,000), minus any amounts outstanding under the Foreign Exchange
Sublimit and the Letter of Credit Sublimit.

          “Accounts” means all presently existing and hereafter arising
accounts, contract rights, payment intangibles, and all other forms of
obligations owing to Borrowers arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other technology)
or the rendering of services by Borrowers, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrowers and Borrowers’
Books relating to any of the foregoing.

          “Advance” or “Advances” means a cash advance or cash advances under
the Revolving Line.

          “Affiliate” means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person’s senior executive officers, directors, and partners.

          “Applicable Revolver Reduction Amount” means (i) Two Hundred Eight
Thousand Three Hundred Thirty Three and 33/100 Dollars ($208,333.33) per month
for each month from April 2008 through July 2008, (ii) Zero Dollars ($0) per
month for each month from August 2008 through November 2008, (iii) Three Hundred
Twelve Thousand Four Hundred Fifty Dollars ($312,450) for December 2008, (iv)
Four Hundred Sixteen Thousand Six Hundred Sixty Six and 66/100 Dollars
($416,666.66) per month for each month from January 2009 through March 2009, (v)
Three Hundred Twelve Thousand Four Hundred Fifty Dollars ($312,450) for April
2009, and (vi) Two Hundred Eight Thousand Three Hundred Thirty Three and 33/100
Dollars ($208,333.33) per month for each month from May 2009 through the
Revolving Maturity Date.

          “Applicable Unused Fee Percentage” means (i) one fifth of one percent
(0.20%) if the Senior Debt/EBITDA ratio calculated pursuant to Section 6.7(c)
hereof is less than or equal to 1.00 to 1.00 for the most recently ended
measuring period, (ii) one quarter of one percent (0.25%) if the Senior
Debt/EBITDA ratio calculated pursuant to Section 6.7(c) hereof is greater than
1.00 to 1.00 but less than or equal to 1.75 to 1.00 for the most recently ended
measuring period, and (iii) three tenths of one percent (0.30%) if the Senior
Debt/EBITDA ratio calculated pursuant to Section 6.7(c) hereof is greater than
1.75 to 1.00 for the most recently ended measuring period.

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          “Bank Expenses” means all: reasonable costs or expenses (including
reasonable attorneys’ fees and expenses, generated by outside counsel) incurred
in connection with the preparation, negotiation, administration, and enforcement
of the Loan Documents; reasonable Collateral audit fees; and Bank’s reasonable
attorneys’ fees and expenses (whether generated in-house or by outside counsel)
incurred in amending, enforcing or defending the Loan Documents (including fees
and expenses of appeal), incurred before, during and after an Insolvency
Proceeding, whether or not suit is brought.

          “Borrower State” means Delaware, Delaware and Nevada the states under
whose laws LYRIS, INC., LYRIS TECHNOLOGIES INC. and COMMODORE RESOURCES
(NEVADA), INC., respectively, is organized.

          “Borrower’s Books” means all of each Borrower’s books and records
including: ledgers; records concerning such Borrower’s assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.

          “Business Day” means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.

          “Capitalized Expenditures” means current period cash expenditures that
are amortized over a period of time in accordance with GAAP.

          “Cash” means unrestricted cash and cash equivalents.

          “Change in Control” shall mean a transaction in which any “person” or
“group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of a
sufficient number of shares of all classes of stock then outstanding of a
Borrower ordinarily entitled to vote in the election of directors, empowering
such “person” or “group” to elect a majority of the Board of Directors of a
Borrower, who did not have such power before such transaction.

          “Chief Executive Office State means California, California and Nevada,
where LYRIS, INC.’s, LYRIS TECHNOLOGIES INC.’s and COMMODORE RESOURCES (NEVADA),
INC.’s, chief executive office is located, respectively.

          “Closing Date” means the date of this Agreement.

          “Code” means the California Uniform Commercial Code, as amended or
supplemented from time to time.

          “Collateral” means the property described on Exhibits A-1, A-2 and A-3
attached hereto and all Negotiable Collateral and Intellectual Property
Collateral to the extent not described on Exhibits A-1, A-2 and A-3, except to
the extent any such property (i) is nonassignable by its terms without the
consent of the licensor thereof or another party (but only to the extent such
prohibition on transfer is enforceable under applicable law, including, without
limitation, Sections 9406 and 9408 of the Code), or (ii) the granting of a
security interest therein is contrary to applicable law, provided that upon the
cessation of any such restriction or prohibition, such property shall
automatically become part of the Collateral; provided that in no case shall the
definition of “Collateral” exclude any Accounts, proceeds of the disposition of
any property, or general intangibles consisting of rights to payment.

          “Collateral State” means the state or states where the Collateral is
located, which are California, Colorado, Nevada, and Delaware.  

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          “Contingent Obligation” means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit, corporate credit cards, or merchant services issued for the account of
that Person; and (iii) all obligations arising under any interest rate, currency
or commodity swap agreement, interest rate cap agreement, interest rate collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; provided, however, that the term “Contingent Obligation” shall not
include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.

          “Copyrights” means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.

          “Credit Extension” means each Advance or any other extension of credit
by Bank to or for the benefit of Borrowers hereunder.

          “EBITDA” means earnings of Borrowers before interest, taxes,
depreciation, amortization and non-cash stock compensation expense plus any cash
or non-cash expenses related to discontinued operations (provided that any such
cash expenses shall be capped at Two Hundred Thousand Dollars ($200,000)).

          “Environmental Laws” means all laws, rules, regulations, orders and
the like issued by any federal state, local foreign or other governmental or
quasi-governmental authority or any agency pertaining to the environment or to
any hazardous materials or wastes, toxic substances, flammable, explosive or
radioactive materials, asbestos or other similar materials.

          “Equipment” means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which a Borrower has any interest.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.

          “Event of Default” has the meaning assigned in Article 8.

          “Excess Cash Flow” means EBITDA less working capital changes, capital
expenditures, cash taxes paid, cash interest expenses paid, required principal
payments on all Indebtedness to Bank hereunder and payments made with respect to
Subordinated Debt that are permitted hereunder.

          “Foreign Exchange Sublimit” means a sublimit for FX Contracts under
the Revolving Line not to exceed Five Hundred Thousand Dollars ($500,000), minus
any amounts outstanding under the ACH Sublimit and the Letter of Credit
Sublimit.

          “GAAP” means generally accepted accounting principles, consistently
applied, as in effect from time to time.

          “Indebtedness” means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations, (d) all Contingent Obligations,
and (e) all obligations arising under the ACH Sublimit and Foreign Exchange
Sublimit, if any.  

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          “Insolvency Proceeding” means any proceeding commenced by or against
any Person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

          “Intellectual Property Collateral” means all of a Borrower’s right,
title, and interest in and to the following:

               (a) Copyrights, Trademarks and Patents;

               (b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;

               (c) Any and all design rights which may be available to a
Borrower now or hereafter existing, created, acquired or held;

               (d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;

               (e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;

               (f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and

               (g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.

          “Inventory” means all present and future inventory in which a Borrower
has any interest.

          “Investment” means any beneficial ownership interest (including stock,
partnership or limited liability company interest or other securities) of any
Person, or any loan, advance or capital contribution to any Person.

          “IRC” means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.

          “Letter of Credit” means a commercial or standby letter of credit or
similar undertaking issued by Bank at Borrower’s request in accordance with
Section 2.1(b)(iv).

          “Letter of Credit Sublimit” means a sublimit for Letters of Credit
under the Revolving Line not to exceed Five Hundred Thousand Dollars ($500,000),
minus any amounts outstanding under the ACH Sublimit and the Foreign Exchange
Sublimit.

          “Lien” means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.

          “Liquidity” means a ratio of Cash held at Bank plus availability under
the Revolving Line.

          “Loan Documents” means, collectively, this Agreement, any note or
notes executed by a Borrower, and any other document, instrument or agreement
entered into in connection with this Agreement, all as amended or extended from
time to time.

          “Material Adverse Effect” means a material adverse effect on (i) the
business operations, condition (financial or otherwise) or prospects of
Borrowers and their Subsidiaries taken as a whole, (ii) the ability of Borrowers
to repay the Obligations or otherwise perform its obligations under the Loan
Documents, or (iii) Borrowers’ interest in, or the value, perfection or priority
of Bank’s security interest in the Collateral.

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          “Negotiable Collateral” means all of a Borrower’s present and future
letters of credit of which it is a beneficiary, drafts, instruments (including
promissory notes), securities, documents of title, and chattel paper, and
Borrower’s Books relating to any of the foregoing.

          “Obligations” means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrowers pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from a Borrower to others that Bank may have obtained by assignment or
otherwise.

          “Parent” means Lyris, Inc.

          “Patents” means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.

          “Periodic Payments” means all installments or similar recurring
payments that Borrowers may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrowers and Bank.

          “Permitted Indebtedness” means:

               (a) Indebtedness of Borrowers in favor of Bank arising under this
Agreement or any other Loan Document;

               (b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;

               (c) Indebtedness not to exceed Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate in any fiscal year of Borrowers secured by a lien
described in clause (c) of the defined term “Permitted Liens;” provided such
Indebtedness does not exceed the lesser of the cost or fair market value of the
equipment financed with such Indebtedness at the time of financing;

               (d) Subordinated Debt;

               (e) Indebtedness to trade creditors incurred in the ordinary
course of business;

               (f) Indebtedness of a Borrower to another Borrower;

               (g) Indebtedness not to exceed Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate with respect to credit card debt incurred in the
ordinary course of Borrowers’ business; and

               (h) Extensions, refinancings and renewals of any items of
Permitted Indebtedness, provided that the principal amount is not increased or
the terms modified to impose more burdensome terms upon the respective Borrower
or its Subsidiary, as the case may be.

          “Permitted Investment” means:

               (a) Investments existing on the Closing Date disclosed in the
Schedule; and

               (b) (i) Marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either Standard
& Poor’s Corporation or Moody’s Investors Service, (iii) Bank’s certificates of
deposit maturing no more than one (1) year from the date of investment therein
and (iv) Bank’s money market accounts;

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               (c) Repurchases of stock from former employees or directors of a
Borrower under the terms of applicable repurchase agreements (i) in an aggregate
amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal
year, provided that no Event of Default has occurred, is continuing or would
exist after giving effect to the repurchases, or (ii) in any amount where the
consideration for the repurchase is the cancellation of indebtedness owed by
such former employees to such Borrower regardless of whether an Event of Default
exists;

               (d) Investments accepted in connection with Permitted Transfers;

               (e) Investments by a Borrower in another Borrower;

               (f) Investments not to exceed Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate in any fiscal year consisting of (i) travel advances
and employee relocation loans and other employee loans and advances in the
ordinary course of business, and (ii) loans to employees, officers or directors
relating to the purchase of equity securities of a Borrower or its Subsidiaries
pursuant to employee stock purchase plan agreements approved by such Borrower’s
Board of Directors;

               (g) Investments (including debt obligations) received in
connection with the bankruptcy, reorganization or other compromise of customers
or suppliers and in settlement of delinquent obligations of, and other disputes
with, customers or suppliers arising in the ordinary course of a Borrower’s
business;

               (h) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business, provided that this subparagraph
(h) shall not apply to Investments of a Borrower in any Subsidiary; and

               (i) Joint ventures or strategic alliances in the ordinary course
of a Borrower’s business consisting of the non-exclusive licensing of
technology, the development of technology or the providing of technical support,
provided that any cash Investments by Borrowers do not exceed Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate in any fiscal year.

          “Permitted Liens” means the following:

               (a) Any Liens existing on the Closing Date and disclosed in the
Schedule (excluding Liens to be satisfied with the proceeds of the Advances) or
arising under this Agreement or the other Loan Documents;

               (b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which the relevant Borrower maintains adequate
reserves;

               (c) Liens not to exceed Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate (i) upon or in any Equipment (other than Equipment
financed by an Equipment Advance) acquired or held by a Borrower or any of its
Subsidiaries to secure the purchase price of such Equipment or indebtedness
incurred solely for the purpose of financing the acquisition or lease of such
Equipment, or (ii) existing on such Equipment at the time of its acquisition,
provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such Equipment;

               (d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase;

               (e) Licenses between Borrowers for the use of property in the
ordinary course of business;

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               (f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Sections 8.5 or 8.9;
and

               (g) Liens in favor of other financial institutions arising in
connection with a Borrower’s deposit accounts held at such institutions to
secured standard fees for deposit services charged by, but not financing made
available by such institutions, provided that Bank has a perfected security
interest in the amounts held in such deposit accounts.

          “Permitted Transfer” means the conveyance, sale, lease, transfer or
disposition by a Borrower or any Subsidiary of:

               (a) Inventory in the ordinary course of business;

               (b) licenses and similar arrangements for the use of the property
of a Borrower or its Subsidiaries in the ordinary course of business;

               (c) cash to foreign Subsidiaries who are not Borrowers hereunder
in an aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000) in
the aggregate per year to be used for such Subsidiaries working capital;

               (d) any property to a Borrower;

               (e) worn-out or obsolete Equipment; or

               (f) other assets of Borrowers and their Subsidiaries that do not
in the aggregate exceed Two Hundred Fifty Thousand Dollars ($250,000) during any
fiscal year.

          “Person” means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

          “Prime Rate” means the variable rate of interest, per annum, most
recently announced by Bank, as its “prime rate,” whether or not such announced
rate is the lowest rate available from Bank.

          “Responsible Officer” means each of the Chief Executive Officer, the
Chief Operating Officer, the Chief Financial Officer, and the Controller of a
Borrower.

          “Revolving Line” means a Credit Extension of up to Twelve Million
Seven Hundred Eight Thousand Three Hundred Thirty Three and 37/100 Dollars
($12,708,333.37) inclusive of any amounts outstanding under the Letter of Credit
Sublimit, the ACH Sublimit and the Foreign Exchange Sublimit; provided however
that availability under the Revolving Line shall be reduced on the last day of
each month by the Applicable Revolver Reduction Amount through the Revolving
Maturity Date.

          “Revolving Maturity Date” means March 31, 2012.

          “Schedule” means the schedule of exceptions attached hereto and
approved by Bank, if any.

          “Shares” means (i) sixty five percent (65%) of the issued and
outstanding capital stock, membership units or other securities owned or held of
record by a Borrower in any Subsidiary of such Borrower which is not an entity
organized under the laws of the United States or any territory thereof, and (ii)
one hundred percent (100%) of the issued and outstanding capital stock,
membership units or other securities owned or held of record by a Borrower in
any Subsidiary of such Borrower which is an entity organized under the laws of
the United States or any territory thereof.

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          “SOS Reports” means the official reports from the Secretaries of State
of each Collateral State, Chief Executive Office State and Borrower State and
other applicable federal, state or local government offices identifying all
current security interests filed in the Collateral and Liens of record as of the
date of such report.

          “Subordinated Debt” means any debt or deferred payments incurred or
owing by a Borrower that is subordinated in writing to the debt owing by such
Borrower to Bank on terms reasonably acceptable to Bank (and identified as being
such by such Borrower and Bank).

          “Subsidiary” means any corporation, partnership or limited liability
company or joint venture in which (i) any general partnership interest or (ii)
more than fifty percent (50%) of the stock, limited liability company interest
or joint venture of which by the terms thereof has the ordinary voting power to
elect the Board of Directors, managers or trustees of the entity, at the time as
of which any determination is being made, is owned by a Borrower, either
directly or through an Affiliate.

          “Trademarks” means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of a Borrower
connected with and symbolized by such trademarks.

          1.2 Accounting Terms. Any accounting term not specifically defined
herein shall be construed in accordance with GAAP and all calculations shall be
made in accordance with GAAP. The term “financial statements” shall include the
accompanying notes and schedules.

     2. LOAN AND TERMS OF PAYMENT.

          2.1 Credit Extensions.

               (a) Promise to Pay. Borrowers promise to pay to Bank, in lawful
money of the United States of America, the aggregate unpaid principal amount of
all Credit Extensions made by Bank to Borrowers, together with interest on the
unpaid principal amount of such Credit Extensions at rates in accordance with
the terms hereof.

               (b) Advances Under Revolving Line.

                    (i) Amount. Subject to and upon the terms and conditions of
this Agreement (1) Borrowers may request one or more Advances in an aggregate
outstanding amount not to exceed the Revolving Line, less any amounts
outstanding under the Letter of Credit Sublimit, the Foreign Exchange Sublimit
and the ACH Sublimit and (2) amounts borrowed pursuant to this Section 2.1(b)
may be repaid and reborrowed at any time prior to the Revolving Maturity Date,
at which time all Advances under this Section 2.1(b) shall be immediately due
and payable. Borrowers may prepay and reborrow any Advances without penalty or
premium.

                    (ii) Excess Cash Flow Recapture. Within three (3) Business
days of receipt of quarterly SEC financial statements for each fiscal quarter
during which Advances are outstanding, Borrowers shall pay to Bank an amount
equal to seventy five percent (75%) of their Excess Cash Flow for the
immediately preceding fiscal quarter. This Excess Cash Flow payment will be
allocated to reduce the amount of outstanding Advances.

                    (iii) Form of Request. Whenever Borrowers desire an Advance,
Borrowers will notify Bank by email or facsimile transmission or telephone no
later than 3:00 p.m. Pacific time (1:00 p.m. Pacific time for wire transfers),
on the Business Day that the Advance is to be made. Each such notification shall
be promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank’s discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrowers shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1(b) to Borrowers’ deposit account.

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                    (iv) Letter of Credit Sublimit. Subject to the availability
under the Revolving Line, and in reliance on the representations and warranties
of Borrowers set forth herein, at any time and from time to time from the date
hereof through the Business Day immediately prior to the Revolving Maturity
Date, Bank shall issue for the account of a Borrower such Letters of Credit as
Parent may request by delivering to Bank a duly executed letter of credit
application on Bank’s standard form; provided, however, that the outstanding and
undrawn amounts under all such Letters of Credit (i) shall not at any time
exceed the Letter of Credit Sublimit, and (ii) shall be deemed to constitute
Advances for the purpose of calculating availability under the Revolving Line.
Any drawn but unreimbursed amounts under any Letters of Credit shall be charged
as Advances against the Revolving Line. All Letters of Credit shall be in form
and substance acceptable to Bank in its sole discretion and shall be subject to
the terms and conditions of Bank’s form application and letter of credit
agreement. Borrowers shall pay any standard issuance and other fees that Bank
notifies Parent it will charge for issuing and processing Letters of Credit.

                    (v) ACH Sublimit. Subject to the terms and conditions of
this Agreement, Borrowers may request ACH origination services by delivering to
Bank a duly executed ACH application on Bank’s standard form; provided, however,
that the total amount of the ACH processing reserves shall not exceed, and
availability under the Revolving Line shall be reduced by, the ACH Sublimit. In
addition, Bank may, in its sole discretion, charge as Advances any amounts that
become due or owing to Bank in connection with the ACH services. If Borrowers
have not secured to Bank’s satisfaction their obligations with respect to any
ACH origination services by the Revolving Maturity Date, then, effective as of
such date, the balance in any deposit accounts held by Bank and the certificates
of deposit issued by Bank in a Borrower’s name (and any interest paid thereon or
proceeds thereof, including any amounts payable upon the maturity or liquidation
of such certificates), shall automatically secure such obligations to the extent
of the then outstanding ACH origination services. Borrowers authorize Bank to
hold such balances in pledge and to decline to honor any drafts thereon or any
requests by a Borrower or any other Person to pay or otherwise transfer any part
of such balances for so long as the ACH origination services continue. Bank,
upon request by Borrower, shall release any such balances to the extent they
exceed the then outstanding ACH liabilities.

                    (vi) Foreign Exchange Sublimit. Subject to and upon the
terms and conditions of this Agreement and any other agreement that a Borrower
may enter into with the Bank in connection with foreign exchange transactions
(“FX Contracts”), Parent may request Bank to enter into FX Contracts with a
Borrower due not later than the Revolving Maturity Date. Borrowers shall pay any
standard issuance and other fees that Bank notifies Parent will be charged for
issuing and processing FX Contracts for such Borrower. The FX Amount shall at
all times be equal to or less than the Foreign Exchange Sublimit. The “FX
Amount” shall equal the amount determined by multiplying (i) the aggregate
amount, in United States Dollars, of FX Contracts between a Borrower and Bank
remaining outstanding as of any date of determination by (ii) the applicable
Foreign Exchange Reserve Percentage as of such date. The “Foreign Exchange
Reserve Percentage” shall be a percentage as determined by Bank, in its sole
discretion from time to time. The initial Foreign Exchange Reserve Percentage
shall be fifty percent (50%).

                    (vii) Collateralization of Obligations Extending Beyond
Maturity. If Borrowers have not secured to Bank’s satisfaction its obligations
with respect to any Letters of Credit, ACH origination services, or FX Contracts
by the Revolving Maturity Date, then, effective as of such date, the balance in
any deposit accounts held by Bank and the certificates of deposit or time
deposit accounts issued by Bank in a Borrower’s name (and any interest paid
thereon or proceeds thereof, including any amounts payable upon the maturity or
liquidation of such certificates or accounts), shall automatically secure such
obligations to the extent of the then continuing or outstanding and undrawn
Letters of Credit, ACH origination services, or FX Contracts. Each Borrower
authorizes Bank to hold such balances in pledge and to decline to honor any
drafts thereon or any requests by Borrower or any other Person to pay or
otherwise transfer any part of such balances for so long as the Letters of
Credit, ACH origination services, or FX Contracts are outstanding or continue.
Bank shall, upon request by Borrowers, release any such balances to the extent
they exceed then outstanding and undrawn Letters of Credit, ACH liabilities and
FX Contracts.

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          2.2 Overadvances. If the aggregate amount of the outstanding Advances
exceeds the Revolving Line at any time, Borrowers shall immediately pay to Bank,
in cash, the amount of such excess.

          2.3 Interest Rates, Payments, and Calculations.

               (a) Interest Rates for Advances. Except as set forth in Section
2.3(b), the Advances shall bear interest, on the outstanding daily balance
thereof, as set forth in the LIBOR Addendum to Loan & Security Agreement
attached as Exhibit D.

               (b) Late Fee; Default Rate. If any payment is not made within ten
(10) days after the date such payment is due, Borrowers shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All Obligations shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.

               (c) Payments. Interest hereunder shall be due and payable on the
last calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of either Borrower’s deposit accounts or against the Revolving Line,
in which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder until repaid. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.

               (d) Computation. In the event the Prime Rate is changed from time
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased, effective as of the day the Prime Rate is changed, by an amount
equal to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.

          2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrowers specifies. After the
occurrence of an Event of Default, Bank shall have the right, in its sole
discretion, to immediately apply any wire transfer of funds, check, or other
item of payment Bank may receive to conditionally reduce Obligations, but such
applications of funds shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon Pacific time shall be deemed to have been received by
Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.

          2.5 Fees. Borrowers shall pay to Bank the following:

               (a) Modification Fee. On the Closing Date, a fee equal to Ten
Thousand Dollars ($10,000), which shall be nonrefundable;

               (b) Unused Fee. A fee equal to a percentage equal to the
Applicable Unused Fee Percentage of the difference between the amount then
available under the Revolving Line pursuant to Section 2.1(b)(i) and the average
daily balance outstanding thereunder during the term hereof, paid quarterly in
arrears on an annualized basis, which shall be nonrefundable; and

               (c) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, and, after the Closing Date, all Bank
Expenses as and when they become due.

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          2.6 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 14.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default.

     3. CONDITIONS OF LOANS.

          3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:

               (a) this Agreement;

               (b) an officer’s certificate of each Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;

               (c) UCC National Form Financing Statement for Lyris, Inc.;

               (d) an amended and restated intellectual property security
agreement from each Borrower;

               (e) to the extent not already in possession of Bank, the
certificate(s) for the Shares, together with Assignment(s) Separate from
Certificate, duly executed by in blank;

               (f) current SOS Reports indicating that except for Permitted
Liens, there are no other security interests or Liens of record in the
Collateral;

               (g) control agreements with respect to any accounts permitted
hereunder to be maintained outside Bank (except with respect to accounts at
Cupertino Bank);

               (h) agreement to provide insurance;

               (i) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;

               (j) current Compliance Certificate in accordance with Section
6.2; and

               (k) such other documents or certificates, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.

          3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:

               (a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and

               (b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrowers on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.2.

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     4. CREATION OF SECURITY INTEREST.

          4.1 Grant of Security Interest. Each Borrower grants and pledges to
Bank a continuing security interest in the Collateral to secure prompt repayment
of any and all Obligations and to secure prompt performance by Borrowers of each
of its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral (except for leasehold interests in
real estate), and will constitute a valid, first priority security interest in
later-acquired Collateral. Notwithstanding any termination, Bank’s Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.

          4.2 Perfection of Security Interest. Each Borrower authorizes Bank to
file at any time financing statements, continuation statements, and amendments
thereto that (i) either specifically describe the Collateral or describe the
Collateral as all assets of such Borrower of the kind pledged hereunder, and
(ii) contain any other information required by the Code for the sufficiency of
filing office acceptance of any financing statement, continuation statement, or
amendment, including whether such Borrower is an organization, the type of
organization and any organizational identification number issued to such
Borrower, if applicable. Any such financing statements may be signed by Bank on
behalf of Borrowers, as provided in the Code, and may be filed at any time in
any jurisdiction whether or not Revised Article 9 of the Code is then in effect
in that jurisdiction. Each Borrower shall from time to time endorse and deliver
to Bank, at the request of Bank, all Negotiable Collateral and other documents
that Bank may reasonably request, in form satisfactory to Bank, to perfect and
continue perfected Bank’s security interests in the Collateral and in order to
fully consummate all of the transactions contemplated under the Loan Documents.
Each Borrower shall have possession of the Collateral, except where expressly
otherwise provided in this Agreement or where Bank chooses to perfect its
security interest by possession in addition to the filing of a financing
statement. Where Collateral is in possession of a third party bailee, each
Borrower shall take such commercially reasonable steps as Bank reasonably
requests for Bank to (i) obtain an acknowledgment, in form and substance
satisfactory to Bank, of the bailee that the bailee holds such Collateral for
the benefit of Bank and (ii) obtain “control” of any Collateral consisting of
investment property, deposit accounts, letter-of-credit rights or electronic
chattel paper (as such items and the term “control” are defined in Revised
Article 9 of the Code) by causing the securities intermediary or depositary
institution or issuing bank to execute a control agreement in form and substance
satisfactory to Bank. No Borrower will create any chattel paper without placing
a legend on the chattel paper acceptable to Bank indicating that Bank has a
security interest in the chattel paper. Each Borrower from time to time may
deposit with Bank specific cash collateral to secure specific Obligations; each
Borrower authorizes Bank to hold such specific balances in pledge and to decline
to honor any drafts thereon or any request by a Borrower or any other Person to
pay or otherwise transfer any part of such balances for so long as the specific
Obligations are outstanding.

          4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during a Borrower’s usual business hours but no more than twice a year (unless
an Event of Default has occurred and is continuing), to inspect such Borrower’s
Books and to make copies thereof and to check, test, and appraise the Collateral
in order to verify such Borrower’s financial condition or the amount, condition
of, or any other matter relating to, the Collateral.

          4.4 Pledge of Collateral. Each Borrower hereby pledges, assigns and
grants to Bank a security interest in all the Shares, together with all proceeds
and substitutions thereof, all cash, stock and other moneys and property paid
thereon, all rights to subscribe for securities declared or granted in
connection therewith, and all other cash and noncash proceeds of the foregoing,
as security for the performance of the Obligations. On the Closing Date, the
certificate or certificates for the Shares will be delivered to Bank,
accompanied by an instrument of assignment duly executed in blank by the
appropriate Borrower. To the extent required by the terms and conditions
governing the Shares, the relevant Borrower shall cause the books of each entity
whose Shares are part of the Collateral and any transfer agent to reflect the
pledge of the Shares. Upon the occurrence and during the continuance of an Event
of Default hereunder, Bank may effect the transfer of any securities included in
the Collateral (including but not limited to the Shares) into the name of Bank
and cause new certificates representing such securities to be issued in the name
of Bank or its transferee. Each Borrower will execute and deliver such
documents, and take or cause to be taken such actions, as Bank may reasonably
request to perfect or continue the perfection of Bank’s security interest in the
Shares. Unless an Event of Default shall have occurred and be continuing, each
Borrower shall be entitled to exercise any voting rights with respect to the
relevant Shares and to give consents, waivers and ratifications in respect
thereof, provided that no vote shall be cast or consent, waiver or ratification
given or action taken which would be inconsistent with any of the terms of this
Agreement or which would constitute or create any violation of any of such
terms. All such rights to vote and give consents, waivers and ratifications
shall terminate upon the occurrence and continuance of an Event of Default.

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     5. REPRESENTATIONS AND WARRANTIES.

     Each Borrower represents and warrants as follows with respect to such
Borrower:

          5.1 Due Organization and Qualification. Borrower and each Subsidiary
is duly existing under the laws of the state in which it is organized and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified, except
where the failure to do so could not reasonably be expected to cause a Material
Adverse Effect.

          5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower’s powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower’s Articles or Certificate of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement by which it is bound, except to the extent such default could not
reasonably be expected to cause a Material Adverse Effect.

          5.3 Collateral. Borrower has rights in or the power to transfer the
Collateral, and its title to the Collateral is free and clear of Liens, adverse
claims, and restrictions on transfer or pledge except for Permitted Liens. All
Collateral is located solely in the Collateral States. All Inventory is in all
material respects of good and merchantable quality, free from all material
defects, except for Inventory for which adequate reserves have been made. Except
as set forth in the Schedule, none of the Collateral is maintained or invested
with a Person other than Bank or Bank’s Affiliates.

          5.4 Intellectual Property Collateral. Borrower is the sole owner or
the valid licensee of the Intellectual Property Collateral, except for licenses
granted by Borrower to its customers in the ordinary course of business. To the
best of Borrower’s knowledge, each of the Copyrights, Trademarks and Patents is
valid and enforceable, and no part of the Intellectual Property Collateral has
been judged invalid or unenforceable, in whole or in part, and no claim has been
made to Borrower that any part of the Intellectual Property Collateral violates
the rights of any third party except to the extent such claim could not
reasonably be expected to cause a Material Adverse Effect. Except as set forth
in the Schedule, Borrower’s rights as a licensee of intellectual property do not
give rise to more than five percent (5%) of its gross revenue in any given
month, including without limitation revenue derived from the sale, licensing,
rendering or disposition of any product or service.

          5.5 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set forth
in the first paragraph of this Agreement. The chief executive office of Borrower
is located in the Chief Executive Office State at the address indicated in
Section 10 hereof.

          5.6 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which a likely adverse decision could
reasonably be expected to have a Material Adverse Effect.

          5.7 No Material Adverse Change in Financial Statements. All
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that are delivered by Borrower to Bank fairly present in all material
respects Borrower’s consolidated and consolidating financial condition as of the
date thereof and Borrower’s consolidated and consolidating results of operations
for the period then ended. There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrowers (taken as
a whole) since the date of the most recent of such financial statements
submitted to Bank.

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          5.8 Solvency, Payment of Debts. Borrower is able to pay its debts
(including trade debts) as they mature; the fair saleable value of Borrower’s
assets (including goodwill minus disposition costs) exceeds the fair value of
its liabilities; and Borrower is not left with unreasonably small capital after
the transactions contemplated by this Agreement.

          5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary
have met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower’s
failure to comply with ERISA that is reasonably likely to result in Borrower’s
incurring any liability that could have a Material Adverse Effect. Borrower is
not an “investment company” or a company “controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied in all material respects with all the
provisions of the Federal Fair Labor Standards Act. Borrower is in compliance
with all environmental laws, regulations and ordinances except where the failure
to comply is not reasonably likely to have a Material Adverse Effect. Borrower
has not violated any statutes, laws, ordinances or rules applicable to it, the
violation of which could reasonably be expected to have a Material Adverse
Effect. Borrower and each Subsidiary have filed or caused to be filed all tax
returns required to be filed, and have paid, or have made adequate provision for
the payment of, all taxes reflected therein except those being contested in good
faith with adequate reserves under GAAP or where the failure to file such
returns or pay such taxes could not reasonably be expected to have a Material
Adverse Effect.

          5.10 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.

          5.11 Government Consents. Borrower and each Subsidiary have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower’s business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Effect.

          5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower
is not a party to, nor is bound by, any license as licensee or other material
agreement that prohibits or otherwise restricts Borrower from granting a
security interest in Borrower’s interest in such license or agreement or any
other property.

          5.13 Shares. Borrower has full power and authority to create a first
lien on the Shares and no disability or contractual obligation exists that would
prohibit Borrower from pledging the Shares pursuant to this Agreement. To
Borrower’s knowledge, there are no subscriptions, warrants, rights of first
refusal or other restrictions on transfer relative to, or options exercisable
with respect to the Shares. The Shares have been and will be duly authorized and
validly issued, and are fully paid and non-assessable. To Borrower’s knowledge,
the Shares are not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.

          5.14 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank taken
together with all such certificates and written statements furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading as of the date made or provided, it being recognized
by Bank that the projections and forecasts provided by Borrower in good faith
and based upon reasonable assumptions are not to be viewed as facts and that
actual results during the period or periods covered by any such projections and
forecasts may differ from the projected or forecasted results.

     6. AFFIRMATIVE COVENANTS.

          Each Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, such Borrower (except as otherwise indicated)
shall do all of the following:

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          6.1 Good Standing and Government Compliance. Borrower shall maintain
its and each of its Subsidiaries’ corporate existence and good standing in the
Borrower State, shall maintain qualification and good standing in each other
jurisdiction in which the failure to so qualify could have a Material Adverse
Effect, and shall furnish to Bank the organizational identification number
issued to Borrower by the authorities of the state in which Borrower is
organized, if applicable. Borrower shall meet, and shall cause each Subsidiary
to meet, the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. Borrower shall comply in all material respects
with all applicable Environmental Laws, and maintain all material permits,
licenses and approvals required thereunder where the failure to do so could have
a Material Adverse Effect. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules
and regulations to which it is subject, and shall maintain, and shall cause each
of its Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which or failure to comply with which could reasonably
be expected to have a Material Adverse Effect.

          6.2 Financial Statements, Reports, Certificates. Borrowers shall
deliver the following to Bank: i) as soon as available, but in any event within
thirty (30) days after the end of each calendar month, a company prepared
consolidated and consolidating balance sheet and income statement covering
Borrowers’ operations during such period, in a form reasonably acceptable to
Bank and certified by a Responsible Officer; (ii) as soon as available, but in
any event within the indicated time frame, copies of all statements, reports and
notices sent or made available generally by Borrowers to its security holders or
to any holders of Subordinated Debt and all reports on Forms 10-Q (within
forty-five (45) days of the end of each fiscal quarter) and 10-K (within ninety
(90) days of the end of each fiscal year) filed with the Securities and Exchange
Commission; (iv) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against a Borrower or any Subsidiary that could
result in damages or costs to a Borrower or any Subsidiary of Two Hundred Fifty
Thousand Dollars ($250,000) or more; (v) promptly upon receipt, each management
letter prepared by a Borrower’s independent certified public accounting firm
regarding such Borrower’s management control systems; (vi) such budgets, sales
projections, operating plans or other financial information generally prepared
by a Borrower in the ordinary course of business as Bank may reasonably request
from time to time; and (vii) within forty five (45) days of the last day of each
fiscal quarter, a report signed by Borrowers, in form reasonably acceptable to
Bank, listing any applications or registrations that a Borrower has made or
filed in respect of any Patents, Copyrights or Trademarks and the status of any
outstanding applications or registrations, as well as any material change in a
Borrower’s Intellectual Property Collateral, including but not limited to any
subsequent ownership right of such Borrower in or to any Trademark, Patent or
Copyright not specified in Exhibits A, B, and C of any Intellectual Property
Security Agreement delivered to Bank by such Borrower in connection with this
Agreement.

               (a) Within thirty (30) days after the last day of each month,
Borrowers shall deliver to Bank aged listings by invoice date of accounts
receivable and accounts payable.

               (b) Within thirty (30) days after the last day of each month,
Borrowers shall deliver to Bank with the monthly financial statements, a
Compliance Certificate certified as of the last day of the applicable month and
signed by a Responsible Officer in substantially the form of Exhibit D hereto.

               (c) As soon as possible and in any event within three (3)
calendar days after becoming aware of the occurrence or existence of an Event of
Default hereunder, a written statement of a Responsible Officer of Parent
setting forth details of the Event of Default, and the action which the relevant
Borrower has taken or proposes to take with respect thereto.

               (d) Bank shall have a right from time to time hereafter to audit
each Borrower’s Accounts and appraise Collateral at Borrowers’ expense and shall
conduct such an audit no later than forty five (45) days after the closing date,
provided that such audits will be conducted no more often than every twelve (12)
months unless an Event of Default has occurred and is continuing.

          Borrowers may deliver to Bank on an electronic basis any certificates,
reports or information required pursuant to this Section 6.2, and Bank shall be
entitled to rely on the information contained in the electronic files, provided
that Bank in good faith believes that the files were delivered by a Responsible
Officer. If Borrowers deliver this information electronically, it shall also
deliver to Bank by U.S. Mail, reputable overnight courier service, hand
delivery, facsimile or .pdf file within five (5) Business Days of submission of
the unsigned electronic copy the certification of monthly financial statements,
the intellectual property report, the Borrowing Base Certificate and the
Compliance Certificate, each bearing the physical signature of the Responsible
Officer.

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          6.3 Inventory; Returns. Borrower shall keep all Inventory in good and
merchantable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist on the
Closing Date. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims involving more than Two Hundred Fifty Thousand
Dollars ($250,000).

          6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, due
and timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, including, but not limited
to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability,
and will execute and deliver to Bank, on demand, proof satisfactory to Bank
indicating that Borrower or a Subsidiary has made such payments or deposits and
any appropriate certificates attesting to the payment or deposit thereof;
provided that Borrower or a Subsidiary need not make any payment if the amount
or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.

          6.5 Insurance.

               (a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower’s
business is conducted on the date hereof. Borrower shall also maintain liability
and other insurance in amounts and of a type that are customary to businesses
similar to Borrower’s.

               (b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All
policies of property insurance shall contain a lender’s loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee, and all liability insurance policies shall show Bank as an additional
insured and specify that the insurer must give at least 10 days notice to Bank
before canceling its policy for any reason. Upon Bank’s request, Borrower shall
deliver to Bank certified copies of the policies of insurance and evidence of
all premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower’s option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, all proceeds payable under any such policy shall, at Bank’s
option, be payable to Bank to be applied on account of the Obligations.

          6.6 Accounts. Borrower shall maintain its primary depository and
operating accounts with Bank, and its primary investment accounts with Bank or
Bank’s Affiliates.

          6.7 Financial Covenants. Borrower shall at all times maintain the
following financial ratios and covenants:

               (a) Fixed Charge Coverage. Measured on a monthly basis, a ratio
of EBITDA minus cash taxes and non-financed Capitalized Expenditures to the sum
of cash interest expense plus the current portion of all Indebtedness to Bank of
at least (i) 1.25 to 1.00 at all times until August 31, 2008, (ii) 1.15 to 1.00
at all times from September 1, 2008 through November 30, 2008, and (iii) 1.25 to
1.00 at all times beginning on December 1, 2008. EBITDA shall be calculated (i)
on a trailing twelve (12) month basis and shall exclude one (1) time impairment
charges and principal payments at all times until November 30, 2008 and (ii) on
an annualized rolling three (3) month basis thereafter.  

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               (b) EBITDA. Measured on a rolling three-month basis, EBITDA as
follows (i) measured quarterly, not less than Eight Hundred Thousand Dollars
($800,000) for the quarterly measuring period ending March 31, 2008, (ii)
measured quarterly, not less than Zero Dollars ($0) for the quarterly measuring
period ending June 30, 2008, (iii) measured quarterly, not less than Two Hundred
Fifty Thousand Dollars ($250,000) for the quarterly measuring period ending
September 30, 2008, (iv) measured monthly, One Million Five Hundred Thousand
Dollars ($1,500,000) for the monthly measuring periods ending December 30, 2008
through February 28, 2009, and (v) measured monthly, Two Million Dollars
($2,000,000) for each monthly measuring period thereafter.

               (c) Senior Debt to EBITDA. Measured on a monthly basis, a ratio
of all outstanding Obligations to EBITDA of not greater than: (i) 2.50 to 1.00
for each monthly measuring period through the measuring period ending June 30,
2008, (ii) 3.25 to 1.00 for the monthly measuring period ending July 31, 2008
through the monthly measuring period ending November 30, 2008 and (iii) 2.00 to
1.00 for each monthly measuring period thereafter. EBITDA shall be calculated
(i) on a trailing twelve (12) month basis and shall exclude one (1) time
impairment charges at all times until November 30, 2008 and (ii) on an
annualized rolling three (3) month basis thereafter.

               (d) Liquidity. Measured monthly, a Liquidity of not less than (i)
Five Hundred Thousand Dollars ($500,000) at all times until March 31, 2008 and
(ii) Two Hundred Fifty Thousand Dollars ($250,000) at all times from April 1,
2008 through June 30, 2008.

               (e) Subordinated Debt. No later than March 31, 2008, all
Subordinated Debt owing by Borrowers to The John Buckman And Jan Hanford Trust
shall have been converted into equity securities of Borrowers.

          6.8 Intellectual Property Rights.

               (a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as the case
may be, those registerable intellectual property rights now owned or hereafter
developed or acquired by Borrower, to the extent that Borrower, in its
reasonable business judgment, deems it appropriate to so protect such
intellectual property rights.

               (b) Borrower shall promptly give Bank written notice of any
applications or registrations of intellectual property rights filed with the
United States Patent and Trademark Office, including the date of such filing and
the registration or application numbers, if any.

               (c) Borrower shall (i) give Bank not less than thirty (30) days
prior written notice of the filing of any applications or registrations with the
United States Copyright Office, including the title of such intellectual
property rights to be registered, as such title will appear on such applications
or registrations, and the date such applications or registrations will be filed;
(ii) prior to the filing of any such applications or registrations, execute such
documents as Bank may reasonably request for Bank to maintain its perfection in
such intellectual property rights to be registered by Borrower; (iii) upon the
request of Bank, either deliver to Bank or file such documents simultaneously
with the filing of any such applications or registrations; (iv) upon filing any
such applications or registrations, promptly provide Bank with a copy of such
applications or registrations together with any exhibits, evidence of the filing
of any documents requested by Bank to be filed for Bank to maintain the
perfection and priority of its security interest in such intellectual property
rights, and the date of such filing.

               (d) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect and maintain the perfection and priority of Bank’s security interest in
the Intellectual Property Collateral.

               (e) Borrower shall (i) protect, defend and maintain the validity
and enforceability of the trade secrets, Trademarks, Patents and Copyrights,
(ii) use commercially reasonable efforts to detect infringements of the
Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected and (iii) not allow any material Trademarks,
Patents or Copyrights to be abandoned, forfeited or dedicated to the public
without the written consent of Bank, which shall not be unreasonably withheld.

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               (f) Bank may audit Borrower’s Intellectual Property Collateral to
confirm compliance with this Section, provided such audit may not occur more
often than twice per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower’s sole expense, any actions that Borrower is required under this
Section to take but which Borrower fails to take, after fifteen (15) days’
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section.

          6.9 Consent of Inbound Licensors. Prior to entering into or becoming
bound by any material license or agreement, Borrower shall: (i) provide written
notice to Bank of the material terms of such license or agreement with a
description of its likely impact on Borrower’s business or financial condition;
and (ii) in good faith use commercially reasonable efforts to obtain the consent
of, or waiver by, any person whose consent or waiver is necessary for Borrower’s
interest in such licenses or contract rights to be deemed Collateral and for
Bank to have a security interest in it that might otherwise be restricted by the
terms of the applicable license or agreement, whether now existing or entered
into in the future, provided, however, that the failure to obtain any such
consent or waiver shall not constitute a default under this Agreement.

          6.10 Creation/Acquisition of Subsidiaries. In the event Borrower or
any Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary
shall promptly notify Bank of the creation or acquisition of such new Subsidiary
and take all such action as may be reasonably required by Bank to cause such
Subsidiary to become a co-Borrower hereunder and Borrower shall grant and pledge
to Bank a perfected security interest in the stock, units or other evidence of
ownership of such Subsidiary.

          6.11 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.

     7. NEGATIVE COVENANTS.

          Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until the outstanding Obligations are paid in
full or for so long as Bank may have any commitment to make any Credit
Extensions, such Borrower will not do any of the following without Bank’s prior
written consent, which shall not be unreasonably withheld:

          7.1 Dispositions. Convey, sell, lease, license, transfer or otherwise
dispose of (collectively, to “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, or move cash balances on
deposit with Bank to accounts opened at another financial institution, other
than Permitted Transfers.

          7.2 Change in Name, Location, Executive Office, or Executive
Management; Change in Business; Change in Fiscal Year; Change in Control. Change
its name or the Borrower State or relocate its chief executive office without
thirty (30) days prior written notification to Bank; replace its chief executive
officer or chief financial officer without subsequent notification to Bank
within three (3) days; engage in any business, or permit any of its Subsidiaries
to engage in any business, other than or reasonably related or incidental to the
businesses currently engaged in by Borrower; change its fiscal year end; suffer
or permit a Change in Control.

          7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person except where (i) such transactions do not in the aggregate exceed Two
Hundred Fifty Thousand Dollars ($250,000) during any fiscal year, (ii) no Event
of Default has occurred, is continuing or would exist after giving effect to
such transactions, (iii) such transactions do not result in a Change in Control,
and (iv) Borrower is the surviving entity.

          7.4 Indebtedness. Create, incur, assume, guarantee or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness, or prepay any Indebtedness or take any
actions which impose on Borrower an obligation to prepay any Indebtedness,
except Indebtedness to Bank.

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          7.5 Encumbrances. Create, incur, assume or allow any Lien with respect
to any of its property, or assign or otherwise convey any right to receive
income, including the sale of any Accounts, or permit any of its Subsidiaries so
to do, except for Permitted Liens, or covenant to any other Person that Borrower
in the future will refrain from creating, incurring, assuming or allowing any
Lien with respect to any of Borrower’s property.

          7.6 Distributions. Except for Permitted Transfers, Pay any dividends
or make any other distribution or payment on account of or in redemption,
retirement or purchase of any capital stock, except that Borrower may (i)
repurchase the stock of former employees pursuant to stock repurchase agreements
as long as an Event of Default does not exist prior to such repurchase or would
not exist after giving effect to such repurchase, and (ii) repurchase the stock
of former employees pursuant to stock repurchase agreements by the cancellation
of indebtedness owed by such former employees to Borrower regardless of whether
an Event of Default exists.

          7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments, or maintain or invest any of its property with
a Person other than Bank or Bank’s Affiliates or permit any Subsidiary to do so
unless such Person has entered into a control agreement with Bank, in form and
substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party
to, or be bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Borrower.

          7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person except for
Permitted Transfers.

          7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt (including any subordination
agreement executed in favor of Bank), or amend any provision affecting Bank’s
rights contained in any documentation relating to the Subordinated Debt without
Bank’s prior written consent.

          7.10 Inventory and Equipment. Store a material part of the Inventory
or the Equipment with a bailee, warehouseman, or similar third party unless the
third party has been notified of Bank’s security interest and Bank (a) has
received an acknowledgment from the third party that it is holding or will hold
the Inventory or Equipment for Bank’s benefit or (b) is in possession of the
warehouse receipt, where negotiable, covering such Inventory or Equipment.
Except for Inventory sold in the ordinary course of business, Inventory in
transit, immaterial items of Inventory and except for such other locations as
Bank may approve in writing, Borrower shall keep the Inventory and Equipment
only at the location set forth in Section 10 and such other locations of which
Borrower gives Bank prior written notice and as to which Bank files a financing
statement, or takes other action, where needed to perfect its security interest.

          7.11 No Investment Company; Margin Regulation. Become or be controlled
by an “investment company,” within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose.

          7.12 Negative Pledge Agreements. Permit the inclusion in any contract
to which it or a Subsidiary becomes a party of any provisions that could
restrict or invalidate the creation of a security interest in any of Borrower’s
or such Subsidiary’s property.

     8. EVENTS OF DEFAULT.

          Any one or more of the following events shall constitute an Event of
Default by Borrowers under this Agreement:

          8.1 Payment Default. If a Borrower fails to pay, when due, any of the
Obligations;

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          8.2 Covenant Default.

               (a) If a Borrower fails to perform any obligation under Article 6
or violates any of the covenants contained in Article 7 of this Agreement; or

               (b) If a Borrower fails or neglects to perform or observe any
other material term, provision, condition, covenant contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between a Borrower and Bank and as to any default under such other term,
provision, condition or covenant that can be cured, has failed to cure such
default within ten (10) days after a Borrower receives notice thereof or any
officer of a Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrowers be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrowers
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default but no Credit Extensions will be made;

          8.3 Defective Perfection. If Bank shall receive at any time following
the Closing Date an SOS Report indicating that except for Permitted Liens,
Bank’s security interest in the Collateral is not prior to all other security
interests or Liens of record reflected in such SOS Report;

          8.4 Material Adverse Effect. If there occurs any circumstance or
circumstances that could reasonably be expected to have a Material Adverse
Effect;

          8.5 Attachment. If any material portion of a Borrower’s assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if a Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of a
Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of a Borrower’s assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within ten (10) days after such Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by such Borrower (provided that no Credit Extensions will be required to be made
during such cure period);

          8.6 Insolvency. If a Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by a Borrower, or if an Insolvency Proceeding is
commenced against a Borrower and is not dismissed or stayed within thirty (30)
days (provided that no Credit Extensions will be made prior to the dismissal of
such Insolvency Proceeding);

          8.7 Other Agreements. If there is a default or other failure to
perform in any agreement to which a Borrower is a party with a third party or
parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in excess
of Two Hundred Fifty Thousand Dollars ($250,000) or that could have a Material
Adverse Effect;

          8.8 Subordinated Debt. If a Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;

          8.9 Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Two Hundred Fifty
Thousand Dollars ($250,000) shall be rendered against a Borrower and shall
remain unsatisfied and unstayed for a period of ten (10) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or

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          8.10 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.

     9. BANK’S RIGHTS AND REMEDIES.

          9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrowers:

               (a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.6, all Obligations shall become immediately due and payable without any action
by Bank);

               (b) Demand that Borrowers (i) deposit cash with Bank in an amount
equal to the amount of any letters of credit issued by Bank remaining undrawn,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and (ii) pay in advance all letter of credit fees scheduled
to be paid or payable over the remaining term of any letters of credit issued by
Bank, and Borrowers shall promptly deposit and pay such amounts;

               (c) Cease advancing money or extending credit to or for the
benefit of Borrowers under this Agreement or under any other agreement between a
Borrower and Bank;

               (d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;

               (e) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrowers agree to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrowers authorize Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank’s determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of a Borrower’s owned
premises, Borrowers hereby grant Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank’s rights or remedies provided herein, at law, in equity, or otherwise;

               (f) Set off and apply to the Obligations any and all (i) balances
and deposits of a Borrower held by Bank, and (ii) indebtedness at any time owing
to or for the credit or the account of a Borrower held by Bank;

               (g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrowers’ labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section 9.1, each
Borrower’s rights under all licenses and all franchise agreements shall inure to
Bank’s benefit;

               (h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrowers’ premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate. Bank may sell the Collateral
without giving any warranties as to the Collateral. Bank may specifically
disclaim any warranties of title or the like. This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral. If Bank sells any of the Collateral upon credit, Borrowers will be
credited only with payments actually made by the purchaser, received by Bank,
and applied to the indebtedness of the purchaser. If the purchaser fails to pay
for the Collateral, Bank may resell the Collateral and Borrowers shall be
credited with the proceeds of the sale;

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               (i) Bank may credit bid and purchase at any public sale;

               (j) Apply for the appointment of a receiver, trustee, liquidator
or conservator of the Collateral, without notice and without regard to the
adequacy of the security for the Obligations and without regard to the solvency
of any Borrower, any guarantor or any other Person liable for any of the
Obligations; and

               (k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrowers.

          9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrowers hereby irrevocably appoint
Bank (and any of Bank’s designated officers, or employees) as each Borrower’s
true and lawful attorney to: (a) send requests for verification of Accounts or
notify account debtors of Bank’s security interest in the Accounts; (b) endorse
each Borrower’s name on any checks or other forms of payment or security that
may come into Bank’s possession; (c) sign each Borrower’s name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all
claims under and decisions with respect to a Borrower’s policies of insurance;
(f) settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; (g) to modify, in its sole discretion, any intellectual property
security agreement entered into between a Borrower and Bank without first
obtaining a Borrower’s approval of or signature to such modification by amending
Exhibits A, B, and C, thereof, as appropriate, to include reference to any
right, title or interest in any Copyrights, Patents or Trademarks acquired by a
Borrower after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which a Borrower
no longer has or claims to have any right, title or interest; and (h) to file,
in its sole discretion, one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature of
Borrower where permitted by law; provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
clauses (g) and (h) above, regardless of whether an Event of Default has
occurred. The appointment of Bank as each Borrower’s attorney in fact, and each
and every one of Bank’s rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank’s obligation to provide Credit Extensions hereunder is terminated.

          9.3 Accounts Collection. At any time after the occurrence and during
the continuance of an Event of Default, Bank may notify any Person owing funds
to a Borrower of Bank’s security interest in such funds and verify the amount of
such Account. Borrowers shall collect all such amounts owing to Borrowers for
Bank, receive in trust all payments as Bank’s trustee, and immediately deliver
such payments to Bank in their original form as received from the account
debtor, with proper endorsements for deposit.

          9.4 Bank Expenses. If a Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable notice to Borrowers: (a) make payment of the same or any part
thereof; (b) set up such reserves under the Revolving Line as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.5 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.

          9.5 Bank’s Liability for Collateral. Bank has no obligation to clean
up or otherwise prepare the Collateral for sale. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrowers.

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          9.6 No Obligation to Pursue Others. Bank has no obligation to attempt
to satisfy the Obligations by collecting them from any other Person liable for
them and Bank may release, modify or waive any collateral provided by any other
Person to secure any of the Obligations, all without affecting Bank’s rights
against Borrowers. Each Borrower waives any right it may have to require Bank to
pursue any other Person for any of the Obligations.

          9.7 Remedies Cumulative. Bank’s rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on a Borrower’s part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver, election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on behalf of
Bank and then shall be effective only in the specific instance and for the
specific purpose for which it was given. Each Borrower expressly agrees that
this Section may not be waived or modified by Bank by course of performance,
conduct, estoppel or otherwise.

          9.8 Demand; Protest. Except as otherwise provided in this Agreement,
each Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment and any other notices relating to the
Obligations.

     10. NOTICES.

     Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrowers or to Bank, as the case may be, at its addresses
set forth below:

      If to Borrowers:  LYRIS, INC. (on behalf of all Borrowers)      5858
Horton St., Suite 270      Emeryville, CA 94608    Attn: President    FAX: (___)
____________      With a copy to  Vinson & Elkins LLP    Trammell Crow Center   
2001 Ross Avenue, Suite 3700    Dallas, TX 75201-2975    Attn: Michael Wortley 
  FAX: (214) 999-7732    If to Bank:  Comerica Bank    75 East Trimble Road, M/C
4770    San Jose, California 95131    Attn: Manager    FAX: (408) 556-5091     
with a copy to:  Comerica Bank    2 Embarcadero Center, Suite 300,    San
Francisco 94111    Attn: Philip Koblis, Vice President    FAX: (415) 477-3260 

     The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.

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     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 Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the 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.

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               (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. CO-BORROWERS.

          13.1 Co-Borrowers. Borrowers are jointly and severally liable for the
Obligations and Bank may proceed against one Borrower to enforce the Obligations
without waiving its right to proceed against the other Borrower. This Agreement
and the Loan Documents are a primary and original obligation of each Borrower
and shall remain in effect notwithstanding future changes in conditions,
including any change of law or any invalidity or irregularity in the creation or
acquisition of any Obligations or in the execution or delivery of any agreement
between Bank and any Borrower. Each Borrower shall be liable for existing and
future Obligations as fully as if all of the Credit Extensions were advanced to
such Borrower. Bank may rely on any certificate or representation made by any
Borrower as made on behalf of, and binding on, all Borrowers, including without
limitation Advance Request Forms, Borrowing Base Certificates and Compliance
Certificates. Borrowers are jointly and severally liable for the Obligations and
Bank may proceed against one or more of the Borrowers to enforce the Obligations
without waiving its right to proceed against any of the other Borrowers. Each
Borrower appoints each other Borrower as its agent with all necessary power and
authority to give and receive notices, certificates or demands for and on behalf
of both Borrowers, to act as disbursing agent for receipt of any Advances on
behalf of each Borrower and to apply to Bank on behalf of each Borrower for
Advances, any waivers and any consents. This authorization cannot be revoked,
and Bank need not inquire as to one Borrower’s authority to act for or on behalf
of another Borrower.

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          13.2 Subrogation and Similar Rights. Notwithstanding any other
provision of this Agreement or any other Loan Document, each Borrower
irrevocably waives, until all obligations are paid in full and Bank has no
further obligation to make Credit Extensions to Borrower, all rights that it may
have at law or in equity (including, without limitation, any law subrogating the
Borrower to the rights of Bank under the Loan Documents) to seek contribution,
indemnification, or any other form of reimbursement from any other Borrower, or
any other Person now or hereafter primarily or secondarily liable for any of the
Obligations, for any payment made by the Borrower with respect to the
Obligations in connection with the Loan Documents or otherwise and all rights
that it might have to benefit from, or to participate in, any security for the
Obligations as a result of any payment made by the Borrower with respect to the
Obligations in connection with the Loan Documents or otherwise. Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited
under this Section shall be null and void. If any payment is made to a Borrower
in contravention of this Section, such Borrower shall hold such payment in trust
for Bank and such payment shall be promptly delivered to Bank for application to
the Obligations, whether matured or unmatured.

          13.3 Waivers of Notice. Each Borrower waives, to the extent permitted
by law, notice of acceptance hereof; notice of the existence, creation or
acquisition of any of the Obligations; notice of an Event of Default except as
set forth herein; notice of the amount of the Obligations outstanding at any
time; notice of any adverse change in the financial condition of any other
Borrower or of any other fact that might increase the Borrower’s risk;
presentment for payment; demand; protest and notice thereof as to any
instrument; and all other notices and demands to which the Borrower would
otherwise be entitled by virtue of being a co-borrower or a surety. Each
Borrower waives any defense arising from any defense of any other Borrower, or
by reason of the cessation from any cause whatsoever of the liability of any
other Borrower. Bank’s failure at any time to require strict performance by any
Borrower of any provision of the Loan Documents shall not waive, alter or
diminish any right of Bank thereafter to demand strict compliance and
performance therewith. Each Borrower also waives any defense arising from any
act or omission of Bank that changes the scope of the Borrower’s risks
hereunder. Each Borrower hereby waives any right to assert against Bank any
defense (legal or equitable), setoff, counterclaim, or claims that such Borrower
individually may now or hereafter have against another Borrower or any other
Person liable to Bank with respect to the Obligations in any manner or
whatsoever.

          13.4 Subrogation Defenses. Until all Obligations are paid in full and
Bank has no further obligation to make Credit Extensions to Borrower, each
Borrower hereby waives any defense based on impairment or destruction of its
subrogation or other rights against any other Borrower and waives all benefits
which might otherwise be available to it under California Civil Code Sections
2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899, and 3433 and California
Code of Civil Procedure Sections 580a, 580b, 580d and 726, as those statutory
provisions are now in effect and hereafter amended, and under any other similar
statutes now and hereafter in effect.

          13.5 Right to Settle, Release.

               13.5.1 The liability of Borrowers hereunder shall not be
diminished by (i) any agreement, understanding or representation that any of the
Obligations is or was to be guaranteed by another Person or secured by other
property, or (ii) any release or unenforceability, whether partial or total, of
rights, if any, which Bank may now or hereafter have against any other Person,
including another Borrower, or property with respect to any of the
Obligations.  

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               13.5.2 Without notice to any Borrower and without affecting the
liability of any Borrower hereunder, Bank may (i) compromise, settle, renew,
extend the time for payment, change the manner or terms of payment, discharge
the performance of, decline to enforce, or release all or any of the Obligations
with respect to a Borrower, (ii) grant other indulgences to a Borrower in
respect of the Obligations, (iii) modify in any manner any documents relating to
the Obligations with respect to a Borrower, (iv) release, surrender or exchange
any deposits or other property securing the Obligations, whether pledged by a
Borrower or any other Person, or (v) compromise, settle, renew, or extend the
time for payment, discharge the performance of, decline to enforce, or release
all or any obligations of any guarantor, endorser or other Person who is now or
may hereafter be liable with respect to any of the Obligations.

          13.6 Subordination. All indebtedness of a Borrower now or hereafter
arising held by another Borrower is subordinated to the Obligations and the
Borrower holding the indebtedness shall take all actions reasonably requested by
Bank to effect, to enforce and to give notice of such subordination.

     14. GENERAL PROVISIONS.

          14.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties and shall bind all Persons who become bound as a debtor to this
Agreement; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by a Borrower without Bank’s prior written consent,
which consent may be granted or withheld in Bank’s sole discretion. Bank shall
have the right without the consent of or notice to a Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights and benefits hereunder.

          14.2 Indemnification. Each Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank,
its officers, employees and agents as a result of or in any way arising out of,
following, or consequential to transactions between Bank and a Borrower whether
under this Agreement, or otherwise (including without limitation reasonable
attorneys’ fees and expenses), except for losses caused by Bank’s gross
negligence or willful misconduct or a material breach of Bank’s obligations
under the Loan Documents.

          14.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.

          14.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

          14.5 Amendments in Writing, Integration. All amendments to or
terminations of this Agreement or the other Loan Documents must be in writing.
All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement and the other Loan Documents, if any, are merged into this
Agreement and the Loan Documents.

          14.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

          14.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make any Credit
Extension to a Borrower. The obligations of Borrowers to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 14.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.  

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          14.8 Effect of Amendment and Restatement. Except as otherwise set
forth herein, this Agreement is intended to and does completely amend and
restate, without novation, the Original Agreement. All security interests
granted under the Original Agreement are hereby confirmed and ratified and shall
continue to secure all Obligations under this Agreement.

 

 

[Balance of Page Intentionally Left Blank]

 

 

 

 

 

 

 

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

LYRIS, INC.    By:  /S/ Luis Rivera      Title:  Chief Executive Officer     
LYRIS TECHNOLOGIES, INC    By:  /S/ Luis Rivera    Title:  Chief Executive
Officer      COMMODORE RESOURCES (NEVADA), INC.    By:  Richard A. McDonald   
Title:  President      COMERICA BANK    By:  Philip Koblis    Title:  First Vice
President 

[Signature Page to Loan and Security Agreement]

--------------------------------------------------------------------------------

DEBTOR    LYRIS, INC.    SECURED PARTY:                    COMERICA BANK 

EXHIBIT A-1

COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT

     All personal property of Borrower (herein referred to as “Borrower” or
“Debtor”) whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:

               (a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor’s books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;

               (b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to sue in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;

               (c) all trademarks, service marks, trade names and service names
and the goodwill associated therewith, together with the right to trademark and
all rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to sue in its own name and/or in the name of the
Debtor for past, present and future infringements of trademark;

               (d) all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and

               (e) any and all cash proceeds and/or noncash proceeds of any of
the foregoing, including, without limitation, insurance proceeds, and all
supporting obligations and the security therefor or for any right to payment.
All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised
Division 9 of the Uniform Commercial Code-Secured Transactions, added by Stats.
1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.

--------------------------------------------------------------------------------

DEBTOR  LYRIS TECHNOLOGIES INC.    SECURED PARTY:                    COMERICA
BANK 

EXHIBIT A-2

COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT

     All personal property of Borrower (herein referred to as “Borrower” or
“Debtor”) whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:

               (f) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor’s books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;

               (g) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to sue in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;

               (h) all trademarks, service marks, trade names and service names
and the goodwill associated therewith, together with the right to trademark and
all rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to sue in its own name and/or in the name of the
Debtor for past, present and future infringements of trademark;

               (i) all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and

               (j) any and all cash proceeds and/or noncash proceeds of any of
the foregoing, including, without limitation, insurance proceeds, and all
supporting obligations and the security therefor or for any right to payment.
All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised
Division 9 of the Uniform Commercial Code-Secured Transactions, added by Stats.
1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.

--------------------------------------------------------------------------------

DEBTOR  COMMODORE RESOURCES (NEVADA), INC.    SECURED PARTY:                   
COMERICA BANK 

EXHIBIT A-3

COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT

     All personal property of Borrower (herein referred to as “Borrower” or
“Debtor”) whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:

               (a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor’s books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;

               (b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to sue in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;

               (c) all trademarks, service marks, trade names and service names
and the goodwill associated therewith, together with the right to trademark and
all rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to sue in its own name and/or in the name of the
Debtor for past, present and future infringements of trademark;

               (d) all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and

               (e) any and all cash proceeds and/or noncash proceeds of any of
the foregoing, including, without limitation, insurance proceeds, and all
supporting obligations and the security therefor or for any right to payment.
All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised
Division 9 of the Uniform Commercial Code-Secured Transactions, added by Stats.
1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.

3

--------------------------------------------------------------------------------

EXHIBIT B

TECHNOLOGY & LIFE SCIENCES DIVISION

LOAN ANALYSIS
LOAN ADVANCE/PAYDOWN REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS [3:00* P.M., Pacific Time/ 3:30 P.M. Eastern
Time]
DEADLINE FOR WIRE TRANSFERS IS [1:30 P.M., Pacific Time/ 3:30 P.M. Eastern Time]
[*At month end and the day before a holiday, the cut off time is 1:30 P.M.,
Pacific Time]

  To: Loan Analysis              DATE:           TIME:      FAX #: (650)
846-6840          FROM:  LYRIS, INC.        TELEPHONE REQUEST (For Bank Use
Only):    Authorized Borrower's Name          FROM:              The following
person is authorized to request the loan payment    Authorized Signer's Name   
  transfer/loan advance on the designated account and is known to me.    FROM: 
              Authorized Signer's Name      Authorized Request & Phone #     
PHONE #:                     Received by (Bank) & Phone #      FROM ACCOUNT#:   
        (please include Note number, if applicable)          TO ACCOUNT #:     
  Authorized Signature (Bank)      (please include Note number, if applicable) 
        

  REQUESTED TRANSACTION TYPE    REQUESTED DOLLAR AMOUNT    For Bank Use Only   
          PRINCIPAL INCREASE* (ADVANCE)    $__________________________________ 
  Date Rec'd:        PRINCIPAL PAYMENT (ONLY)   
$__________________________________    Time:            Comp. Status:  YES  NO 
  OTHER INSTRUCTIONS:      Status Date:            Time:              Approval: 
   

All representations and warranties of Borrowers stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of the
telephone request for and advance confirmed by this Borrowing Certificate,
including without limitation the representation that Borrowers have paid for and
owns the equipment financed by the Bank; provided, however, that those
representations and warranties the date expressly referring to another date
shall be true, correct and complete in all material respects as of such date.

*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE   YES 
 NO  If YES, the Outgoing Wire Transfer Instructions must be completed below.   
 

  OUTGOING WIRE TRANSFER INSTRUCTIONS  Fed Reference Number  Bank Transfer
Number   The items marked with an asterisk (*) are required to be completed.   
*Beneficiary Name          *Beneficiary Account Number          *Beneficiary
Address          Currency Type   US DOLLARS ONLY    *ABA Routing Number (9
Digits)          *Receiving Institution Name          *Receiving Institution
Address          *Wire Account     $     

--------------------------------------------------------------------------------

EXHIBIT C

COMPLIANCE CERTIFICATE

TO:  COMERICA BANK  FROM:    LYRIS INC., for itself and on behalf of all
Borrowers 

     The undersigned authorized officer of LYRIS, INC., for itself and on behalf
of all Borrowers, hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrowers and Bank (the
"Agreement"), (i) Each Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties of each Borrower stated in the Agreement are true
and correct as of the date hereof. Attached herewith are the required documents
supporting the above certification. The Officer further certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP) and
are consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

Please indicate compliance status by circling Yes/No under "Complies" column.

Reporting Covenant  Required    Complies              Monthly financial
statements  Monthly within 30 days    Yes  No  10K  Within 90 days of fiscal
year end  Yes  No  10Q  Within 45 days of quarter end    Yes  No  A/R & A/P
Agings  Monthly within 30 days    Yes  No  Compliance Cert.  Monthly within 30
days    Yes  No  A/R Audit  Annual    Yes  No  IP Report  Quarterly within 45
days    Yes  No  Total amount of Borrowers' cash and investments 
Amount: $________    Yes  No  Total amount of Borrowers' cash and investments
maintained with  Amount: $________    Yes  No  Bank            Financial
Covenant  Required  Actual  Complies                Maximum Senior Debt to
EBITDA*                         Through 6/30/08  2.50:1.00  ____ : 1.00  Yes 
No                 7/1/08 – 11/30/08  3.25:1.00                       12/1/08
and thereafter  2.00:1.00                    Minimum EBITDA         
               Quarter ending 3/31/08  $800,000  $___________  Yes  No 
               Quarter ending 6/30/08  $0                       Quarter ending
9/30/08  $250,000                       12/30/08 through 2/28/09  $1,500,000   
                   3/1/09 and thereafter  $2,000,000                    Minimum
Fixed Charge Coverage**                         Through 8/31/08, 12/1/08 and
thereafter  1.25 : 1.00  ____ : 1.00  Yes  No                 9/1/08 – 11/3/08 
1.15:1.00                    Minimum Liquidity                         Through
3/31/08  $500,000  $___________  Yes  No                 4/1/08 through 6/30/08 
$250,000                    Buckman Subordinated Debt converted to equity 
3/31/08   ___________  Yes  No 

*EBITDA shall be calculated (i) on a trailing twelve (12) month basis and shall
exclude one (1) time impairment charges at all times until November 30, 2008 and
(ii) on an annualized rolling three (3) month basis thereafter.

**EBITDA shall be calculated (i) on a trailing twelve (12) month basis and shall
exclude one (1) time impairment charges and principal payments at all times
until November 30, 2008 and (ii) on an annualized rolling three (3) month basis
thereafter.

Comments Regarding Exceptions: See Attached.     BANK USE ONLY                 
  Sincerely,     Received by:            AUTHORIZED SIGNER                
Date:          SIGNATURE                   Verified:        TITLE     
AUTHORIZED SIGNER           Date:                         Compliance Status 
Yes  No  DATE         

--------------------------------------------------------------------------------

Exhibit D

LIBOR Addendum To Amended and Restated Loan and Security Agreement

     This Addendum to Amended and Restated Loan and Security Agreement (this
“Addendum”) is entered into as of March 6, 2008, by and between COMERICA BANK
("Bank") and LYRIS, INC., LYRIS TECHNOLOGIES INC. and COMMODORE RESOURCES
(NEVADA), INC. (collectively, “Borrower”). This Addendum supplements the terms
of the Amended and Restated Loan and Security Agreement dated as of March 6,
2008.

2. Definitions.

      (a)       Advance. As used herein, “Advance” means a borrowing requested
by Borrower and made by Bank under the Note, including a LIBOR Option Advance
and/or a Prime Rate Option Advance.   (b) Business Day. As used herein,
“Business Day” means any day except a Saturday, Sunday or any other day
designated as a holiday under Federal or California statute or regulation.   (c)
LIBOR. As used herein, “LIBOR” means the rate per annum (rounded upward if
necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the
following formula:  

                  Base LIBOR        LIBOR =           100% - LIBOR Reserve
Percentage 

                 (i)       “Base LIBOR” means the rate per annum determined by
Bank at which deposits for the relevant LIBOR Period would be offered to Bank in
the approximate amount of the relevant LIBOR Option Advance in the inter-bank
LIBOR market selected by Bank, upon request of Bank at 10:00 a.m. California
time, on the day that is the first day of such LIBOR Period.   (ii) “LIBOR
Reserve Percentage” means the reserve percentage prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for “Eurocurrency
Liabilities” (as defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by Bank for expected changes in such reserve percentage
during the applicable LIBOR Period.  

      (d)       LIBOR Business Day. As used herein, “LIBOR Business Day” means a
Business day on which dealings in Dollar deposits may be carried out in the
interbank LIBOR market.   (e) LIBOR Period. As used herein, “LIBOR Period”
means, with respect to a LIBOR Option Advance:  

                 (i)       initially, the period commencing on, as the case may
be, the date the Advance is made or the date on which the Advance is converted
to a LIBOR Option Advance, and continuing for, in every case, a 30, 60, 90 or
180 day period thereafter so long as the LIBOR Option is quoted for such period
in the applicable interbank LIBOR market, as such period is selected by Borrower
in the notice of Advance as provided in the Note or in the notice of conversion
as provided in this Addendum; and   (ii) thereafter, each period commencing on
the last day of the next preceding LIBOR Period applicable to such LIBOR Option
Advance and continuing for, in every case, a 30, 60, 90 or 180 day period
thereafter so long as the LIBOR Option is quoted for such period in the
applicable interbank LIBOR market, as such period is selected by Borrower in the
notice of continuation as provided in this Addendum.  

      (f)       Note. As used herein, “Note” means the Amended and Restated Loan
and Security Agreement dated as of March 6, 2008, as may subsequently be amended
from time to time.   (g) Regulation D. As used herein, “Regulation D” means
Regulation D of the Board of Governors of the Federal Reserve System as amended
or supplemented from time to time.   (h) Regulatory Development. As used herein,
“Regulatory Development” means any or all of the following: (i) any change in
any law, regulation or interpretation thereof by any public authority (whether
or not having the force of law); (ii) the application of any existing law,
regulation or the interpretation thereof by any public authority (whether or not
having the force of law); and (iii) compliance by Bank with any request or
directive (whether or not having the force of law) of any public authority.  

--------------------------------------------------------------------------------

3. Interest Rate Options. Borrower shall have the following options regarding
the interest rate to be paid by Borrower on Advances under the Note as follows:

     1) If the Senior Debt/EBITDA ratio in section 6.7(c) of the Note is less
than or equal to 1.00 to 1.00 for the most recently ended measuring period then:

            (a)       A rate equal to three and one quarter percent (3.25%)
above Bank’s LIBOR, (the “LIBOR Option”), which LIBOR Option shall be in effect
during the relevant LIBOR Period; or   (b) A rate equal to one half of one
percent above (0.50%) the “Prime Rate” as referenced in the Note and quoted from
time to time by Bank as such rate may change from time to time (the “Prime Rate
Option”).

     2) If the Senior Debt/EBITDA ratio in section 6.7(c) of the Note is greater
than 1.00 to 1.00 but less than or equal to 1.75 to 1.00 for the most recently
ended measuring period then:

            A rate equal to three and one half percent (3.50%) above Bank’s
LIBOR, (the “LIBOR Option”), which LIBOR Option shall be in effect during the
relevant LIBOR Period; or

            A rate equal to three quarters of one percent (0.75%) above the
“Prime Rate” as referenced in the Note and quoted from time to time by Bank as
such rate may change from time to time (the “Prime Rate Option”).

     3) If the Senior Debt/EBITDA ratio in section 6.7(c) of the Note is greater
than 1.75 to 1.00 for the most recently ended measuring period then:

            A rate equal to three and three quarters percent (3.75%) above
Bank’s LIBOR, (the “LIBOR Option”), which LIBOR Option shall be in effect during
the relevant LIBOR Period; or

            A rate equal to one percent (1.00%) above the “Prime Rate” as
referenced in the Note and quoted from time to time by Bank as such rate may
change from time to time (the “Prime Rate Option”).

4. LIBOR Option Advance. The minimum LIBOR Option Advance will not be less than
One Million and 00/100 Dollars ($1,000,000) for any LIBOR Option Advance.

5. Payment of Interest on LIBOR Option Advances. Interest on each LIBOR Option
Advance shall be payable pursuant to the terms of the Note. Interest on such
LIBOR Option Advance shall be computed on the basis of a 360-day year and shall
be assessed for the actual number of days elapsed from the first day of the
LIBOR Period applicable thereto but not including the last day thereof.

6. Bank’s Records Re: LIBOR Option Advances. With respect to each LIBOR Option
Advance, Bank is hereby authorized to note the date, principal amount, interest
rate and LIBOR Period applicable thereto and any payments made thereon on Bank’s
books and records (either manually or by electronic entry) and/or on any
schedule attached to the Note, which notations shall be prima facie evidence of
the accuracy of the information noted.

7. Selection/Conversion of Interest Rate Options. At the time any Advance is
requested under the Note and/or Borrower wishes to select the LIBOR Option for
all or a portion of the outstanding principal balance of the Note, and at the
end of each LIBOR Period, Borrower shall give Bank notice specifying (a) the
interest rate option selected by Borrower; (b) the principal amount subject
thereto; and (c) if the LIBOR Option is selected, the length of the applicable
LIBOR Period. Any such notice may be given by telephone so long as, with respect
to each LIBOR Option selected by Borrower, (i) Bank receives written
confirmation from Borrower not later than three (3) LIBOR Business Days after
such telephone notice is given; and (ii) such notice is given to Bank prior to
10:00 a.m., California time, on the first day of the LIBOR Period. For each
LIBOR Option requested hereunder, Bank will quote the applicable fixed LIBOR
Rate to Borrower at approximately 10:00 a.m., California time, on the first day
of the LIBOR Period. If Borrower does not immediately accept the rate quoted by
Bank, any subsequent acceptance by Borrower shall be subject to a
redetermination of the rate by Bank; provided, however, that if Borrower fails
to accept any such quotation as given, then the quoted rate shall expire and
Bank shall have no obligation to permit a LIBOR Option to be selected on such
day. If no specific designation of interest is made at the time any Advance is
requested under the Note or at the end of any LIBOR Period, Borrower shall be
deemed to have selected the Prime Rate Option for such Advance or the principal
amount to which such LIBOR Period applied. At any time the LIBOR Option is in
effect, Borrower may, at the end of the applicable LIBOR Period, convert to the
Prime Rate Option. At any time the Prime Rate Option is in effect, Borrower may
convert to the LIBOR OPTION, and shall designate a LIBOR Period.

--------------------------------------------------------------------------------

8. Default Interest Rate. From and after the maturity date of the Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of the Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to five percent (5.00%)
above the rate of interest from time to time applicable to the Note.

9. Prepayment. In the event that the LIBOR Option is the applicable interest
rate for all or any part of the outstanding principal balance of the Note, and
any payment or prepayment of any such outstanding principal balance of the Note
shall occur on any day other than the last day of the applicable LIBOR Period
(whether voluntarily, by acceleration, required payment, or otherwise), or if
Borrower elects the LIBOR Option as the applicable interest rate for all or any
part of the outstanding principal balance of the Note in accordance with the
terms and conditions hereof, and, subsequent to such election, but prior to the
commencement of the applicable LIBOR Period, Borrower revokes such election for
any reason whatsoever, or if the applicable interest rate in respect of any
outstanding principal balance of the Note hereunder shall be changed, for any
reason whatsoever, from the LIBOR Option to the Prime Rate Option prior to the
last day of the applicable LIBOR Period, or if Borrower shall fail to make any
payment of principal or interest hereunder at any time that the LIBOR Option is
the applicable interest rate hereunder in respect of such outstanding principal
balance of the Note, Borrower shall reimburse Bank, on demand, for any resulting
loss, cost or expense incurred by Bank as a result thereof, including, without
limitation, any such loss, cost or expense incurred in obtaining, liquidating,
employing or redeploying deposits from third parties. Such amount payable by
Borrower to Bank may include, without limitation, an amount equal to the excess,
if any, of (a) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, refunded or converted, for the period from the date
of such prepayment or of such failure to borrow, refund or convert, through the
last day of the relevant LIBOR Period, at the applicable rate of interest for
such outstanding principal balance of the Note, as provided under this Note,
over (b) the amount of interest (as reasonably determined by Bank) which would
have accrued to Bank on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank eurodollar market.
Calculation of any amounts payable to Bank under this paragraph shall be made as
though Bank shall have actually funded or committed to fund the relevant
outstanding principal balance of the Note hereunder through the purchase of an
underlying deposit in an amount equal to the amount of such outstanding
principal balance of the Note and having a maturity comparable to the relevant
LIBOR Period; provided, however, that Bank may fund the outstanding principal
balance of the Note hereunder in any manner it deems fit and the foregoing
assumptions shall be utilized only for the purpose of the calculation of amounts
payable under this paragraph. Upon the written request of Borrower, Bank shall
deliver to Borrower a certificate setting forth the basis for determining such
losses, costs and expenses, which certificate shall be conclusively presumed
correct, absent manifest error. Any prepayment hereunder shall also be
accompanied by the payment of all accrued and unpaid interest on the amount so
prepaid. Any outstanding principal balance of the Note which is bearing interest
at such time at the Prime Rate Option may be prepaid without penalty or premium.
Partial prepayments hereunder shall be applied to the installments hereunder in
the inverse order of their maturities.

BY INITIALING BELOW, BORROWER ACKNOWLEDGE(S) AND AGREE(S) THAT: (A) THERE IS NO
RIGHT TO PREPAY ANY LIBOR OPTION ADVANCE, IN WHOLE OR IN PART, WITHOUT PAYING
THE PREPAYMENT AMOUNT SET FORTH HEREIN (“PREPAYMENT AMOUNT”), EXCEPT AS
OTHERWISE REQUIRED UNDER APPLICABLE LAW; (B) BORROWER SHALL BE LIABLE FOR
PAYMENT OF THE PREPAYMENT AMOUNT IF BANK EXERCISES ITS RIGHT TO ACCELERATE
PAYMENT OF ANY LIBOR OPTION ADVANCE AS PART OR ALL OF THE OBLIGATIONS OWING
UNDER THE NOTE, INCLUDING WITHOUT LIMITATION, ACCELERATION UNDER A DUE-ON-SALE
PROVISION; (C) BORROWER WAIVES ANY RIGHTS UNDER SECTION 2954.10 OF THE
CALIFORNIA CIVIL CODE, OR ANY SUCCESSOR STATUTE; AND (D) BANK HAS MADE EACH
LIBOR OPTION ADVANCE PURSUANT TO THE NOTE IN RELIANCE ON THESE AGREEMENTS.

_________________________________________
BORROWERS’ INITIALS

10. Hold Harmless and Indemnification. Borrower agrees to indemnify Bank and to
hold Bank harmless from, and to reimburse Bank on demand for, all losses and
expenses which Bank sustains or incurs as a result of (i) any payment of a LIBOR
Option Advance prior to the last day of the applicable LIBOR Period for any
reason, including, without limitation, termination of the Note, whether pursuant
to this Addendum or the occurrence of an Event of Default; (ii) any termination
of a LIBOR Period prior to the date it would otherwise end in accordance with
this Addendum; or (iii) any failure by Borrower, for any reason, to borrow any
portion of a LIBOR Option Advance.

11. Funding Losses. The indemnification and hold harmless provisions set forth
in this Addendum shall include, without limitation, all losses and expenses
arising from interest and fees that Bank pays to lenders of funds it obtains in
order to fund the loans to Borrower on the basis of the LIBOR Option(s) and all
losses incurred in liquidating or re-deploying deposits from which such funds
were obtained and loss of profit for the period after termination. A written
statement by Bank to Borrower of such losses and expenses shall be conclusive
and binding, absent manifest error, for all purposes. This obligation shall
survive the termination of this Addendum and the payment of the Note.

--------------------------------------------------------------------------------

12. Regulatory Developments Or Other Circumstances Relating To Illegality or
Impracticality of LIBOR. If any Regulatory Development or other circumstances
relating to the interbank Euro-dollar markets shall, at any time, in Bank’s
reasonable determination , make it unlawful or impractical for Bank to fund or
maintain, during any LIBOR Period, to determine or charge interest rates based
upon LIBOR, Bank shall give notice of such circumstances to Borrower and:

      (a)       In the case of a LIBOR Period in progress, Borrower shall, if
requested by Bank, promptly pay any interest which had accrued prior to such
request and the date of such request shall be deemed to be the last day of the
term of the LIBOR Period; and   (b) No LIBOR Period may be designated thereafter
until Bank determines that such would be practical.

13. Additional Costs. Borrower shall pay to Bank from time to time, upon Bank’s
request, such amounts as Bank determines are needed to compensate Bank for any
costs it incurred which are attributable to Bank having made or maintained a
LIBOR Option Advance or to Bank’s obligation to make a LIBOR Option Advance, or
any reduction in any amount receivable by Bank hereunder with respect to any
LIBOR Option or such obligation (such increases in costs and reductions in
amounts receivable being herein called “Additional Costs”), resulting from any
Regulatory Developments, which (i) change the basis of taxation of any amounts
payable to Bank hereunder with respect to taxation of any amounts payable to
Bank hereunder with respect to any LIBOR Option Advance (other than taxes
imposed on the overall net income of Bank for any LIBOR Option Advance by the
jurisdiction where Bank is headquartered or the jurisdiction where Bank extends
the LIBOR Option Advance; (ii) impose or modify any reserve, special deposit, or
similar requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, Bank (including any LIBOR Option
Advance or any deposits referred to in the definition of LIBOR); or (iii) impose
any other condition affecting this Addendum (or any of such extension of credit
or liabilities). Bank shall notify Borrower of any event occurring after the
date hereof which entitles Bank to compensation pursuant to this paragraph as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. Determinations by Bank for purposes of this
paragraph, shall be conclusive, provided that such determinations are made on a
reasonable basis.

14. Legal Effect. Except as specifically modified hereby, all of the terms and
conditions of the Note remain in full force and effect.

--------------------------------------------------------------------------------

      IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the
date first set forth above.

LYRIS, INC.  COMERICA BANK      By:      By:    Title:    Title:        LYRIS
TECHNOLOGIES INC.      By:      Title:        COMMODORE RESOURCES (NEVADA),
INC.      By:      Title:   

--------------------------------------------------------------------------------

SCHEDULE OF EXCEPTIONS

Permitted Indebtedness (Section 1.1)

Reimbursement obligations owed by Lyris, Inc. (formerly Uptilt Inc.) to Greater
Bay Bank, N.A. pursuant to Standby Letter of Credit SBLC-11384 in the principal
amount of $93,017.60 dated February 25, 2005.

Indebtedness owed by Lyris Technologies, Inc. to Commodore Resources (Nevada),
Inc. in the principal aggregate amount of $18,000,000.

Permitted Investments (Section 1.1)

Investment in Greater Bay Bank certificate of deposit as collateral for standby
letter of credit described in Permitted Indebtedness section above

Intercompany investments among Borrowers.

Lyris, Inc. money market account # 5607076426 at PNC Bank, Delaware.

Permitted Liens (Section 1.1)

Lyris Technologies, Inc.

California - equipment filing in favor of Pac-West Telecomm, Inc. filed 08/25/03
as instrument number 0324060758.

Uptilt Inc. (now merged with Lyris Technologies, Inc.)

Delaware - filing covers a certificate of deposit held by and in favor of
Venture Banking Group, a division of Greater Bay Bank, N.A., filed 2/24/05 as
instrument number 50607045, to secure reimbursement obligations described as
item # 1 on Permitted Indebtedness schedule.

California - equipment filing in favor of US Bancorp filed 9/30/02 as instrument
number 0227461048. Lease has been terminated and the Company will work to have
lien released.

Prior Names (Section 5.5)

Lyris, Inc. - NovaCare, Inc., NAHC, Inc. and J. L. Halsey Corporation

Lyris Technologies Inc. - Walter Shelby Group, Ltd., Uptilt, Inc. (d/b/a
Emaillabs) and ClickTracks Analytics, Inc.

Commodore Resources (Nevada), Inc. - Commodore Resources, Inc.

Litigation (Section 5.6)

“the Company” refers to the Borrowers, Subsidiaries, and Affiliates. Note: the
items below are disclosed in the Form 10-Q filing made by Lyris, Inc. on
February 13, 2008

     NovaCare v. Stratford Nursing Home. We filed this collection lawsuit in
August, 1999, to collect on a receivable of approximately $146,000, which we
have fully reserved. Stratford counter-claimed with numerous theories asserting
that we instead owed Stratford money. Although Stratford’s principal claims were
dismissed by the court, Stratford, in the last quarter of fiscal year 2003, had
quantified its remaining counter-claims at approximately $1 million. We believe
that the theories on which these damages are based are inconsistent with the
contract between the parties and with the conduct of each party. As of December
31, 2007, this case is pending in the U.S. District Court for the Southern
District of New Jersey (Camden). The outcome of this action is not possible to
predict and we have reserved an estimate of the cost of litigating this action;
however, this estimate does not reflect the possibility of an adverse ruling or
a judgment against us or a settlement.

--------------------------------------------------------------------------------

     O’Leary v. Joyner Sports Medicine. We are a defendant in this professional
liability claim and had previously purchased professional liability insurance
policies from PHICO Insurance Company. On February 2, 2002, a Pennsylvania court
authorized state insurance regulators to liquidate the insolvent PHICO Insurance
Company, which had provided professional liability insurance policies to us. As
a result, PHICO will not be permitted to pay any claims on our behalf; however,
the remaining claims were transferred to various state guaranty funds. Since
2002, state insurance guaranty funds have paid the amounts due for liability
claims settlements on our behalf. Based on our discussion with the state
guaranty funds and a review of claims during the third quarter of 2004, we now
believe that a payment may be required to settle the professional liability
claim that may exceed the amount available to us under the applicable state
guaranty fund limits. We recorded an accrual and related expense in the third
quarter of 2004 equal to the estimated cost to settle that claim less the amount
that would be paid by the state guaranty fund. A ruling in February 2006, by the
Superior Court of New Jersey may free this state guarantee fund from
contributing their limit to any settlement on our behalf. Because of this
ruling, we have increased our reserve for this liability claim. There is no
insurance policy in place that would pay any settlement or award for this claim;
therefore, in the event that our current reserve assessment is incorrect, we
will be required to fund any amount in excess of the reserve amount.

Inbound Licenses (Section 5.12)

Except as disclosed on the Schedule, Borrower is not a party to, nor is bound
by, any license as licensee or other material agreement that prohibits or
otherwise restricts Borrower from granting a security interest in Borrower’s
interest in such license or agreement or any other property.

1. Licenses to which the Guarantors or Borrowers are a party as licensee entered
into in the ordinary course of business in connection with the purchase of
software and other business equipment.

2. Digital Impact license.

3. By Product

     1) ListManager

a. Oracle versions requires user to acquire an Oracle license

b. Microsoft SQL server versions requires user to acquire licenses to run the
Sql Server database server

c. Lyris has a perpetual license to use and re-distribute FusionCharts (from
InfoSoft Global) with ListManager

     (2) MailShield Server

a. Oracle versions requires user to acquire an Oracle license

b. Microsoft SQL server versions requires user to acquire licenses to run the
Sql Server database server

     (3) MailEngine – requires no other licenses to operate

4. Description of licenses required, General:

     a. Oracle user needs to acquire per user licenses or a per processor
license for Oracle 9i or 10g database server

--------------------------------------------------------------------------------

     b. Microsoft SQL server – user needs to acquire a processor license for SQL
server 2000 or 2005 database software

     c. Lyris has redistribution rights to package Microsoft’s MSDE 2000
database server along with ListManager.

5. Open Source license the company uses several open source license in its
products including-

     a. html_mime_mail.class 
     b. jpgraph 
     c. adodb 
     d. phpHtmlLib 
     e. DevEdit 
     f. PHP – Programming Scripting Language 
     g. Apache HTTP Server- Web Server Software 
     h. RedHat Fedora OS – Base operating system on all production machines 
     i. MySQL- Database Software

--------------------------------------------------------------------------------

Corporation Resolutions and Incumbency Certification
Authority to Procure Loans

I certify that I am the duly elected and qualified Secretary of LYRIS, INC.;
that the following is a true and correct copy of resolutions duly adopted by the
Board of Directors of the Corporation in accordance with its bylaws and
applicable statutes.

Copy of Resolutions:

Be it Resolved, That:

1.       Any one (1) of the following __________________________ (insert titles
only) of the Corporation are/is authorized, for, on behalf of, and in the name
of the Corporation to:     (a) Negotiate and procure loans, letters of credit
and other credit or financial accommodations from Comerica Bank ("Bank"), a
Texas banking association, including, without limitation, that certain Loan and
Security Agreement dated as of March 6, 2008, as may subsequently be amended
from time to time.     (b)       Discount with the Bank, commercial or other
business paper belonging to the Corporation made or drawn by or upon third
parties, without limit as to amount;     (c) Purchase, sell, exchange, assign,
endorse for transfer and/or deliver certificates and/or instruments representing
stocks, bonds, evidences of Indebtedness or other securities owned by the
Corporation, whether or not registered in the name of the Corporation;     (d)
Give security for any liabilities of the Corporation to the Bank by grant,
security interest, assignment, lien, deed of trust or mortgage upon any real or
personal property, tangible or intangible of the Corporation; and     (e)
Execute and deliver in form and content as may be required by the Bank any and
all notes, evidences of Indebtedness, applications for letters of credit,
guaranties, subordination agreements, loan and security agreements, financing
statements, assignments, liens, deeds of trust, mortgages, trust receipts and
other agreements, instruments or documents to carry out the purposes of these
Resolutions, any or all of which may relate to all or to substantially all of
the Corporation's property and assets.   2. Said Bank be and it is authorized
and directed to pay the proceeds of any such loans or discounts as directed by
the persons so authorized to sign, whether so payable to the order of any of
said persons in their individual capacities or not, and whether such proceeds
are deposited to the individual credit of any of said persons or not;   3. Any
and all agreements, instruments and documents previously executed and acts and
things previously done to carry out the purposes of these Resolutions are
ratified, confirmed and approved as the act or acts of the Corporation.   4.
These Resolutions shall continue in force, and the Bank may consider the holders
of said offices and their signatures to be and continue to be as set forth in a
certified copy of these Resolutions delivered to the Bank, until notice to the
contrary in writing is duly served on the Bank (such notice to have no effect on
any action previously taken by the Bank in reliance on these Resolutions).   5.
Any person, corporation or other legal entity dealing with the Bank may rely
upon a certificate signed by an officer of the Bank to effect that these
Resolutions and any agreement, instrument or document executed pursuant to them
are still in full force and effect and binding upon the Corporation.

  6.       The Bank may consider the holders of the offices of the Corporation
and their signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of the Corporation until notice to the contrary in
writing is duly served on the Bank.

--------------------------------------------------------------------------------

I further certify that the above Resolutions are in full force and effect as of
the date of this Certificate; that these Resolutions and any borrowings or
financial accommodations under these Resolutions have been properly noted in the
corporate books and records, and have not been rescinded, annulled, revoked or
modified; that neither the foregoing Resolutions nor any actions to be taken
pursuant to them are or will be in contravention of any provision of the
articles of incorporation or bylaws of the Corporation or of any agreement,
indenture or other instrument to which the Corporation is a party or by which it
is bound; and that neither the articles of incorporation nor bylaws of the
Corporation nor any agreement, indenture or other instrument to which the
Corporation is a party or by which it is bound require the vote or consent of
shareholders of the Corporation to authorize any act, matter or thing described
in the foregoing Resolutions.

I further certify that the following named persons have been duly elected to the
offices set opposite their respective names, that they continue to hold these
offices at the present time, and that the signatures which appear below are the
genuine, original signatures of each respectively:

(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)

NAME (Type or Print)        TITLE        SIGNATURE                             
       

In Witness Whereof, I have affixed my name as Secretary and have caused the
corporate seal (where available) of said Corporation to be affixed on March 6,
2008.

  Secretary, LYRIS, INC. 

The Above Statements are Correct.            SIGNATURE OF OFFICER OR DIRECTOR
OR, IF NONE. A SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO
SIGN ALONE.

Failure to complete the above when the Secretary is authorized to sign alone
shall constitute a certification by the Secretary that the Secretary is the sole
Shareholder, Director and Officer of the Corporation.

--------------------------------------------------------------------------------

Corporation Resolutions and Incumbency Certification
Authority to Procure Loans  

I certify that I am the duly elected and qualified Secretary of LYRIS
TECHNOLOGIES INC.; that the following is a true and correct copy of resolutions
duly adopted by the Board of Directors of the Corporation in accordance with its
bylaws and applicable statutes.

Copy of Resolutions:

Be it Resolved, That:

1.       Any one (1) of the following __________________________ (insert titles
only) of the Corporation are/is authorized, for, on behalf of, and in the name
of the Corporation to:     (a)       Negotiate and procure loans, letters of
credit and other credit or financial accommodations from Comerica Bank ("Bank"),
a Texas banking association, including, without limitation, that certain Loan
and Security Agreement dated as of March 6, 2008, as may subsequently be amended
from time to time.     (b) Discount with the Bank, commercial or other business
paper belonging to the Corporation made or drawn by or upon third parties,
without limit as to amount;     (c) Purchase, sell, exchange, assign, endorse
for transfer and/or deliver certificates and/or instruments representing stocks,
bonds, evidences of Indebtedness or other securities owned by the Corporation,
whether or not registered in the name of the Corporation;     (d) Give security
for any liabilities of the Corporation to the Bank by grant, security interest,
assignment, lien, deed of trust or mortgage upon any real or personal property,
tangible or intangible of the Corporation; and     (e) Execute and deliver in
form and content as may be required by the Bank any and all notes, evidences of
Indebtedness, applications for letters of credit, guaranties, subordination
agreements, loan and security agreements, financing statements, assignments,
liens, deeds of trust, mortgages, trust receipts and other agreements,
instruments or documents to carry out the purposes of these Resolutions, any or
all of which may relate to all or to substantially all of the Corporation's
property and assets.   2. Said Bank be and it is authorized and directed to pay
the proceeds of any such loans or discounts as directed by the persons so
authorized to sign, whether so payable to the order of any of said persons in
their individual capacities or not, and whether such proceeds are deposited to
the individual credit of any of said persons or not;   3. Any and all
agreements, instruments and documents previously executed and acts and things
previously done to carry out the purposes of these Resolutions are ratified,
confirmed and approved as the act or acts of the Corporation.   4. These
Resolutions shall continue in force, and the Bank may consider the holders of
said offices and their signatures to be and continue to be as set forth in a
certified copy of these Resolutions delivered to the Bank, until notice to the
contrary in writing is duly served on the Bank (such notice to have no effect on
any action previously taken by the Bank in reliance on these Resolutions).   5.
Any person, corporation or other legal entity dealing with the Bank may rely
upon a certificate signed by an officer of the Bank to effect that these
Resolutions and any agreement, instrument or document executed pursuant to them
are still in full force and effect and binding upon the Corporation.

6.       The Bank may consider the holders of the offices of the Corporation and
their signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of the Corporation until notice to the contrary in
writing is duly served on the Bank.

--------------------------------------------------------------------------------

I further certify that the above Resolutions are in full force and effect as of
the date of this Certificate; that these Resolutions and any borrowings or
financial accommodations under these Resolutions have been properly noted in the
corporate books and records, and have not been rescinded, annulled, revoked or
modified; that neither the foregoing Resolutions nor any actions to be taken
pursuant to them are or will be in contravention of any provision of the
articles of incorporation or bylaws of the Corporation or of any agreement,
indenture or other instrument to which the Corporation is a party or by which it
is bound; and that neither the articles of incorporation nor bylaws of the
Corporation nor any agreement, indenture or other instrument to which the
Corporation is a party or by which it is bound require the vote or consent of
shareholders of the Corporation to authorize any act, matter or thing described
in the foregoing Resolutions.

I further certify that the following named persons have been duly elected to the
offices set opposite their respective names, that they continue to hold these
offices at the present time, and that the signatures which appear below are the
genuine, original signatures of each respectively:

(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)

NAME (Type or Print)        TITLE        SIGNATURE                             
       

In Witness Whereof, I have affixed my name as Secretary and have caused the
corporate seal (where available) of said Corporation to be affixed on March 6,
2008.

  Secretary, LYRIS TECHNOLOGIES INC. 

The Above Statements are Correct.            SIGNATURE OF OFFICER OR DIRECTOR
OR, IF NONE. A SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO
SIGN ALONE.

Failure to complete the above when the Secretary is authorized to sign alone
shall constitute a certification by the Secretary that the Secretary is the sole
Shareholder, Director and Officer of the Corporation.

--------------------------------------------------------------------------------

Corporation Resolutions and Incumbency Certification
Authority to Procure Loans  

I certify that I am the duly elected and qualified Secretary of COMMODORE
RESOURCES (NEVADA), INC.; that the following is a true and correct copy of
resolutions duly adopted by the Board of Directors of the Corporation in
accordance with its bylaws and applicable statutes.

Copy of Resolutions:

Be it Resolved, That:

1.       Any one (1) of the following __________________________ (insert titles
only) of the Corporation are/is authorized, for, on behalf of, and in the name
of the Corporation to:     (a)       Negotiate and procure loans, letters of
credit and other credit or financial accommodations from Comerica Bank ("Bank"),
a Texas banking association, including, without limitation, that certain Loan
and Security Agreement dated as of March 6, 2008, as may subsequently be amended
from time to time.     (b) Discount with the Bank, commercial or other business
paper belonging to the Corporation made or drawn by or upon third parties,
without limit as to amount;     (c) Purchase, sell, exchange, assign, endorse
for transfer and/or deliver certificates and/or instruments representing stocks,
bonds, evidences of Indebtedness or other securities owned by the Corporation,
whether or not registered in the name of the Corporation;     (d) Give security
for any liabilities of the Corporation to the Bank by grant, security interest,
assignment, lien, deed of trust or mortgage upon any real or personal property,
tangible or intangible of the Corporation; and     (e) Execute and deliver in
form and content as may be required by the Bank any and all notes, evidences of
Indebtedness, applications for letters of credit, guaranties, subordination
agreements, loan and security agreements, financing statements, assignments,
liens, deeds of trust, mortgages, trust receipts and other agreements,
instruments or documents to carry out the purposes of these Resolutions, any or
all of which may relate to all or to substantially all of the Corporation's
property and assets.   2. Said Bank be and it is authorized and directed to pay
the proceeds of any such loans or discounts as directed by the persons so
authorized to sign, whether so payable to the order of any of said persons in
their individual capacities or not, and whether such proceeds are deposited to
the individual credit of any of said persons or not;   3. Any and all
agreements, instruments and documents previously executed and acts and things
previously done to carry out the purposes of these Resolutions are ratified,
confirmed and approved as the act or acts of the Corporation.   4. These
Resolutions shall continue in force, and the Bank may consider the holders of
said offices and their signatures to be and continue to be as set forth in a
certified copy of these Resolutions delivered to the Bank, until notice to the
contrary in writing is duly served on the Bank (such notice to have no effect on
any action previously taken by the Bank in reliance on these Resolutions).

  5. Any person, corporation or other legal entity dealing with the Bank may
rely upon a certificate signed by an officer of the Bank to effect that these
Resolutions and any agreement, instrument or document executed pursuant to them
are still in full force and effect and binding upon the Corporation.   6.      
The Bank may consider the holders of the offices of the Corporation and their
signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of the Corporation until notice to the contrary in
writing is duly served on the Bank.

--------------------------------------------------------------------------------

I further certify that the above Resolutions are in full force and effect as of
the date of this Certificate; that these Resolutions and any borrowings or
financial accommodations under these Resolutions have been properly noted in the
corporate books and records, and have not been rescinded, annulled, revoked or
modified; that neither the foregoing Resolutions nor any actions to be taken
pursuant to them are or will be in contravention of any provision of the
articles of incorporation or bylaws of the Corporation or of any agreement,
indenture or other instrument to which the Corporation is a party or by which it
is bound; and that neither the articles of incorporation nor bylaws of the
Corporation nor any agreement, indenture or other instrument to which the
Corporation is a party or by which it is bound require the vote or consent of
shareholders of the Corporation to authorize any act, matter or thing described
in the foregoing Resolutions.

I further certify that the following named persons have been duly elected to the
offices set opposite their respective names, that they continue to hold these
offices at the present time, and that the signatures which appear below are the
genuine, original signatures of each respectively:

(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)

NAME (Type or Print)        TITLE        SIGNATURE                             
       

In Witness Whereof, I have affixed my name as Secretary and have caused the
corporate seal (where available) of said Corporation to be affixed on March 6,
2008.

  Secretary, COMMODORE RESOURCES (NEVADA), INC. 

The Above Statements are Correct.            SIGNATURE OF OFFICER OR DIRECTOR
OR, IF NONE. A SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO
SIGN ALONE.

Failure to complete the above when the Secretary is authorized to sign alone
shall constitute a certification by the Secretary that the Secretary is the sole
Shareholder, Director and Officer of the Corporation.

--------------------------------------------------------------------------------

ATTN: LYRIS, INC., LYRIS TECHNOLOGIES INC. AND COMMODORE
RESOURCES (NEVADA), INC.

 

USA PATRIOT ACT
NOTICE
OF
CUSTOMER IDENTIFICATION

     IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

     To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account.

     WHAT THIS MEANS FOR YOU: when you open an account, we will ask your name,
address, date of birth, and other information that will allow us to identify
you. We may also ask to see your driver's license or other identifying
documents.

--------------------------------------------------------------------------------

COMERICA BANK
Member FDIC

ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(Revolver)

Name(s):   LYRIS, INC.    Date: March 6, 2008  LYRIS TECHNOLOGIES INC. 
COMMODORE RESOURCES (NEVADA), INC. 

      $  credited to deposit account No. ________ when Advances are requested by
LYRIS, INC. 

Amounts paid to others on your behalf:

      $  to Comerica Bank for Loan Fee    $  to Comerica Bank for Document Fee 
  $  to Comerica Bank for accounts receivable audit (estimate)    $  to Bank
counsel fees and expenses    $  to ________   $  to ________   $  TOTAL (AMOUNT
FINANCED) 

Upon consummation of this transaction, this document will also serve as the
authorization for Comerica Bank to disburse the loan proceeds as stated above.

    Signature    Signature 

--------------------------------------------------------------------------------

AGREEMENT TO PROVIDE INSURANCE

TO:    COMERICA BANK  Date: March 6, 2008    Attn: Deni M. Snider, MC 4770     
75 E. Trimble Road      San Jose, CA 95131   

     Borrowers: LYRIS, INC., LYRIS TECHNOLOGIES INC. and COMMODORE RESOURCES
(NEVADA), INC.

     In consideration of a loan in the amount of $12,708,333.37, secured by all
tangible personal property including inventory and equipment.

     I/We agree to obtain adequate insurance coverage to remain in force during
the term of the loan.

     I/We also agree to advise the below named agent to add Comerica Bank as
lender's loss payable on the new or existing insurance policy, and to furnish
Bank at above address with a copy of said policy/endorsements and any subsequent
renewal policies.

     I/We understand that the policy must contain:

     1. Fire and extended coverage in an amount sufficient to cover:

                (a)       The amount of the loan, OR   (b) All existing
encumbrances, whichever is greater,

     But not in excess of the replacement value of the improvements on the real
property.

     2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Comerica
Bank, or any other form acceptable to Bank.

INSURANCE INFORMATION

Insurance Co./Agent  Telephone No.:    Agent's Address:   

  Signature of Obligor:        Signature of Obligor:        Signature of
Obligor:     

    FOR BANK USE ONLY    INSURANCE VERIFICATION: Date: 
  Person Spoken to: 
    Policy Number: 
    Effective From: __________ To:
     Verified by: 

   

--------------------------------------------------------------------------------

COMERICA BANK                         Member FDIC  AUTOMATIC DEBIT
AUTHORIZATION     

To:  Comerica Bank        Re:  Loan # _____________________________________  
You are hereby authorized and instructed to charge account No.
__________________________________ in the name of LYRIS, INC. or LYRIS
TECHNOLOGIES INC. or COMMODORE RESOURCES (NEVADA), INC. for principal and
interest payments due on above referenced loan as set forth below and credit the
loan referenced above.                                    x     Debit each
interest payment as it becomes due according to the terms of the Loan and       
                         Security Agreement and any renewals or amendments
thereof.                                     x     Debit each principal payment
as it becomes due according to the terms of the Loan and                       
         Security Agreement and any renewals or amendments thereof.       
                             x     Debit each payment for Bank Expenses as it
becomes due according to the terms of the                                 Loan
and Security Agreement and any renewals or amendments thereof.      This
Authorization is to remain in full force and effect until revoked in writing. 
 

                     LYRIS, INC., for itself and on behalf of all Borrowers 
Date 
        March 6, 2008 
          March 6, 2008 
     
 

--------------------------------------------------------------------------------

COMERICA BANK                         Member FDIC  AUTOMATIC DEBIT
AUTHORIZATION     

To:  Comerica Bank        Re:  Loan # _____________________________________  
You are hereby authorized and instructed to charge account No.
__________________________________ in the name of LYRIS, INC. or LYRIS
TECHNOLOGIES INC. or COMMODORE RESOURCES (NEVADA), INC. for principal and
interest payments due on above referenced loan as set forth below and credit the
loan referenced above.                                    x     Debit each
interest payment as it becomes due according to the terms of the Loan and       
                         Security Agreement and any renewals or amendments
thereof.                                     x     Debit each principal payment
as it becomes due according to the terms of the Loan and                       
         Security Agreement and any renewals or amendments thereof.       
                             x     Debit each payment for Bank Expenses as it
becomes due according to the terms of the                                 Loan
and Security Agreement and any renewals or amendments thereof.      This
Authorization is to remain in full force and effect until revoked in writing. 
 

                     LYRIS, INC., for itself and on behalf of all Borrowers 
Date 
        March 6, 2008 
          March 6, 2008 
   

--------------------------------------------------------------------------------

COMERICA BANK

COMERICA BANK    CLIENT AUTHORIZATION  Fax:  

 

General Authorization
The undersigned, for LYRIS, INC. and on behalf of all Borrowers, hereby
authorizes Comerica Bank to use Borrowers' company names, logos, and information
relating to our banking relationship in its marketing and advertising campaigns
which is intended for Comerica Bank's customers, prospects and shareholders.

Comerica Bank will forward any advertising or article including Borrowers for
prior review and approval.

  Signature      Printed Name                                      Title   
Company      Mailing Address      City, State, Zip Code      Phone Number     
Fax Number      E-Mail      March 6, 2008    Date   

--------------------------------------------------------------------------------

DEBTOR: LYRIS, INC.    SECURED PARTY:                    COMERICA BANK 

EXHIBIT A

COLLATERAL DESCRIPTION ATTACHMENT
TO UCC NATIONAL FORM FINANCING STATEMENT

     All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:

               (a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;

               (b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to sue in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;

               (c) all trademarks, service marks, trade names and service names
and the goodwill associated therewith, together with the right to trademark and
all rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to sue in its own name and/or in the name of the
Debtor for past, present and future infringements of trademark;

               (d) all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and

               (e) any and all cash proceeds and/or noncash proceeds of any of
the foregoing, including, without limitation, insurance proceeds, and all
supporting obligations and the security therefor or for any right to payment.
All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised
Division 9 of the Uniform Commercial Code-Secured Transactions, added by Stats.
1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.

--------------------------------------------------------------------------------

DEBTOR  LYRIS TECHNOLOGIES INC.    SECURED PARTY:                    COMERICA
BANK 

EXHIBIT A

COLLATERAL DESCRIPTION ATTACHMENT
TO UCC NATIONAL FORM FINANCING STATEMENT

     All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:

               (a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;

               (b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to sue in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;

               (c) all trademarks, service marks, trade names and service names
and the goodwill associated therewith, together with the right to trademark and
all rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to sue in its own name and/or in the name of the
Debtor for past, present and future infringements of trademark;

               (d) all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and

               (e) any and all cash proceeds and/or noncash proceeds of any of
the foregoing, including, without limitation, insurance proceeds, and all
supporting obligations and the security therefor or for any right to payment.
All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised
Division 9 of the Uniform Commercial Code-Secured Transactions, added by Stats.
1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.

--------------------------------------------------------------------------------

DEBTOR  COMMODORE RESOURCES (NEVADA), INC.    SECURED PARTY:                   
COMERICA BANK 

EXHIBIT A

COLLATERAL DESCRIPTION ATTACHMENT
TO UCC NATIONAL FORM FINANCING STATEMENT

     All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:

               (a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;

               (b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to sue in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;

               (c) all trademarks, service marks, trade names and service names
and the goodwill associated therewith, together with the right to trademark and
all rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to sue in its own name and/or in the name of the
Debtor for past, present and future infringements of trademark;

               (d) all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and

               (e) any and all cash proceeds and/or noncash proceeds of any of
the foregoing, including, without limitation, insurance proceeds, and all
supporting obligations and the security therefor or for any right to payment.
All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised
Division 9 of the Uniform Commercial Code-Secured Transactions, added by Stats.
1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.

--------------------------------------------------------------------------------