**Exhibit 10(j)**

 

**EXECUTION VERSION**

 

**PROMISSORY NOTE**

 
| US $5,600,000 |   | May 12, 2005 |
|---------------|--------|-------------------|

 

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

 

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

 

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

 

3.                                       PrepaymentOption.  Maker shall have the rightto prepay this Note in whole or in part at any time without penalty orpremium.  The payments on this Note shallbe applied first to accrued but unpaid interest, if any, and then to principal.

 

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

 

5.                                       Conditionto Payment.

 

(a)                                  Exceptin the event of prepayment pursuant to Section 3, it shall be a conditionto payment of all amounts of interest and principal hereunder that the TotalRevenues of the Company for the twelve month periods ended March 31, 2006and 2007, taken in the aggregate, be equal to or greater than $24,000,000; providedthat, the amounts of interest and principal due hereunder shall be ratablyreduced to the extent that such Total Revenues for the twelve month periodsended March 31, 2006 and 2007 are less than $24,000,000 but greater thanor equal to $16,000,000.  By way ofexample, if Total Revenues for the twelve month periods ended March 31,2006 and 2007 are $20,000,000, then the amounts of interest and principalotherwise due hereunder shall be reduced by 50%, and if Total Revenues are$15,000,000, then no amounts of interest and principal shall be duehereunder.  Maker shall deliver or causeto be delivered to Payee the Financial Statements for each of the twelve monthperiods ended March 31, 2006 and 2007 within 10 days after completion ofeach such Financial Statements by the Company.

 

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(b)                                 Inthe event the Company elects for any reason to divest itself of a businessdivision or product line, including by licensing any entire product line to athird party, during the twelve month periods ended March 31, 2006 and2007, Total Revenues for purposes of Section 3(a) shall deemed toinclude ***the greater of***: (i) theconsideration received by the Company as a result of the sale or divestituretransaction or (ii) the revenue that would have been received by theCompany from such division or product line for the remainder of the two yearperiod based upon average monthly revenue for (y) the six months immediatelypreceding the sale or divestiture transaction or (z) the year ended December 31,2004, whichever shall be greater.

 

(c)                                  IfPayee disagrees with the Total Revenues reflected in the Financial Statementsfor a particular year, then within 30 days (the “Notice Period”) after Payee’sreceipt of such Financial Statements, Payee shall notify Maker of suchdisagreement in writing (the “Notice of Disagreement”), setting forth inreasonable detail the particulars of any such disagreement; provided, however,that the basis for any such disagreement shall be limited to an objection onthe basis that the Total Revenues reflected in the Financial Statements werenot determined in accordance with GAAP or that GAAP was not applied in theFinancial Statements in a manner consistent with the audited financialstatements of the Company for the year ended December 31, 2004.  Unless the Financial Statements reflect thatTotal Revenues exceed $24,000,000 forthe applicable two-year period**,** during theNotice Period, Payee (either directly or through its representative(s)) shallhave full access to all books and records of the Company and its affiliatesreflecting the computation of Total Revenues, and all supporting informationrelated thereto, including but not limited to books and records necessary tocompute any adjustments pursuant to Section 5(b) immediately above; providedthat Payee and its representatives and affiliates shall keep all suchinformation confidential. In the event that Payee does not provide a Notice ofDisagreement within the Notice Period, Payee shall be deemed to have acceptedin full the amount of Total Revenues reflected in the Financial Statements asprepared by Maker, which shall be final, binding and conclusive for allpurposes hereunder.  In the event thatany Notice of Disagreement is timely provided, Maker and Payee shall usecommercially reasonable efforts for a period of 30 days (or such longer periodas they may mutually agree) to resolve any disagreements.  If, at the end of such period, Maker andPayee are unable to resolve such disagreements, then the San Francisco, Californiaoffice of Deloitte & Touche or, failing such accounting firm’swillingness to so serve, such other independent accounting firm of recognizednational standing as may be mutually selected by Maker and Payee shall resolveany remaining disagreements; provided, however, if Maker andPayee are unable to so agree within 5 days after Deloitte & Toucheinforms either Maker or Payee of its unwillingness to so serve (the “DeclineDate”), then within 10 days after the Decline Date, each of Maker and Payeeshall select an office of an independent accounting firm of recognized nationalstanding and such two firms shall, within 15 days after the Decline Date, thenselect a third independent accounting firm of recognized national standing toresolve any remaining disagreements (any such accountants selected pursuant tothis Section 5(c), the “Dispute Resolution Accounting Firm”).  Maker and Payee will enter into reasonableand customary arrangements for the services to be rendered by the DisputeResolution Accounting Firm under this Section 5(c).  The Dispute Resolution Accounting Firm shalldetermine as promptly as practicable (and in any event within 30 days from thedate that the dispute is submitted to it), to what extent (if any) the TotalRevenues reflected in the Financial Statements require adjustment, limiting itsreview, however, only to the disagreements submitted in the Notice ofDisagreement.

 

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

 

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

 

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

 

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

 

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

 

6.                                       Subordination.

 

(a)                                  Payee(by its acceptance hereof) acknowledges and agrees that the indebtednessevidenced by this Note is subordinate and subject in right of payment, priorityand collection to any secured indebtedness of Maker (the “Senior Indebtedness”).  Notwithstanding the immediately precedingsentence, Payee shall be entitled toreceive the payment of principal and interest under and in strict accordancewith the terms and conditions of this Note, provided that no Event of Default(as defined in the agreements governing the Senior Indebtedness) has occurredunder the agreements governing the Senior Indebtedness which is continuing orwould exist immediately after giving effect to such payment.  Maker agrees promptly to notify Payee of theoccurrence of any Event of Default upon receipt of notice of the Event ofDefault from the lender under the Senior Indebtedness.

 

(b)                                 Makercovenants and agrees that it will not incur Senior Indebtedness that exceeds3.5 times the trailing twelve month EBITDA of the Company.  As used in this Note, “EBITDA” means theconsolidated earnings of the Company before interest, taxes, depreciation andamortization, as derived from the Financial Statements; provided, that anycalculation of EBITDA for purposes of this Note shall exclude (withoutduplication):  (i) any expensesincurred in connection with the transactions contemplated by the PurchaseAgreement; (ii) any payments

 

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(whether in the form of principal, interest or otherwise) to anyprovider to the Company of financing in connection with (A) theconsummation of the transactions contemplated by the Purchase Agreement, (B) anyrecapitalization or reorganization of the Company, (C) any merger oracquisition transaction, or (D) providing working capital following theclosing of the transactions contemplated by the Purchase Agreement (the “Closing”),and any expenses incurred in connection with any of the foregoing; (iii) anyextraordinary expenses and losses; (iv) if, after the Closing, newaccounting, computer or other office information technology systems, or majorchanges in any existing information technology systems or operations, areintroduced, the cost of such systems or changes and any expenses associatedtherewith; (v) any net losses in respect of asset dispositions other thansales of inventory in the ordinary course of business; (vi) any chargesfor equity-based compensation (including, without limitation, for employeestock options); and (vii) any Indemnifiable Losses incurred by Purchaserpursuant to Article 11 of the Purchase Agreement and any indemnificationpayments received related thereto.  Asused in this Note, “incur” means, with respect to any debt or other obligationof any Person, to create, issue, incur (by merger, conversion, exchange orotherwise), extend, assume, guarantee or become liable in respect of such debtor other obligation or the recording, as required pursuant to GAAP orotherwise, of any such debt or obligation on the balance sheet of such Person;provided, however, that a change in GAAP that results in an obligation of suchPerson that exists at such time, and is not theretofore classified as debt,becoming debt shall not be deemed an incurrence of such debt.

 

7.                                       Rightof Offset.  Payee (by its acceptancehereof) acknowledges and agrees that Maker shall have the right at any time andfrom time to time to set-off any and all indebtedness owing to Payee thenoutstanding under this Note against, and reduce the amount of indebtednessowing to Payee then outstanding under this Note by, (a) upon writtennotice to Payee, any amount of Purchaser Indemnifiable Losses to which Maker isentitled pursuant to Article 11 of the Purchase Agreement or pursuant toparagraph (j) of Schedule I to the Purchase Agreement and (b) anyamounts paid by the Company through the period ended March 31, 2007pursuant to that certain License Agreement between Digital Impact, Inc.and Maker dated May 6, 2005.

 

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

 

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

 

10.                                 Notices.  All notices and other communications requiredor permitted hereunder will be in writing and will be deemed to have been dulygiven when delivered in person or when dispatched by electronic facsimiletransfer or one business day after having been dispatched by an internationallyrecognized overnight courier service to the appropriate person at the addressspecified below:

 
| If to Payee: |   | c/o John  Buckman                |
|--------------|--------|----------------------------------|
|         |   | 2735 Fulton  Street              |
|         |   | Berkeley,  California 94705-1031 |

 

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| with a copy  to: |   | Higham,  McConnell & Dunning LLP       |
|------------------|--------|-------------------------------------------------|
|             |   | 15 Enterprise, Suite 360                   |
|             |   | Aliso Viejo, CA 92656                           |
|             |   | Attention:   Curt  C. Barwick    |
|             |   | Telecopy  No.: 949-900-4403                     |
|             |   |                                            |
| If to Maker:     |   | J. L. Halsey Corporation                        |
|             |   | 103 Foulk Road, Suite 205-Q                |
|             |   | Wilmington, Delaware 19803                      |
|             |   | Attention: David Burt                           |
|             |   | Telecopy  No.: (978) 945-5992                   |
|             |   |                                            |
| with a copy  to: |   | Vinson &  Elkins L.L.P.                |
|             |   | 3700  Trammell Crow Center                      |
|             |   | 2001 Ross  Avenue                               |
|             |   | Dallas,  Texas 75201                            |
|             |   | Attention:   Michael  D. Wortley |
|             |   | Telecopy  No.: (214) 999-7732                   |
|             |   |                                            |
| with a copy to:  |   | Admiral Management Company                      |
|             |   | 790 Turnpike Street, Suite 202             |
|             |   | North Andover, Massachusetts 01845              |
|             |   | Attention: David Burt                           |
|             |   | Telecopy No.: (978) 945-5992                    |

 

or to such other address oraddresses as any such Person may from time to time designate as to itself bylike notice to the other party.

 

11.                                 GoverningLaw; Jurisdiction.  This Note shallbe governed by and construed in accordance with the laws of the State ofDelaware without regard to the conflicts of laws provisions thereof.  Maker hereby irrevocably and unconditionallyconsents to submit to the exclusive jurisdiction of the courts of the State ofCalifornia and the courts of the United States of America located in AlamedaCounty, State of California for any litigation arising out of or relating tothis Note or the transactions contemplated hereby or any of the othertransactions contemplated hereby (and agrees not to commence any litigationrelating hereto except in such courts), and further agrees that service of anyprocess, summons, notice or document by U.S. registered mail to its respectiveaddress set forth in Section 10 shall be effective service of process forany litigation brought against it in any such court.  Maker hereby irrevocably and unconditionallywaives any objection to the laying of venue of any litigation arising out ofthis Note or the transactions contemplated hereby or any of the othertransactions contemplated hereby in the courts of the State of California orthe courts of the United States of America located in Alameda County, State ofCalifornia and hereby further irrevocably and unconditionally waives and agreesnot to plead or claim in any such court that any such litigation brought in anysuch court has been brought in an inconvenient forum.  Each of Maker and Payer hereby irrevocablyand unconditionally waives any right it may have to trial by jury in

 

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

 

12.                                 Compliancewith Laws.  It is expresslystipulated and agreed to be the intent of Maker and Payee to at all timescomply with the usury and other laws applicable to the Transaction Documentsand any subsequent revisions, repeals, or judicial interpretations thereof, tothe extent any of the same are applicable hereto.  If such laws are ever revised, repealed, orjudicially interpreted so as to render usurious any amount called for under theTransaction Documents, or contracted for, charged, or received with respect tothe indebtedness evidenced by this Note, then it is Maker’s and Payee’s expressintent that all excess amounts theretofore collected by Payee be credited onthe principal balance of this Note (or, if this Note has been paid in full,refunded to Maker), and the provisions of the Transaction Documents immediatelybe deemed reformed and the amounts thereafter collectable hereunder andthereunder reduced, without the necessity of the execution of any new document,so as to comply with the then applicable law, but so as to permit the recoveryof the fullest amount otherwise called for hereunder and thereunder.  As used herein, “Maximum Lawful Rate” meansthe maximum rate (or, if the context so permits or requires, an amountcalculated at such rate) of interest which, at the time in question would notcause the interest charged on this Note at such time to exceed the maximumamount which the Payee would be allowed to contract for, charge, take, reserve,or receive under applicable law (including the “Cost of Money” limitationspursuant to Section 107.855 of Title 13 of the United States Code ofFederal Regulations) after taking into account, to the extent required byapplicable law, any and all relevant payments or charges under the TransactionDocuments.

 

[Remainder of Page Intentionally Left Blank]

 

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EXECUTED as of the date first written above.

 
|   | **MAKER:**                    |
|--------|-------------------------------|
|   |                          |
|   | **COMMODORE RESOURCES, INC.** |
|   | ** **                    |
|   |                          |
|   | By:                           |   |   |
|   | Name:                         |   |   |
|   | Title:                        |   |   |
|        |                               |  |  |  |  |

 

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