**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM10-K/A**

**(Amendment No. 1)**

 

**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of**

**the SECURITIES EXCHANGE ACT OF 1934**

 

**For thefiscal year ended June 30, 2007**

 

**Commissionfile number 1-10875**

 

**J. L.HALSEY CORPORATION**

 (exact name of registrant as specified in itscharter)

 

| **DELAWARE**                             | ** ** | **01-0579490**                        |
|------------------------------------------|------------|---------------------------------------|
| (State of  incorporation)                |       | (I.R.S. Employer  Identification No.) |
|                                     |       |                                  |
| **103  Foulk Rd, Suite 205Q**            | ** ** | **19803**                             |
| **Wilmington,  DE**                      | ** ** | (Zip Code)                            |
| (Address of principal  executive office) |       |                                  |

 

Registrant’s telephonenumber, including area code:  **(302)691-6189**

 

Securities registeredpursuant to Section 12(g) of the Act:

 

**CommonStock, Par Value $.01 Per Share**

 (Title of class)

 

Indicate by check mark ifthe Registrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.  Yes  o      No  x

 

Indicated by check markif the Registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act.  Yes  o     No  x

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes  x     No  o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of Registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K   x

 

Indicate by checkmarkwhether the Registrant is a larger accelerated filer, an accelerated filer, ora non-accelerated filer. See definition of “accelerated filer and largeraccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)

 

Large Accelerated filer  o                   Acceleratedfiler  o                           Non-acceleratedfiler  x

 

Indicated by check markwhether the Registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes  o     No  x

 

As of December 29, 2006,the aggregate market value of the shares of common stock held by non-affiliateswas approximately $39,377,801 (Determination of stock ownership bynon-affiliates was made solely for the purpose of responding to thisrequirement and the Registrant is not bound by this determination for any otherpurpose.)

 

There were 96,330,675shares of the Registrant’s common stock outstanding as of September 5, 2007.

 

DOCUMENTS INCORPORATED BYREFERENCE

 

None.

 

 

 

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This amendment No. 1 tothe Annual Report on Form 10-K of J. L. Halsey Corporation amends and restatesin its entirety Part III of the Annual Report on our Form 10-K filed with theSecurities and Exchange Commission on September 26, 2007 (the “Original Form10-K”).  In addition, Part IV, Item 15 isbeing amended to include employment agreements for two individuals recently appointedas executive officers by our Board of Directors and to update thecertifications required pursuant to Sections 302 and 906 of the Sarbanes-OxleyAct of 2002.  Capitalized terms usedherein and not otherwise defined shall have the meaning assigned to such termsin the Original Form 10-K. Unless the context requires otherwise in thisamendment No. 1, the terms “we,” “us” and “our” refer to J.L. HalseyCorporation and its subsidiaries.

 

**PART III**

**ITEM 10. Directors, Executive Officers andCorporate Governance.**

**DIRECTORS**

Our directors are asfollows:

 
| **Name of Director**      | ** ** | **Age** | ** ** | **Title**                                               | ** ** | **Annual Meeting at which Term Ends** | ** ** |
|---------------------------|------------|---------|------------|---------------------------------------------------------|------------|-------------------------------------------------|------------|
| Andrew Richard  Blair     |       | 74      |       | Class I Director                                        |       | 2008                                            |       |
| William T.  Comfort, III  |       | 41      |       | Class III Director, Chairman of the Board of  Directors |       | 2007                                            |       |
| Nicolas De  Santis Cuadra |       | 41      |       | Class I Director                                        |       | 2008                                            |       |
| Luis A. Rivera            |       | 36      |       | Class II Director                                       |       | 2009                                            |       |
| James A. Urry             |       | 53      |       | Class II Director                                       |       | 2009                                            |       |

* *

*AndrewRichard Blair* hasbeen a member of our Board since November 12, 2002. He is a founder of FreimarkBlair & Company, Inc., a broker-dealer research boutique located at OneRice Bluff Road, Pawley's Island, South Carolina. Mr. Blair has served asPresident, Chief Executive Officer, Chief Financial Officer and as a directorof Freimark Blair since January 1983. Mr. Blair received his B.S. in Science and Business Administration fromWake Forest University.

 

*WilliamT. Comfort*, *III* has served as a member of our Boardsince June 2002, and as Chairman of the Board since November 12, 2002. Hewas a private equity investor with CVC Capital Partners, a leading privateequity firm based in London, England, from February 1995 until December 2000.From February 2001 to February 2003 he served as a consultant to CiticorpVenture Capital (“CVC”).  He is nowprincipal of Conversion Capital Partners Limited, an investment fundheadquartered at 4th Floor, Liscartan House, 127 Sloane Street,London, England.  Mr. Comfort also hasserved as a director of numerous public and private companies as arepresentative of CVC Capital Partners and CVC, from all of which he hasresigned.  Mr. Comfort received his J.D.and L.L.M. in tax law from New York University School of Law.

 

*NicolasDe Santis Cuadra*hasbeen a member of our Board since January 16, 2003. Mr. De SantisCuadra has served since January 2003 as the Chief Executive Officer ofLondon-based Twelve Stars Communications, an international brand businessconsulting firm, located at 13 Chesterfield Street, Mayfair, London, whichMr. De Santis Cuadra founded in 1994. He previously served as the ChiefExecutive Officer of Twelve Stars from 1994 until December 1998. From December2000 until January 2003, Mr. De Santis Cuadra served as the marketingdirector of OPODO Ltd., an online travel portal owned by several European-basedairlines. From January 1999 until December 2000 Mr. De Santis Cuadra servedas Senior Vice President and Chief Marketing Officer of Beenz.com, the internetcurrency.

 

*Luis A. Rivera* was appointed our Chief ExecutiveOfficer on May 11, 2007.  He hasbeen a director since June 25, 2007.  Hepreviously served as our Interim Chief Executive Officer and Presidentbeginning on January 29, 

 

 

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2007.  From May 2005 until hisappointment as Interim Chief Executive Officer, Mr. Rivera had served as ourChief Operating Officer.  Mr. Riveracontinues to serve as President and Chief Executive Officer of LyrisTechnologies, Inc. and Uptilt, Inc., positions he has held since May 2005 andOctober 2005, respectively.  From May2003 through May 2005, Mr. Rivera was the General Manager of Lyris.  From May 2001 through April 2003, Mr. Riverawas the Director of Sales of Lyris.  FromNovember 1999 through May 2001, Mr. Rivera served as Director of InternationalSales of Turbolinx, an open source technology company.  Mr. Rivera is a graduate of Claremont McKennaCollege.

 

*James A. Urry* has been a member of our Board sinceJune 25, 2007.  Mr. Urry is a partner atCourt Square Capital Management L.P., a private equity firm located at ParkAvenue Plaza, 55 East 52nd Street, 34th Floor, New York, New York.  Prior to joining Court Square, he was apartner at Citigroup Venture Capital Equity Partners from 1989 to 2006.  Mr. Urry also serves as a member of the boardof directors of AMIS Holdings, Inc. and Intersil Corporation, both of which aresemiconductor companies.  Mr. Urry is thebrother-in-law of William T. Comfort, III, one of our directors.

 

Our Certificate ofIncorporation provides that the Board of Directors shall be divided into threeclasses, designated Class I, Class II and Class III. Directors serve forstaggered terms of three years each. Messrs.  Blair and De Santis Cuadra currentlyserve as Class I directors, whose terms expire at the Annual Meeting ofStockholders following the 2008 fiscal year. Mr. Comfort currently serves as aClass III director whose term expires at the Annual Meeting of Stockholdersfollowing the 2007 fiscal year.  Messrs.Rivera and Urry currently serve as Class II directors whose terms expire at theAnnual Meeting of Stockholders following the 2009 fiscal year.

 

# **EXECUTIVE OFFICERS**

Our  executive officers are as follows:

 
| **Name**       | ** ** | **Age** | ** ** | **Title**                                                                                                                    | ** ** |
|----------------|------------|---------|------------|------------------------------------------------------------------------------------------------------------------------------|------------|
| David R. Burt  |       | 44      |       | President, Chief Executive Officer, Treasurer and  Secretary                                                                 |       |
| Luis A. Rivera |       | 36      |       | President and Chief Executive Officer and President  and Chief Executive Officer of Lyris Technologies, Inc and Uptilt, Inc. |       |
| Joseph Lambert |       | 46      |       | Chief Financial Officer, Treasurer and Secretary                                                                             |       |
| Peter Biro     |       | 37      |       | Chief Operating Officer                                                                                                      |       |
| Robb Wilson    |       | 38      |       | Vice President of Technology                                                                                                 |       |
| Loren McDonald |       | 50      |       | Vice President and Chief Marketing Officer                                                                                   |       |
| Jason Han      |       | 37      |       | Vice President, Sales                                                                                                        |       |
| Sean Ryan      |       | 42      |       | Vice President, Engineering                                                                                                  |       |

 

The Executive Officersnamed above were appointed by the Board of Directors to serve in suchcapacities until their respective successors have been duly appointed andqualified, or until their earlier death, resignation or removal from office.

 

*DavidR. Burt* served asour Chief Executive Officer, President and Secretary since May 4, 2000, andTreasurer since January 14, 2002, and as a director since June 7, 2000. Mr.Burt previously served as a Class III director until January 31, 2004, when heresigned that position and was reappointed as a Class II director to fill thevacancy on the Board of Directors created by the resignation of Charles E.Finelli. Mr. Burt was also President, Chief Executive Officer, Secretary, and adirector of Ergo Science Corporation, a biopharmaceutical company, until hisresignation in December 2003. Mr. Burt had served in various capacities withErgo since joining that company in March 1993.  Mr. Burt resigned all of his positions with us as an officer in Januaryof 2007, and as a member of our board  inMarch of 2007.

 

 

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Biographical informationon Mr. Rivera is set forth above.  See “Directors.”

 

*JosephLambert* wasappointed our Chief Financial Officer on January 29, 2007, and Secretary andTreasurer on February 5, 2007.  He joinedus on August 29, 2005 as Vice President and Controller.  He was appointed as Chief Accounting Officerin November 2005.  Prior to joining us,Mr. Lambert served as Director of Operational Accounting for Dreyer’s Grand IceCream, Inc. from December 2001 to August 2005. From March 2001 through June 2001, Mr. Lambert was a consultant andserved as Interim Controller of Equilibrium Technologies.  From June 2001 through October 2001, Mr.Lambert was employed by New Boston Select Group, Inc., in which capacity hecontinued to serve as Interim Controller of Equilibrium Technologies.  Prior to his work with EquilibriumTechnologies, Mr. Lambert served as Controller of 1stUp.com Corporation from1999 to 2001.  Mr. Lambert holds a B.A.in Economics from the University of California Los Angeles.

 

*Peter Biro*was appointed our Chief Operating Officeron February 14, 2007.  He served asour Vice President of Corporate Development and Planning since August 17,2006.  From July 2001 until joining us,Mr. Biro was founder and managing partner of The Cowper Group, a Boston-basedcorporate development consulting firm focused on buy-side mergers andacquisitions for small to mid-market technology companies.  Working with both venture-backed and publiccompanies, including us, Mr. Biro consulted on the use of mergers andacquisitions as a core part of business strategy and actively assisted clientswith transaction sourcing and execution. Mr. Biro received an M.B.A. from Stanford University and both a B.S. inelectrical engineering and B.A. in computer science and history from DukeUniversity.

 

*RobbWilson* wasappointed our Vice President of Technology on January 19, 2006.  Since December 15, 2004, Mr. Wilson hasserved as Vice President of Development and Deliverability for Lyris.  Prior to joining Lyris, Mr. Wilson served asPresident and founder of Piper Software, a pioneer in the development of e-maildeliverability solutions, from October 1, 2004 to December 15, 2004.  Lyris acquired Piper Software in November2004.  Prior to his tenure at PiperSoftware, Mr. Wilson served as Vice President of Software Development forQuiris, Inc., the online marketing firm, from March 1, 2001 to October 1, 2001.

 

*Loren McDonald*was appointed our Vice President and ChiefMarketing Officer on June 26, 2006. Prior to joining us Mr. McDonald was vicepresident of marketing for EmailLabs beginning in March 2003. EmailLabs is aleading email service provider, which was acquired by us in October of 2005.From January 2002 through March 2003, Mr. McDonald was founder and president ofIntevation, an e-marketing services consulting firm specializing in email andsearch engine marketing services. From December 2000 through January 2002 Mr.McDonald was Chief Marketing Officer of NetStruxr.

 

*Jason Han*was appointed our Vice President of Saleson July 1, 2007.  From April of 2002 to June of 2007, Mr. Han has servedas Director of ASP Operations for Lyris.  Prior to joining Lyris, Mr. Hanserved various sales management positions with enterprise software companiesTurbolinux, Siebel Systems and Netscape Communications.  Mr. Han holds abachelor degree from University of California, Berkeley.

 

*SeanRyan*wasappointed our Vice President of Engineering on May 21, 2007.  SinceJanuary of 2005, Mr. Ryan has been providing SaaS consulting services andassisted early stage companies in raising investment capital. Notably heassisted eSchoolware, a provider of hosted assessment services to theeducational market acting as their interim CTO and helping them raise capital.From January 2004 to December 2004 he acted as the CTO/COO of Booksurge, LLC anonline provider of print-on-demand services. In December of 2004 BookSurge wasacquired by Amazon.com. From January 2000 to December 2003 Mr. Ryan was afounder and the CTO of ExactTarget, a hosted email solutions provider.

 

# **COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT**

Section 16(a) of theExchange Act requires our directors, executive officers and holders of morethan 10% of our shares of Common Stock to file with the SEC initial reports ofownership of shares of Common Stock and reports of changes in such ownership.The SEC’s rules require such persons to furnish us with copies of all Section16(a) reports that they file. Based on a review of these reports and on writtenrepresentations from the reporting persons that no other reports were required,we believe that the applicable Section 16(a) reporting requirements werecomplied with for all transactions which occurred in the fiscal year ended June 30,2007.

 

 

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**CODE OFETHICS**

We adopted our Code ofBusiness Conduct and Ethics on September 25, 2003, and it was filed with theSEC as an exhibit to our Annual Report on Form 10-K for the year ended June 30,2003.

 

**STOCKHOLDERNOMINATION**

There have been nomaterial changes to the procedures by which stockholders may recommend nomineesto the board of directors, since the disclosure in our last proxy statement.

 

**AUDITCOMMITTEE**

The Audit Committee isappointed by the Board of Directors to assist the Board of Directors withcarrying out its duties.  The primaryfunctions of the Audit Committee are to oversee:

 

•                                           ouraccounting and financial reporting process;

•                                           thequality and integrity of the financial statements and other financialinformation that we provide to any governmental body or the public;

•                                           ourcompliance with legal and regulatory requirements;

•                                           theindependent auditors’ qualifications and independence; and

•                                           theperformance of our internal audit function and independent auditors.

The role and otherresponsibilities of the Audit Committee are set forth in the Audit CommitteeCharter.  The Audit Committee Charter isnot available on our website.  A copy ofthe Audit Committee Charter was last provided to stockholders as an exhibit tothe proxy statement for our annual meeting for fiscal year 2005, which wasoriginally filed with the SEC on June 20, 2006.

 

The members of the AuditCommittee are Messrs. Blair and De Santis Cuadra, with Mr. Blair serving aschairman.  The Board of Directors has affirmativelydetermined that all members of the Audit Committee meet the currentindependence requirements of the NASDAQ Stock Market listing standards andapplicable rules and regulations of the SEC. Those standards require that, in addition to meeting the independencestandards set forth under “Certain Relationship and Related Transactions —Director Independence,”****each member ofthe Audit Committee must not be an affiliate of ours and must not receive fromus, directly or indirectly, any consulting, advisory or other compensatory feesexcept for fees for services as a director. The Board of Directors also has determined that Mr. Blair satisfies therequirements for an “audit committee financial expert” and has designated Mr.Blair as our audit committee financial expert.

 

**ITEM 11. EXECUTIVE COMPENSATION.**

# **COMPENSATION DISCUSSION AND ANALYSIS**

**Overview of Compensation Program**

The CompensationCommittee of the Board is responsible for our compensation programs.  Prior to 2005, our operations consisted entirelyof maximizing the assets we retained from our prior physical rehabilitationbusiness and in pursuing another operating business to acquire.  During that period we had only one executiveofficer, and as such our compensation program focused largely on retaining theongoing services of that officer.  SinceMay 12, 2005, we have purchased four operating businesses and in the processseveral new executive officers have been appointed.  The individuals who served as our ChiefExecutive Officer and Chief Financial Officer during our fiscal year ended June30, 2007, as well as the other individuals included in the Summary CompensationTable below, are 

 

 

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referred to as the “Named Executive Officers.”

 

**Compensation Philosophy and Objectives**

Since the acquisition of ouroperating subsidiaries, our compensation programs and policies have focusedmainly on the areas of retaining and attracting employees necessary to operatethe acquired subsidiaries and grow our respective businesses.  Historically, a formal compensation policywas not utilized by the Compensation Committee. Rather, compensation of executives, including the Named ExecutiveOfficers, was established on a more informal, ad-hoc basis.  To date, no formal studies have beenundertaken to determine whether compensation paid to our executives iscompetitive with that of our competitors. Instead, the Compensation Committee has focused on one-on-onenegotiations with our executives at the time of hire for the purpose ofrecruiting the executive in order to assemble an executive team that willdevelop and implement our long-term strategic goals.  In the fourth quarter of the fiscal yearended June 30, 2007, we began implementing formal procedures to ensure that shortterm incentive bonuses and annual salary increases are tied to individualperformance.  The Compensation Committeecontinues to evaluate those procedures and we intend to take steps to revisethose procedures to establish more formal and objective compensation policiesin the future that will strengthen the nexus between executive pay and theexecutives individual, and our, performance.

 

**Setting Executive Compensation**

For those executives whowere previously employed at one of the operating subsidiaries, initial basesalary largely has been based on their respective salaries prior to thesubsidiary’s acquisition.  In certaininstances upward adjustments have been made in order to compensate theexecutive for additional responsibilities or duties given to the executivefollowing the integration of that executive’s subsidiary with the operations ofthe public company parent.  For instance,our VP of Technology, originally a Lyris Technologies, Inc. officer, receivedan increase in base salary of 13 percent and additional bonus potential of 24percent when he assumed the technology leadership for us, including all of oursubsidiaries.** **Forother executives, base salary has been established largely through negotiationsbetween the executive and our Chief Executive Officer, with input and finalapproval from the Compensation Committee.

 

Base salaries aretypically evaluated annually prior to the anniversary date of initialemployment of each executive with any changes in base salary effective as ofthe anniversary date.  Like the initialanalysis, the annual evaluation is also an informal process, with the ChiefExecutive Officer evaluating the salaries of our other executive officers, andthe Compensation Committee evaluating the salary of the Chief ExecutiveOfficer.  The focus of the evaluation is largelybased on the Company’s and the individual executive’s performance during theprevious year.  The individualperformance evaluation is largely subjective, as no formal criteria have beenestablished.  For the 2007 fiscal year,this evaluation resulted in an increase in base salary ranging from 0 to 28percent for the Named Executive Officers, with the Chief Executive Officerreceiving a 0 percent increase and the Chief Financial Officer receiving a 28percent increase because his base salary and bonus were deemed to beinequitable with his responsibilities. In future years the quarterly performance bonuses described below willalso be incorporated into the annual review process, with the attainment of (orthe failure to attain) the quarterly performance targets established in thepreceding year as a factor in determining the propriety of a salary increase.

 

In addition to basesalary, we use a combination of cash incentives and equity-based awards as keycomponents in the short- and long-term incentive compensation arrangements forexecutive officers, including the Named Executive Officers.   Short-term incentives generally take theform of cash bonuses which range from 10 to 25 percent of the executives’ basesalaries.  However, the Chief ExecutiveOfficer’s bonus potential was set by the terms of his initial employmentcontract at 125 percent of his base salary and the Chief Operating Officer’sbonus potential is set at 42 percent of his base salary.  Generally, executives with greaterresponsibilities are eligible to receive higher bonuses as a percentage of basesalary.  In the fourth quarter of thefiscal year ended June 30, 2007, we implemented individual business objectivesupon which quarterly bonuses are contingent.** **See “Summary Compensation Table”below for a list of those objectives for each Named Executive Officer and thepercentage of total possible bonus paid to each Named Executive Officer.  We estimate that at the time fourth quarterperformance criteria were established there was approximately a 60 to 70percent chance that the criteria would be fully satisfied.

 

Although our Amended andRestated 2005 Equity-Based Compensation Plan (the “2005 Plan”) provides the 

 

 

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Compensation Committee with flexibility to design and grant a host ofstock-based awards, currently the long-term incentive awards granted under the2005 Plan have consisted entirely of non-qualified stock options.   The Compensation Committee believes that theuse of equity-based incentives promotes individual and Company performance byallowing employees to participate in long-term growth and profitability.  It also believes that our exclusive use ofstock options is appropriate because this type of equity-based award is the onewith which employees in the industry in which we compete are most accustomed toreceiving as long-term incentive compensation. The options granted under the 2005 Plan generally vest in equal annualinstallments over a four year period from the date of grant.  The Compensation Committee is responsible forthe granting of all equity-based compensation, including the award dates foreach grant.  Although award dates aredetermined exclusively at the Compensation Committee’s discretion, typicallygrants are made to an employee on the date of hire, and then on specialcircumstances such as a promotion or when deemed necessary to retain a valuedemployee.   See “Grants of Plan BasedAward Table” for additional information regarding these incentive awards.

 

**Role of Executive Officers in Compensation Decisions**

The CompensationCommittee makes all compensation decisions for all executive officers (whichincludes the Named Executive Officers). The Compensation Committee activelyconsiders, and has the ultimate authority of approving, recommendations made bythe Chief Executive Officer regarding all equity-based awards to employees. OurChief Executive Officer determines, in consultation with the CompensationCommittee, the non-equity compensation of our employees who are not executiveofficers.

 

**Employment Agreements and Change-In-Control Provisions**

All of the NamedExecutive Officers, other than Loren McDonald, have employment agreements.  Certain of these agreements provide forseverance payments upon termination of employment without “cause” (by us) orfor “good reason” (by the executive), in each case as defined in the respectiveagreement.** **The2005 Plan also provides discretion to the Compensation Committee foraccelerated benefits upon termination for certain reasons or upon us having achange in control.   The CompensationCommittee intends that severance, if provided, provide protection for a limitedtime period sufficient to allow the executive to obtain new employment.  The Compensation Committee believes that suchseverance benefits due to these termination events provides the Named ExecutiveOfficers a reasonable package based on the value the officers have created thatis ultimately realized by our stockholders.

 

**Retirement and Other Benefits**

All executive officersare eligible to participate in our 401(k) plan and other benefit programs asdescribed below.  All executive officersare eligible to participate in the group health and 401(k) plans under the sameterms and conditions as all other employees with the exception that, by theterms of his employment contract, the employee contribution of the ChiefExecutive Officer Luis Rivera, under our healthcare plan is paid by us.  These amounts are disclosed in the SummaryCompensation Table below.

 

Our 401(k) plan providesfor employer matching funds of up to 50 percent of the first six percentof an employee’s salary for all qualifying employees including executiveofficers. We do not provide any other retirement benefits or tax-qualifieddeferred compensation plans or programs for our executive officers, nor do weprovide a nonqualified deferred compensation plan.

 

**Tax andAccounting Implications**

***Deductibilityof Executive Compensation***

As part of its role, theCompensation Committee reviews and considers the deductibility of executivecompensation under Section 162(m) of the Code, which provides that we maynot deduct compensation of more than $1 million that is paid to certainindividuals, subject to certain exceptions. We believe that compensation paidis generally fully deductible for federal income tax purposes. However, theCompensation Committee may approve compensation that will not meet theserequirements in order to ensure competitive levels of total compensation forour executive officers.

 

 

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***Accounting for Stock-Based Compensation***

Effective January 1,2005, we began accounting for stock-based payments, including awards under our2005 Plan, in accordance with the requirements of FASB Statement 123R.

 

***Monitoring the Effectiveness of our Compensation Practices***

Despite the informal and relatively subjectivenature of the compensation practices set forth above, we nonetheless believethat, at least to date, they have beenrelatively successful in attracting and retaining the employees necessary to operate, manage and growour businesses.  Indeed, no officer hasleft our employ during the past year as a result of inadequate compensation.

 

**SUMMARYCOMPENSATION TABLE**

The following tablesummarizes, with respect to our Chief Executive Officer, our Chief FinancialOfficer, each of our other named executive officers, as well as our formerChief Executive Officer, information relating to the compensation earned forservices rendered in all capacities during fiscal year 2007.

 
| **Name and Principal Position**               | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus  ($)** | ** ** | **Option  Awards   ($)(1)** | ** ** | **All Other Compensation ($)** | ** ** | **Total ($)** | ** ** |
|-----------------------------------------------|------------|----------|------------|-----------------|------------|----------------|------------|-----------------------------|------------|--------------------------------|------------|---------------|------------|
|                                          |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
| David R. Burt                                 |       | 2007     |       | 153,846         | (2)        |           |       |                        |       | 359,000                        | (3)        | 512,846       |       |
| Former President  and Chief Executive Officer |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
|                                          |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
| Luis A. Rivera                                |       | 2007     |       | 200,000         |       | 250,000        | (4)        | 137,156                     |       | —                         |       | 600,515       |       |
| President and  Chief Executive Officer        |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
|                                          |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
| Joseph Lambert                                |       | 2007     |       | 149,791         |       | 30,000         | (5)        | 23,461                      |       | —                         |       | 203,252       |       |
| Chief Financial  Officer                      |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
|                                          |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
| Robb Wilson                                   |       | 2007     |       | 175,000         |       | 7,525          | (6)        | 31,851                      |       | —                         |       | 214,376       |       |
| Vice President  of Technology                 |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
|                                          |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
| Loren McDonald                                |       | 2007     |       | 173,765         |       | 7,075          | (7)        | 52,068                      |       | —                         |       | 232,908       |       |
| Vice President  Corporation Communications    |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
|                                          |       |     |       |            |       |           |       |                        |       |                           |       |          |       |
| Peter Biro                                    |       | 2007     |       | 165,519         |       | 23,010         | (8)        | 81,082                      |       | —                         |       | 276,939       |       |
| Chief Operating  Officer                      |       |     |       |            |       |           |       |                        |       |                           |       |          |       |

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(1)                 We account forthe cost of stock-based compensation awarded under the 2005 Plan in accordancewith the Financial Accounting Standards Board Statement of Financial AccountingStandards No. 123 (revised 2004) Share Based Payment (“SFAS 123R”),under which the cost of equity awards to employees is measured by the fairvalue of the awards on their grant date and is recognized over the vestingperiods of the awards, whether or not the awards had any intrinsic value duringthe period. Amounts shown in the table above reflect the dollar amountrecognized for financial statement reporting purposes for fiscal year 2007 inaccordance with SFAS 123R of awards granted under the 2005 Plan and thusmay include amounts from awards granted in and prior to fiscal year 2007. Noforfeitures occurred during fiscal year 2007, and all awards are based on theclosing market price of our common stock on the date of grant.  Assumptions used in calculation of theseamounts are included in Note 17 to our consolidated audited financialstatements for the fiscal year ended June 30, 2007, included in the OriginalForm 10-K.

(2)                 Representssalary paid through January 28, 2007, the date on which Mr. Burt resigned as anofficer and employee.

(3)                 Mr. Burt waspaid $120,000 by us in FY 2007 following his resignation as an employee,President and Chief Executive Officer. In connection with his 

 

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resignation,on March 8, 2007 we entered into an agreement with Mr. Burt to, among otherthings, pay to Mr. Burt a total of $359,000 representing bonuses earned by Mr.Burt at the time he was employed by us as an officer.  The exact amount of the bonus earned by Mr.Burt was in dispute and the amount agreed upon represented a settlement betweenthe parties.  Such bonus amount is to bepaid as follows: (i) $30,000 on the first business day of each month beginningin March 2007 and ending on the first business day of January 2008, and (ii)$29,000 on the first business day of February 2008.  The $120,000 paid in fiscal year 2007represents the first four installments of the settlement.

(4)                 Performancecriteria were only established in the fourth quarter and, consequently, bonusesin the fiscal year ending June 30, 2007, have not be treated as payablepursuant to an incentive plan for purposes of these disclosures.  The fourth quarter bonus objectives for Mr.Rivera are as follows: Successful integration of the acquired companies,achievement of specified EBITDA targets, achievement of key metrics for supportresponse times, customer retention and application uptime, meeting targets forintroduction of new on-demand software platform and successfully developingsenior management team.  Mr. Riverareceived 100 percent of his bonus potential for each quarter of the fiscal yearpursuant to his employment agreement

(5)                 Performancecriteria were only established in the fourth quarter and, consequently, bonusesin the fiscal year ending June 30, 2007, have not be treated as payablepursuant to an incentive plan for purposes of these disclosures.  The fourth quarter bonus objectives for Mr.Lambert are as follows: Successful integration of the acquired companies’financial systems and personnel and successful implementation of consolidatedaccounting system.  Mr. Lambert received100 percent of his bonus potential for the fourth quarter of the fiscal year.

(6)                 Performancecriteria were only established in the fourth quarter and, consequently, bonusesin the fiscal year ending June 30, 2007, have not be treated as payablepursuant to an incentive plan for purposes of these disclosures.  The fourth quarter bonus objectives for Mr.Wilson are as follows: Development of product roadmap, management of externalfacing and internal development for both point and integrated products andaccomplishment certain other technical metrics. Mr. Wilson received 86 percent of his bonus potential for the fourthquarter of the fiscal year.

(7)                 Performancecriteria were only established in the fourth quarter and, consequently, bonusesin the fiscal year ending June 30, 2007, have not be treated as payablepursuant to an incentive plan for purposes of these disclosures.  The fourth quarter bonus objectives for Mr.McDonald are as follows: Improve our PR efforts, as measured by press mentionsand caliber of publication, planning and development of industry analystrelations and investor relations work on messaging presentations andconferences.  Mr. McDonald received 56.6percent of his bonus potential for the fourth quarter of the fiscal year.

(8)                 Performancecriteria were only established in the fourth quarter and, consequently, bonusesin the fiscal year ending June 30, 2007, have not be treated as payablepursuant to an incentive plan for purposes of these disclosures.  The fourth quarter bonus objectives for Mr.Biro are as follows: Successful integration and consolidation of supportfunction into a single unit and attaining key support metrics, successfuldevelopment and rollout of new on demand software platform.  Mr. Biro received 90 percent of his bonuspotential for the fourth quarter of the fiscal year.

**GRANTS OF PLAN BASED AWARDS**

The followingtable reflects possible payouts under our equity and non-equity incentive plansto the Named Executive Officers from grants made to such Named ExecutiveOfficers during the fiscal year ending June 30, 2007.

 
| **Name**                                                     | ** ** | **Grant  Date** | ** ** | **All  Other   Option   Awards:   Number of Securities Underlying   Options (#)** | ** ** | **Exercise  or Base Price of Option Awards ($/Share)** | ** ** | **Grant  Date Fair Value of Stock and Option Awards** | ** ** |
|--------------------------------------------------------------|------------|-----------------|------------|-----------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
|                                                         |       |            |       |                                                                              |       |                                                   |       |                                                  |       |
| David R. Burt   Former President and Chief Executive Officer |       | —          |       | 0                                                                                 |       | 0                                                      |       | $                                                     | 0          |   |
|                                                         |       |            |       |                                                                              |       |                                                   |       |                                                  |       |
| Luis A. Rivera   President and Chief Executive Officer       |       | —          |       | 0                                                                                 |       | 0                                                      |       | $                                                     | 0          |   |
|                                                         |       |            |       |                                                                              |       |                                                   |       |                                                  |       |
| Joseph Lambert   Chief Financial Officer                     |       | 5/8/07          |       | 150,000                                                                           | (1)        | $                                                      | 0.83       |                                                  | $          | 55,320 |   |
|                                                              |            |                 |            |                                                                                   |            |                                                        |            |                                                       |            |  |  |  |

 

 

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|                                                        |   |    |   |    |   |   |   |   |   |
|-------------------------------------------------------------|--------|---------|--------|---------|--------|--------|--------|--------|--------|
| Robb Wilson   Vice President of Technology                  |   | 5/8/07  |   | 200,000 | (2)    | $      | 0.83   |   | $      | 73,760 |   |
|                                                        |   |    |   |    |   |   |   |   |   |
| Loren McDonald   Vice President   Corporation Communication |   | —  |   | 0       |   | 0      |   | $      | 0      |   |
|                                                        |   |    |   |    |   |   |   |   |   |
| Peter Biro                                                  |   | 8/17/06 |   | 400,000 | (3)    | $      | 0.95   |   | $      | 177,720 |   |
| Chief Operating Officer                                     |   | 5/8/07  |   | 300,000 | (4)    | $      | 0.83   |   | $      | 110,640 |   |

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(1)                 The option vestsand becomes exercisable in four equal annual installments beginning on May 8,2008

(2)                 The option vestsand becomes exercisable in four equal annual installments beginning on May 8,2008

(3)                 The Option vestsand becomes exercisable in cumulative installments as follows: (i) the Optionshall be exercisable with respect to 50 percent of the Option Shares on thefirst anniversary of the Grant Date; and (ii) the Option shall be exercisablewith respect to the remaining 50 percent of the Option Shares in four (4) equalinstallments on the last day of each quarter of the year that begins on the dayafter the first anniversary of the Grant Date and ends on the secondanniversary of the Grant Date.

(4)                 The option vestsand becomes exercisable in four equal annual installments beginning on May 8,2008

**EmploymentAgreements/Arrangements**

 

*David R. Burt*. Effective as of May 5, 2000, we enteredinto an employment agreement with David R. Burt, to serve as the ChiefExecutive Officer. The original term of the agreement continued through May 5,2005, subject to certain extensions. Pursuant to the agreement, Mr. Burtreceived an annual base salary of $250,000 and an annual performance bonus ofnot less than $20,000. The agreement required Mr. Burt to devote at least 50percent of his business time and attention to the performance of the duties andresponsibilities of Chief Executive Officer, inasmuch as Mr. Burt also served,until December 2003, as president, chief executive officer and a director of anotherpublic Company. Mr. Burt’s agreement provided for additional bonuses of 10percent of the amount that we collected on certain of our delinquentreceivables in excess of the amount booked for such receivables on our balancesheet, subject to a specified cap, and 10 percent of the difference between theamount at which certain of our liabilities were booked on our balance sheet andthe actual amounts that we paid. As consideration for, among other things, hisefforts in obtaining settlements on certain disputes in July 2000, we grantedMr. Burt a convertible promissory note in the principal amount of $60,000. Mr.Burt subsequently transferred the note to a family limited partnershipcontrolled by him. On or about May 28, 2002, the holder of the note converted$52,125 of principal on the note into 20,850,000 shares of Common Stock. Theremaining $7,875 in principal and $9,500 in accrued interest were redeemed byus. On September 19, 2002, the family limited partnership granted an option topurchase 4,170,000 shares of the Common Stock acquired upon conversion of thenote to Mr. William T. Comfort III, currently the Chairman of our Board ofDirectors, at $0.04 per share which was later exercised. On January 8, 2003,the partnership sold an additional 4,170,000 shares of the Common Stock to LDNStuyvie Partnership, of which Mr. Comfort is the sole general partner, for$0.02676 per share. Mr. Burt’s employment agreement also provided him certainregistration rights with respect to the shares of the Common Stock acquiredupon conversion of the note. Because the exercise price of the options and theselling price of the shares were at or above market price in effect at the timeof the transactions, there was no effect on our results of operations.

 

The employment agreementprovided that we could terminate Mr. Burt’s employment for “due cause” (asdefined in the employment agreement) or without cause.  If Mr. Burt’s employment were terminated withoutcause, Mr. Burt would have been entitled to receive his base salary as accruedto the date of termination and not paid, as well as a severance payment equalto his base salary. Mr. Burt would also have been entitled to receive anybonuses he would have been entitled through the date of termination.

 

Upon, or within one yearfollowing, a “change in control” (as defined in the employment agreement), ifMr. Burt had resigned, the termination would have constituted a termination ofemployment without cause, entitling Mr. Burt to the same severance package asnoted above.

 

 

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Our  Board of Directors accepted the resignationof Mr. Burt as an officer on January 28, 2007, and as a director on March 7,2007.  In connection with hisresignation, on March 8, 2007 we entered into an agreement with Mr. Burt to, amongother things, pay to Mr. Burt a total of $359,000 representing bonuses earnedby Mr. Burt at the time he was employed by us. The exact amount of the bonus earned by Mr. Burt was in dispute and theamount agreed upon represented a settlement between the parties.  Such bonus amount is to be paid as follows:(i) $30,000 on the first business day of each month beginning in March 2007 andending on the first business day of January 2008, and (ii) $29,000 on the firstbusiness day of February 2008.

 

*Luis A. Rivera*. Effective May 12, 2005, Lyris Technologies,Inc., our wholly owned subsidiary, entered into an employment agreement withLuis A. Rivera, to serve as President and Chief Executive Officer. The term ofthe agreement is for five years and expires on May 12, 2010. The initial annualbase salary under the agreement is $200,000, and Mr. Rivera is eligible toreceive a quarterly performance bonus based on our profitability. In addition,Mr. Rivera received an award of options to purchase 3,600,000 shares of ourCommon Stock at an exercise price of $0.30 per share that vest ratably on aquarterly basis over four years from the date of grant.  Mr. Rivera is also eligible to participate inany “Investment Plans” and “Welfare Plans” (as defined in the employmentagreement) to the extent applicable generally to our other employees.

 

The employment agreementprovides that we may terminate Mr. Rivera for “cause” (as defined in theemployment agreement) or without cause. Mr. Rivera’s employment agreement doesnot contain any provision for a change in control. If we terminate Mr. Rivera’semployment without cause or if he resigns for “good reason” (as defined in theemployment agreement), Mr. Rivera will be entitled to the following:

 

•                  A lump sum severance payment equal to 1.5 times his then current base salary

•                  Any annual bonus awarded to Mr. Rivera prior to the date of terminationbut not yet paid;

•                  Mr. Rivera’s annual base salary through the date of termination to theextent not yet paid;

•                  Any compensation previously deferred by Mr. Rivera;

•                  Any unreimbursed business expenses;

•                  Any “accrued investments” (as defined in the employment agreement); and

•                  Any “accrued welfare benefits”, including any amounts owed as a resultof accrued vacation.

Additionally, following termination Mr. Rivera will be subject tonon-competition and non-solicitation provisions for a twelve month periodfollowing his termination and ongoing confidentiality and non-disparagementobligations.

 

*Robb Wilson*. Effective May 12, 2005, LyrisTechnologies, Inc. entered into an employment agreement with Robb Wilson, toserve as Vice President. The term of the agreement is for five years andexpires on May 12, 2010. The initial base salary under the agreement was$155,000. In addition, Mr. Wilson received an award of options to purchase 400,000shares of our Common Stock at an exercise price of $0.30 per share, which willvest ratably on an annual basis over four years from the date of grant. Mr.Wilson is also eligible to participate in any “Investment Plans” and “WelfarePlans” (as defined in the employment agreement) to the extent applicablegenerally to our other employees.  Mr.Wilson is not entitled to severance upon termination of his employment.

 

The employment agreementprovides that we may terminate Mr. Wilson for “cause” (as defined in theemployment agreement) or without cause. Mr. Wilson’s employment agreement doesnot contain any provision for a change in control. If we terminate Mr. Wilson’semployment without cause or if he resigns for “good reason” (as defined in theemployment agreement), Mr. Wilson will be entitled to the following:

 

•                  A lump sum severance payment equal to his then current base salary

 

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•                  Any annual bonus awarded to Mr. Wilson prior to the date of terminationbut not yet paid;

•                  Mr. Wilson’s annual base salary through the date of termination to theextent not yet paid;

•                  Any compensation previously deferred by Mr. Wilson;

•                  Any unreimbursed business expenses;

•                  Any “accrued investments” (as defined in the employment agreement); and

•                  Any “accrued welfare benefits”, including any amounts owed as a resultof accrued vacation.

Additionally, following termination Mr. Wilson will be subject tonon-competition and non-solicitation provisions for a twelve month periodfollowing his termination and ongoing confidentiality.  On January 19, 2006, Mr. Wilson was appointedour Vice President of Technology.  OnFebruary 10, 2006 he was granted an award of options to purchase 200,000 sharesof our Common Stock at an exercise price of $0.60 per share, which will vest infour equal annual installments beginning on February 10, 2007.  On May 8, 2007, Mr. Wilson assumed technologyleadership for all of our subsidiaries. At that time he was granted an award of options to purchase 200,000shares of our Common Stock at an exercise price of $0.83 per share, which willvest in four equal annual installments beginning May 8, 2008.

 

*Joseph Lambert*. On August 29, 2005, Joseph Lambertjoined us as Vice President and Controller and on November 14, 2005 he wasappointed our Chief Accounting Officer. Mr. Lambert received an initial annual base salary of $125,000 and willbe eligible to receive an annual merit bonus of up to 25 percent of his basesalary. In addition, on the date****Mr. Lambertwas employed by us, he received an award of options to purchase 250,000 sharesof our Common Stock, at an exercise price of $0.70 per share, that vest ratablyon an annual basis over four years from the date of grant.  The terms of Mr. Lambert’s employment arecontained in an offer letter, dated August 2, 2005 from Lyris, and anemployment agreement between Lyris Technologies, Inc. and Mr. Lambert datedAugust 29, 2005.  Mr. Lambert is alsoeligible to participate in any “Investment Plans” and “Welfare Plans” (asdefined in the employment agreement) to the extent applicable generally to ourother employees.  Mr. Lambert is notentitled to severance upon termination of his employment.  Upon termination, he will be subject to non-competitionand non-solicitation provisions for a twelve month period following histermination and ongoing confidentiality. On May 8, 2007, Mr. Lambert was granted an award of options to purchase150,000 shares of our Common Stock at an exercise price of $0.83 per share,which will vest in four equal annual installments beginning May 8, 2008.

 

*Loren McDonald*. On June 26, 2006, we hired LorenMcDonald to serve as Vice President and Chief Marketing Officer. Mr. McDonalddoes not have an employment agreement with us. Mr. McDonald received an initialannual base salary of $175,000 and he is eligible to receive an annual meritbonus of up to $25,000. In addition, in connection with his employment, Mr.McDonald received an award of options to purchase 250,000 shares of our CommonStock, at $0.85 per share, that vest ratably each quarter over four years fromthe date of grant.

 

*Peter Biro*. On August 17, 2006, we entered into anemployment agreement with Peter Biro to serve as Vice President of CorporateDevelopment and Planning. The term of the agreement is for four years andexpires on August 16, 2010. The initial annual base salary under the agreementis $190,000 (subject to adjustment by our board of directors), and Mr. Biro iseligible to receive an annual bonus as determined by our board of directors,provided that such annual bonus will not be less than $15,000. In addition, Mr.Biro received an award of options to purchase 400,000 shares of our CommonStock at an exercise price of $0.95, 50 percent of which shall vest on August17, 2007 and the remaining 50 percent shall vest in four equal installments onthe last day of each quarter of the period that begins on August 18, 2007, andends on August 17, 2008. Mr. Biro is also eligible to participate in any “InvestmentPlans” and “Welfare Plans” (as defined in the employment agreement) to theextent applicable generally to our other employees.  We also agreed to reimburse Mr. Biro formonthly premiums incurred by Mr. Biro for medical, prescription drug, dentaland/or vision insurance for himself and his immediate family, not to exceed $1,200per month.

 

 

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The employment agreementprovides that we may terminate Mr. Biro for “cause” (as defined in theemployment agreement) or without cause. Mr. Biro’s employment agreement doesnot contain any provision for a change in control. If we terminate Mr. Biro’semployment without cause or if he resigns for “good reason” (as defined in theemployment agreement), Mr. Biro will be entitled to the following:

 

•                  A lump sum severance payment equal to his then current base salary

•                  Any annual bonus awarded to Mr. Biro prior to the date of terminationbut not yet paid;

•                  Mr. Biro’s annual base salary through the date of termination to theextent not yet paid;

•                  Any compensation previously deferred by Mr. Biro;

•                  Any unreimbursed business expenses;

•                  Any “accrued investments” (as defined in the employment agreement); and

•                  Any “accrued welfare benefits”, including any amounts owed as a resultof accrued vacation.

Additionally, following his termination Mr. Biro will be subject tonon-competition and non-solicitation provisions for a twelve month periodfollowing his termination and ongoing confidentiality and non-disparagementobligations.  On February 14, 2007, Mr.Biro was appointed our Chief Operating Officer and on May 8, 2007, Mr. Biro wasgranted an award of options to purchase 300,000 shares of our Common Stock atan exercise price of $0.83 per share, which will vest in four equal annualinstallments beginning May 8, 2008.

 

**OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END**

The followingtable reflects outstanding stock options held by the Named Executive Officersas of June 30, 2007.

 

| ** **                           | ** ** | **Number of  Securities  Underlying  Unexercised  Options  (#)** | ** ** | **Number of  Securities  Underlying  Unexercised  Options  (#)** | ** ** | **Option  Exercise  Price** | ** ** | **Option  Expiration  Date** | ** ** |
|--------------------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| **Name**                             | ** ** | **Exercisable**                                                  | ** ** | **Unexercisable**                                                | ** ** | **($)**                     | ** ** | ** **                   |
| David R. Burt                   |       |                                                             |       |                                                             |       |                        |       |                         |       |
| Former President and                 |       | —                                                           |       | —                                                           |       | —                      |       | —                       |       |
| Chief Executive Officer              |       |                                                             |       |                                                             |       |                        |       |                         |       |
|                                 |       |                                                             |       |                                                             |       |                        |       |                         |       |
| Luis A. Rivera 

President and Chief |       | 1,935,612                                                        |       | 1,664,388                                                        | (1)        | $                           | 0.30       |                         | 5/6/15     |   |
| Executive Officer                    |       |                                                             |       |                                                             |       |                        |       |                         |       |
|                                 |       |                                                             |       |                                                             |       |                        |       |                         |       |
| Joseph Lambert                       |       |                                                             |       |                                                             |       |                        |       |                         |       |
| Chief Financial Officer              |       | 62,500                                                           |       | 187,500                                                          | (2)        | $                           | 0.70       |                         | 8/29/15    |   |
|                                 |       | —                                                           |       | 150,000                                                          | (3)        | $                           | 0.83       |                         | 5/8/17     |   |
|                                 |       |                                                             |       |                                                             |       |                        |       |                         |       |
| Robb Wilson                          |       |                                                             |       |                                                             |       |                        |       |                         |       |
| VicePresident of                     |       | 200,000                                                          |       | 200,000                                                          | (4)        | $                           | 0.30       |                         | 5/6/15     |   |
| Technology                           |       | 50,000                                                           |       | 150,000                                                          | (5)        | $                           | 0.60       |                         | 2/10/16    |   |
|                                 |       | —                                                           |       | 200,000                                                          | (6)        | $                           | 0.83       |                         | 5/8/17     |   |

 

 

 

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| Loren McDonald                      |   |   |   |        |   |   |   |   |     |
|-------------------------------------|--------|--------|--------|-------------|--------|--------|--------|--------|----------|
| Vice President                      |   | 87,500 |   | 262,500 (7  | )      | $      | 0.62   |   | 10/11/15 |   |
| and Chief Marketing                 |   | 63,375 |   | 186,625 (8  | )      | $      | 0.85   |   | 6/26/16  |   |
| Officer                             |   |   |   |        |   |   |   |   |     |
|                                |   |   |   |        |   |   |   |   |     |
| Peter Biro

Chief Operating Officer |   | — |   | 400,000 (9  | )      | $      | 0.95   |   | 8/17/16  |   |
|                                |   | — |   | 300,000 (10 | )      | $      | 0.83   |   | 5/8/17   |   |

----

 
| (1)    |   | The  Compensation Committee granted this option to Mr. Rivera on May 6, 2005. The  award vests in equal quarterly installments over a four year period beginning  June 30, 2005.                                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                        |
| (2)    |   | The  Compensation Committee granted this option to Mr. Lambert on August 29, 2005.  The award vests in equal annual installments over a four year period  beginning August 29, 2006.                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                        |
| (3)    |   | The  Compensation Committee granted this option to Mr. Lambert on May 8, 2007. The  award vests in equal annual installments over a four year period beginning  May 8, 2008.                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                        |
| (4)    |   | The  Compensation Committee granted this option to Mr. Wilson on May 6, 2005. The  award vests in equal annual installments over a four year period beginning  May 6, 2006.                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                        |
| (5)    |   | The  Compensation Committee granted this option to Mr. Wilson on February 10,  2006. The award in equal annual installments over a four year period  beginning February 10, 2007.                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                        |
| (6)    |   | The  Compensation Committee granted this option to Mr. Wilson on May 8, 2007. The  award vests in equal annual installments over a four year period beginning  May 8, 2008.                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                        |
| (7)    |   | The  Compensation Committee granted this option to Mr. McDonald on October 11,  2005. The award vests in equal annual installments over a four year period  beginning October 11, 2007.                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                        |
| (8)    |   | The  Compensation Committee granted this option to Mr. McDonald on June 26, 2006.  The award vests in equal quarterly installments over a four year period  beginning June 30, 2006.                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                        |
| (9)    |   | The  Compensation Committee granted this option to Mr. Biro on August 17, 2006.  Fifty percent of the shares underlying this option vested on August 17, 2007  and the remaining 50 percent of the shares underlying this option vest in  four equal quarterly installments beginning on November 17, 2007. |
|   |   |                                                                                                                                                                                                                                                                                                        |
| (10)   |   | The  Compensation Committee granted this option to Mr. Biro on May 8, 2007. The  award vests annually over a four year period beginning May 8, 2008.                                                                                                                                                        |

 

**OPTIONEXERCISES AND STOCK VESTED TABLE**

None of the NamedExecutive Officers exercised options during the fiscal year 2007, and noneholds any other type of stock award.

 

**PENSIONBENEFITS AND NONQUALIFIED DEFERRED COMPENSATION**

Wedo not sponsor or maintain either a defined benefit plan or anonqualified deferred compensation plan for the benefit of our employees.

 

**POTENTIALPAYMENTS UPON TERMINATION OR CHANGE IN CONTROL**

*Mr. Burt.*Our Board of Directors accepted the resignation of Mr.Burt as an officer on January 28, 2007, and as a director on March 7,2007.  In connection with hisresignation, on March 8, 2007, we entered into an agreement with Mr. Burt to,among other things, pay to Mr. Burt a total of $359,000 representing bonusesearned by Mr. Burt at the time he was employed by us.  The exact amount of the bonus earned by Mr.Burt was in dispute and the amount agreed upon represented a settlement betweenthe parties.  Such bonus amount is to bepaid as follows: (i) $30,000 on the first business day of each month beginningin March 2007, and ending on the first business day of January 2008, and (ii)$29,000 on the first business day of February 2008.

 

 

 

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*Mr. Rivera*. Pursuant to his employment agreement,in the event Mr. Rivera’s employment is terminated for good reason or withoutcause, we shall pay to Mr. Rivera any amounts, payments, entitlements andbenefits earned, accrued or owing but not yet paid, as well as an amount equalto 1.5 times his then current annual base salary.  At the end of fiscal year 2007 this provisionwould have entitled Mr. Rivera to $300,000 plus any other amounts accrued butnot yet paid.  Mr. Rivera’s agreementalso provides that any amounts, payments, entitlements and benefits earned,accrued or owing but not yet paid will be made in the event of his death ordisability or if his employment is terminated for cause. Mr. Rivera’s agreementdoes not contain a provision for additional payment based on a change of control;however, we will require any successor to us to assume expressly and agree toperform this employment agreement in the same manner and to the same extentthat we would be required to perform.

 

Under the terms of theagreement: (i) “cause” means (a) the failure of Mr. Rivera to materiallyperform his obligations and duties hereunder to our satisfaction, which failureis not remedied within 45 days after receipt of written notice from us,(b) commission by Mr. Rivera of an act of fraud upon, or willful grossmisconduct toward, us or any of our affiliates, (c) a material breach byEmployee of certain sections of the agreement, which in either case is notremedied within 15 business days after receipt of written notice from us or ourBoard of Directors , (d) the conviction of Mr. Rivera of any felony (or aplea of nolocontendere thereto) or any crime involving moralturpitude, or (e) the failure of Mr. Rivera to carry out, or comply with,in any material respect any directive of the Board of Directors consistent withthe terms of the agreement, which is not remedied within 30 business days afterreceipt of written notice from us or our Board of Directors; and (ii) “goodreason” shall mean any material breach by us of any provision of the agreement,and shall also include our (or our successors and assigns) substantiallyaltering the position, geographic location, or responsibilities of Mr. Riveraduring the term of his employment.

 

*Mr. Biro*. Mr. Biro’s employment agreementprovides that, in the event his employment is terminated for good reason orwithout cause, we shall pay to Mr. Biro his current annual base salary at thetime of termination for one year following termination, subject to mitigation,as well as any amounts, payments, entitlements and benefits earned, accrued orowing but not yet paid.  At the end offiscal year 2007 this provision would have entitled Mr. Biro to $190,000(subject to mitigation) plus any other amounts accrued but not yet paid.  Mr. Biro’s agreement also provides that anyamounts, payments, entitlements and benefits earned, accrued or owing but notyet paid will be made in the event of his death or disability or if hisemployment is terminated for cause.  Mr.Biro’s agreement does not contain a provision for additional payment based on achange of control; however, we will require any successor to us to assumeexpressly and agree to perform this employment agreement in the same manner andto the same extent that we would be required to perform.

 

Under the terms of theagreement: (i) “cause” means (a) the failure of Mr. Biro to perform hisobligations and duties hereunder to our satisfaction, which failure is notremedied within fifteen (15) days after receipt of written notice from us, (b)commission by Mr. Biro of an act of fraud upon, or willful misconduct toward,us or any of our affiliates, (c) a material breach by Mr. Biro of certainsections of the agreement, which in either case is not remedied within fifteen(15) days after receipt of written notice from us or our Board of Directors;(iv) the conviction of Mr. Biro of any felony (or a plea of nolo contenderethereto) or any crime involving moral turpitude; or (v) the failure of Mr. Biroto carry out, or comply with, in any material respect any directive of theBoard consistent with the terms of this Agreement, which is not remedied withinfifteen (15) days after receipt of written notice from us or our Board ofDirectors; and (ii) “good reason” means (w) a material reduction in the natureor scope of Mr. Biro’s responsibilities or authorities that is not consented toor approved by him, (x) any failure by us to comply in any material respectwith the compensation provisions of the agreement that is not consented to orapproved by Mr. Biro, (y) failure by us to comply with any other material termor provision of the agreement, or (z) the relocation or transfer of Mr. Biro’sprincipal office to a location more than 50 miles from the city of Boston,Massachusetts.

 

*Mr. Wilson*. Mr. Wilson’s employment agreementprovides that, in the event his employment is terminated for good reason orwithout cause, we shall pay to Mr. Wilson an amount equal to one year of hiscurrent annual base salary at the time of termination, as well as any amounts,payments, entitlements and benefits earned, accrued or owing but not yetpaid.  At the end of fiscal year 2007this provision would have entitled 

 

 

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Mr. Wilson to $175,000 plus any other amounts accrued but not yetpaid.  Mr. Wilson’s agreement alsoprovides that any amounts, payments, entitlements and benefits earned, accruedor owing but not yet paid will be made in the event of his death or disabilityor if his employment is terminated for cause. Mr. Wilson’s agreement does notcontain a provision for additional payment based on a change of control;however, we will require any successor to us to assume expressly and agree toperform this employment agreement in the same manner and to the same extentthat we would be required to perform.

 

Under the terms of theagreement: (i) “cause” means (a) the failure of Mr. Wilson to perform hisobligations and duties hereunder to the satisfaction of us, which failure isnot remedied within 15 days after receipt of written notice from us, (c)commission by Mr. Wilson of an act of fraud upon, or willful misconduct toward,us or any of our affiliates, (c) a material. breach by Mr. Wilson of certainsections of the agreement, which in either case is not remedied within 15 daysafter receipt of written notice from us or our Board of Directors, (d) theconviction of the executive of any felony (or a plea of nolocontenderethereto) or any crime involving moral turpitude, or (e) the failure of Mr.Wilson to carry out, or comply with, in any material respect any directive ofthe Board of Directors consistent with the terms of the agreement, which is notremedied within 15 days after receipt of written notice from us or our Board ofDirectors; and (ii) “good reason” shall mean any material breach by us of anyprovision of the agreement.

 

*Mr. Lambert*. Mr. Lambert’s agreement does notprovide for any severance payment to Mr. Lambert following the termination ofhis employment for any reason.  Mr.Lambert’s agreement does not contain a provision for additional payment basedon a change of control.

 

*Loren McDonald*. Mr. McDonald does not have anemployment agreement and he would not be entitled to any severance payment upontermination.

 

Additionally, the 2005Plan gives the Compensation Committee the discretion (but does not require it)to vest options outstanding under the 2005 Plan upon us having a change incontrol.  The option agreements for eachof the Named Executive Officers provide that within one year following ushaving a change in control, if the executive’s employment is terminated withoutcause by us, or with good reason by the executive (in each case as defined inthe option agreement), any options that would have become exercisable on orprior to the one year anniversary following the termination shall become immediatelyexercisable and shall remain exercisable until the earlier of the firstanniversary of the termination of employment or the earlier expiration of theoption in accordance with its terms.  Inaddition, Mr. Biro’s option agreement provides that all of his options shallbecome exercisable immediately prior to us having a change in control.

 

**COMPENSATIONOF DIRECTORS**

We provide eachnon-employee director with an annual retainer of $25,000.  Each director receives a fee of $1,000 permeeting attended, plus out-of-pocket expenses. In addition, members of board committees receive a fee of $1,000, plusout-of-pocket expenses, for each non-telephonic committee meeting attended thatis not scheduled in conjunction with a meeting of the full Board of Directors,and a fee of $500, plus out-of-pocket expenses, for each non-telephoniccommittee meeting attended in conjunction with a meeting of the full Board ofDirectors and for each telephonic meeting of any committee of the Board ofDirectors.  Our executive officers do notreceive additional compensation for serving on the Board of Directors.  Mr. Comfort, our Chairman of the Board, andMr. Urry have waived all retainers and fees for their services.  On October 11, 2005, Mr. DeSantis Cuadrawas granted 120,968 restricted shares of Common Stock under the J. L. HalseyCorporation 2005 Equity-Based Compensation Plan, which began vesting ratably ona quarterly basis on January 11, 2006 and continues throughOctober 11, 2008.  Mr. DeSantisCuadra’s shares were granted in lieu of $75,000 to be received in future annualdirector retainer fees over the three-year period following the date of grant.

 

 

 

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**Director Compensation Table**

The table belowsummarizes the compensation paid to our independent directors for the fiscalyear ended June 30, 2007.

 

| **Name**                    | ** ** | **Fees Earned or Paid in Cash  ($)** | ** ** | **Stock Awards  ($)** | ** ** | **Total  ($)** | ** ** |
|-----------------------------|------------|--------------------------------------|------------|-----------------------|------------|----------------|------------|
|                        |       |                                 |       |                  |       |           |       |
| Andrew Richard  Blair       |       | 27,000                               | (1)        | —                |       | 27,000         |       |
| William T.  Comfort III (2) |       | —                               |       | —                |       | —         |       |
| Nicolas De  Santis Cuadra   |       | 2,000                                | (3)        | 26,397                | (4)        | 28,397         |       |
| James A. Urry  (2)          |       | —                               |       | —                |       | —         |       |

----

 

(1)          Fees are for$25,000 annual retainer and four telephonic Audit Committee meetings.

(2)          Messrs. Comfortand Urry have waived all retainers and fees.

(3)          Fees are for fourtelephonic Audit Committee meetings.

(4)          On October 11, 2005, Mr.DeSantis Cuadra was granted 120,968 restricted shares of Common Stock under theJ. L. Halsey Corporation 2005 Equity-Based Compensation Plan, which beganvesting ratably on a quarterly basis on January 11, 2006, and continuesthrough October 11, 2008.  Mr.DeSantis Cuadra’s shares were granted in lieu of $75,000 to be received infuture annual director retainer fees over the three-year period following thedate of grant.  As of the end of fiscalyear 2007, 60,484****of these shares remainunvested.  We account for the cost ofstock-based compensation in accordance with FAS 123(R), under which the cost ofequity awards to employees and directors is measured by the fair value of theawards on their grant date and is recognized over the vesting periods of theawards, whether or not the awards had any intrinsic value during the period.The grant date fair value of the restricted stock granted to Mr. DeSantisCuadra was $78,629.  Amounts shown in thetable above reflect the dollar amount recognized for financial statementreporting purposes for fiscal year 2007 in accordance with SFAS 123R andthus may include amounts from awards granted in and prior to fiscal year 2007.No forfeitures occurred during fiscal year 2007, and all awards are based onthe closing market price of our common stock on the date of grant.  Assumptions used in calculation of theseamounts are included in Note 17 to our consolidated audited financialstatements for the fiscal year ended June 30, 2007, included in the OriginalForm 10-K.  Mr. DeSantis Cuadra isentitled to receive dividends on the restricted stock underlying this grantalong with our other stockholders, although we do not expect to declaredividends on our common stock in the foreseeable future.

# **COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION**

Our CompensationCommittee during fiscal 2007 consisted of William T. Comfort, III, who alsoserves as our non-executive Chairman of the Board.  See “Certain Relationships and RelatedTransactions” for a description of transactions involving us and an entitycontrolled by Mr. Comfort.

 

No executive officer ofthe Company serves as a member of the compensation committee or board ofdirectors of another company of which an executive officer serves on theCompensation Committee of the Company, nor does any executive officer of theCompany serve as a member of the compensation committee of another company ofwhich an executive officer serves as a director of the Company.

 

**COMPENSATION COMMITTEE REPORT**

 

The CompensationCommittee has reviewed and discussed with management the disclosures set forthabove under the heading “Compensation Discussion and Analysis” and, based onsuch review and discussions, the Compensation Committee recommended to theBoard that such disclosure be included in our proxy statement and in the AnnualReport on Form 10-K for the fiscal year ended June 30, 2007.

 

William T. Comfort, III, ChairmanJames A. Urry

 

 

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**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS.**

The following table setsforth information with respect to the beneficial ownership of the Common Stockas of October 15**,**2007 by:

 

•                  each stockholder known by us to beneficially own more than fivepercent of the Common Stock;

•                  each of our directors;

•                  each of our named executive officers; and

•                  all directors and executive officers as agroup.

We have determinedbeneficial ownership in accordance with the rules of the SEC. Unless otherwiseindicated, the persons included in this table have sole voting and investmentpower with respect to all the shares of Common Stock beneficially owned bythem, subject to applicable community property laws.

 
| **Name of Beneficial Owner (a)**                | ** ** | **Amount and Nature  of Beneficial  Ownership** | ** ** | **Percentage of  Outstanding Shares** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------------|------------|
| LDN Stuyvie  Partnership                        |       | 31,662,752                                      | (b)        | 32.8                                  | %          |
| William T.  Comfort III                         |       | 35,832,752                                      | (c)        | 37.2                                  | %          |
| David R. Burt                                   |       | 8,010,000                                       | (d)        | 8.3                                   | %          |
| Luis A. Rivera                                  |       | 2,330,612                                       | (e)        | 2.4                                   | %          |
| Andrew Richard  Blair                           |       | 985,000                                         | (f)        | 1.0                                   | %          |
| Joseph Lambert                                  |       | 125,000                                         | (g)        | *                                     |       |
| Robb Wilson                                     |       | 251,500                                         | (h)        | *                                     |       |
| Peter Biro                                      |       | 360,000                                         | (i)        | *****                                 | ** ** |
| Loren McDonald                                  |       | 254,000                                         | (j)        | *****                                 | ** ** |
| Sean Ryan                                       |       | 0                                               |       | *****                                 | ** ** |
| Jason Han                                       |       | 300,000                                         | (k)        | *****                                 | ** ** |
| Nicolas De  Santis Cuadra                       |       | 120,968                                         | (l)        | *****                                 | ** ** |
| James A. Urry                                   |       | 0                                               | (m)        | *                                     |       |
| Directors and  Officers as a group (11 persons) |       | 48,569,832                                      |       | 48.7                                  | %          |

 

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*                      Representsbeneficial ownership of less than 1%.

(a)               Informationas to the interests of the directors and officers has been furnished in part bythem. The inclusion of information concerning shares held by or for theirspouses or children or by corporations or other entities in which they have aninterest does not constitute an admission by such persons of beneficialownership thereof. Unless otherwise indicated, the address of each director andofficer listed is 103 Foulk Rd., Suite 205Q, Wilmington, Delaware 19803.

(b)              LDNStuyvie Partnership is a limited partnership, the sole general partner of whichis William T. Comfort III, our Chairman of the Board. The address of LDNStuyvie Partnership is 127-131 Sloane St., 4th Floor, LiscartanHouse, SWIX 9AS, London, UK.

(c)               Includesthe shares held by LDN Stuyvie Partnership, of which Mr. Comfort is the solegeneral partner.

(d)              Consistsentirely of shares held by a family limited partnership, the general partner ofwhich is controlled by Mr. Burt.

(e)               Includes2,160,612 shares of common stock subject to stock options held by Mr. Rivera onOctober 15, 2007, and exercisable within 60 days thereafter.

(f)                 Theshares reported by Mr. Blair consist of 825,000 shares owned by Mr. Blair andhis wife, 60,000 owned by Freimark, Blair & Co. pension fund and 100,000owned by the Blair Family Trust.

(g)              Consistsof 125,000 shares of common stock subject to stock options held by Mr. Lamberton October 15, 2007, and exercisable within 60 days thereafter.

(h)              Includes250,000 shares of common stock subject to stock options held by Mr. Wilson onOctober 15, 2007, and exercisable within 60 days thereafter.

 

 

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(i)                  Includes250,000 shares of common stock subject to stock options held by Mr. Biro onOctober 15, 2007, and exercisable within 60 days thereafter.

(j)                  Consistsof 254,000 shares of common stock subject to stock options held by Mr. McDonaldon October 15, 2007, and exercisable within 60 days thereafter.

(k)               Includes200,000 shares of common stock subject to stock options held by Mr. Han onOctober 15, 2007, and exercisable within 60 days thereafter.

(l)                  Includes40,319 shares held by Mr. DeSantis Cuadra on October 15, 2007, but subject tocertain restrictions pertaining to his continued service on the Board ofDirectors.

(m)            Doesnot include the 31,662,752 shares beneficially owned by LDN Stuyvie Partnership,of which Mr. Urry’s spouse is a partner. Mr. Urry’s spouse has no dispositive or voting authority with respect tothe shares beneficially owned by LDN Stuyvie Partnership, and Mr. Urrydisclaims beneficial ownership of such shares.

***Equity Compensation Plan Information***

 
| **Plan Category**                                           | ** ** | **Number of securities to be issued upon exercise of outstanding  options, warrants and rights  (a)** | ** ** | **Weighted-average exercise of outstanding options, warrants and rights  (b)** | ** ** | **Number of securities remaining available for future issuance under  compensation plans (excluding securities related in (a))  (c)** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                        |       |                                                                                                  |       |                                                                           |       |                                                                                                                                  |       |
| Equity  compensation plans approved by security holders     |       | 10,935,482                                                                                            |       | $0.53                                                                          |       | 1,879,082                                                                                                                             |       |
| Equity  compensation plans not approved by security holders |       | —                                                                                                |       | —                                                                         |       | —                                                                                                                                |       |
|                                                        |       |                                                                                                  |       |                                                                           |       |                                                                                                                                  |       |
| Total                                                       |       | 10,935,482                                                                                            |       | $0.53                                                                          |       | 1,879,082                                                                                                                             |       |

 

We established the EquityBased Compensation Plan on May 6, 2005. The Equity Based Compensation Planprovides for grants of stock options and stock-based awards to our employees,directors, and consultants. Stock options issued in connection with the EquityBased Compensation Plan are granted with an exercise price per share equal tothe fair market value of a share of our common stock at the date of grant. Allstock options have ten-year maximum terms and vest, either quarterly orannually and all within four years of grant date. The total number of shares ofcommon stock issuable under the Equity Based Compensation Plan is 13,200,000.At June 30, 2007, there were 1,879,082 shares available for grant under theEquity Based Compensation Plan.

 

***Performance Graph***

The following performancegraph compares the cumulative total return on our Common Stock during the lastfive fiscal years to the NASDAQ Composite and NASDAQ Computer indices for theperiod from June 30, 2002 through June 30, 2007. The graph assumesthat $100 was invested in each of our Common Stock, the NASDAQ Composite Indexand the companies listed on the NASDAQ Computer Index on June 30, 2002 andthat any dividends were reinvested.

 
| ** ** | ** ** | **J. L. Halsey** | ** ** | **NASDAQ  Composite** | ** ** | **NASDAQ  Computer** | ** ** |
|------------|------------|------------------|------------|-----------------------|------------|----------------------|------------|
| 6/30/02    |       | $                | 100        |                  | $          | 100                  |       | $ | 100 |   |
| 6/30/03    |       | $                | 200        |                  | $          | 111                  |       | $ | 109 |   |
| 6/30/04    |       | $                | 567        |                  | $          | 140                  |       | $ | 136 |   |
| 6/30/05    |       | $                | 850        |                  | $          | 141                  |       | $ | 135 |   |
| 6/30/06    |       | $                | 1,533      |                  | $          | 148                  |       | $ | 135 |   |
| 6/30/07    |       | $                | 1,383      |                  | $          | 178                  |       | $ | 169 |   |

 

 

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# *The informationsupplied under heading “performance graph” is deemed furnished, not filed, andis therefore not subject to the liabilities of Section 18 of the ExchangeAct, and shall not be deemed incorporated by reference into any of the filingspreviously made or made in the future by us under the Exchange Act or theSecurities Act (except to the extent we specifically incorporate thisinformation into a document that is filed).*

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

 

**TRANSACTIONSAND AGREEMENTS**

***LDN Stuyvie Loan and BackstopAgreement***

On August 18, 2006, wecompleted the acquisition of ClickTracks Analytics, Inc. and Hot BananaSoftware, Inc.  Funding for theacquisitions was provided by LDN Stuyvie Partnership (“LDN Stuyvie”).  LDNStuyvie beneficially owns more than 5% of our outstanding Common Stock, andWilliam T. Comfort, III, the chairman of our Board of Directors, is its solegeneral partner.  On August 16, 2006, we issued a promissory note to LDNStuyvie in the amount of $10 million (the “Note”).  The Note accruedinterest at the rate of 9.5% per annum, or 11.5% per annum in the event ofdefault, and was to become due upon the earlier to occur of (i) the closingunder the Backstop Agreement (discussed below), (ii) the date on which theBoard of Directors resolved to abandon the rights offering, (iii) the date onwhich any order issued by a governmental entity of competent jurisdiction orany other legal restraint prohibited the consummation of the rights offering,(iv) the date on which any law or order by any governmental entity of competentjurisdiction made the rights offering illegal, (v) February 1, 2007, if theregistration statement filed in connection with rights offering had not beendeclared effective by the SEC by 5:30 p.m. ET on January 31, 2007, or (vi)April 1, 2007, if the registration statement filed in connection with rightsoffering had been declared effective by the SEC by 5:30 p.m. ET on January 31,2007, but the rights offered in the rights offering had not expired by 11:59p.m. ET on March 31, 2007.

 

In connection with theNote, we and LDN Stuyvie entered into a Backstop Agreement, dated August 16,2006 (the “Backstop Agreement”), pursuant to which LDN Stuyvie agreed topurchase Common Stock in connection with a proposed rights offering byus.  Pursuant to the Backstop Agreement, LDN Stuyvie agreed to backstop$10 million of rights offered in the rights offering. Under the terms of theBackstop Agreement, LDN Stuyvie was to purchase that number of shares of CommonStock so that, together with all rights subscribed for and exercised in therights offering (including any rights subscribed for by LDN Stuyvie), we wouldhave received gross proceeds (including offsets against the Note) in the rightsoffering of at least $10 million. In partial consideration for making the $10million loan to us and agreeing to backstop the rights offering up to $10million, we granted to LDN Stuyvie the exclusive right to purchase up to an additional$10 million of Common Stock at the subscription price in respect of each rightgranted to other stockholders but which they decline to exercise.

 

 

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We did not file aregistration statement for the rights offering with the SEC by January 31,2007, and terminated the rights offering.  The Backstop Agreementtherefore terminated as of January 31, 2007. On February 1, 2007, in accordancewith the terms of the LDN Stuyvie Note, we issued to LDN Stuyvie a total of12,279,130 shares of common stock as payment in full of the principal andaccrued interest on the LDN Stuyvie Note.   In accordance with theterms of the LDN Stuyvie Note, the common stock was valued at $0.85 per sharefor an aggregate price of $10,437,260.27, representing $10,000,000 for theprincipal and $437,260.27 for the accrued interest under the LDN StuyvieNote.  The shares of common stock were issued in a private placement.

 

***Resignationof Former Director***

   On March 7, 2007, the Board of Directors accepted the resignationof David R. Burt, our director and former Chief Executive Officer.  Inconnection with the resignation, we, Mr. Burt, Texas Addison LimitedPartnership (“Addison”), LDN Stuyvie and Andrew Richard Blair, entered into anAgreement and Mutual Release, dated March 8, 2007 (the “Release”).  Mr.Blair is a member of our Board of Directors and LDN Stuyvie is controlled byMr. Comfort, the chairman of our Board of Directors.

 

Pursuant to the Release,Addison, which is controlled by Mr. Burt, agreed to sell (A) to LDN, and LDNagreed to purchase from Addison, 4,166,667 shares (the “LDN Sale Shares”) ofCommon Stock and (B) to Blair, and Blair agreed to purchase from Addison,333,333 shares (the “Blair Sale Shares” and together with the LDN Sale Shares,the “Sale Shares”) of Common Stock.  The purchase price paid by LDN andBlair for the Sale Shares was $0.75 per share, or an aggregate of$3,375,000.  The closing of the purchase of the Sale Shares by LDN andBlair occurred on March 16, 2007.  In addition, we waived the transferrestrictions on the remaining Common Stock owned by Burt and Addison in orderto permit them to sell such Common Stock on the open market; provided, that (A)the amount of Common Stock sold in any 90-day period shall not exceed 300,000shares (or such greater or lesser number to appropriately reflect adjustmentsfor stock splits, stock dividends, or similar actions by us with respect to theCommon Stock), (B) all sales of Common Stock sold by Addison or Burt pursuantto this provision are to be effected through the Designated Brokerage Firm(defined below) and (C) neither Burt nor Addison will undertake a sale ofCommon Stock to any Person whereby, to the knowledge of Burt or Addison, suchsale would (1) cause the Transferee to have a Prohibited Ownership Percentageor (2) increase the ownership percentage of any Person already having aProhibited Ownership Percentage.  For purposes of the Release, the “DesignatedBrokerage Firm” means (a) Freimark Blair & Company, Inc. (“Freimark Blair”),an entity controlled by Blair, or (b) any office of Smith Barney; provided,however,**that Smith Barney mayonly be used in the event (1) Blair retires or terminates his relationship withFreimark Blair; (2) Freimark Blair is unable for any reason whatsoever toprovide the brokerage services necessary for Burt and/or Addison to sell theshares permitted under this provision of the Agreement; or (3) Blair orFreimark Blair engage or propose to engage in conduct that is outside thereasonable norms of the brokerage industry.  For purposes of the Release,the terms “Transferee”, “Prohibited Ownership Percentage” and “Person” have themeanings given such terms in Article Fifth of our Certificate ofIncorporation.  Once the number of shares of Common Stock owned by Burtfalls below a Prohibited Ownership Percentage, Burt and Addison shall be freeto sell shares of Common Stock without restriction, other than restrictionsimposed by law.

 

Also in connection withBurt’s resignation and pursuant to the terms of the Release, we and Burtprovided general releases of claims (other than certain types of claimsspecified in the Agreement) to each other and their respectiveaffiliates.  In addition, we agreed to pay to Burt a total of $359,000representing bonuses earned by Burt at the time he was employed by us as anofficer.  The exact amount of bonuses earned by Burt was in dispute andthe amount agreed upon represented a settlement between the parties.  Such bonus amount is to be paid as follows:(i) $30,000 on the first business day of each month beginning in March 2007(provided that the payment due in March 2007 shall be made concurrently withthe closing of the sale of the Sale Shares to LDN and Blair) and ending on thefirst business day of January 2008, and (ii) $29,000 on the first business dayof February 2008.

 

***IndemnificationAgreements***

We have entered intoindemnification agreements with our directors other than Mr. Urry and Mr.Rivera. Under these agreements, we are obligated to indemnify the directors tothe fullest extent permitted under the Delaware General Corporation Law forexpenses, including attorneys’ fees, judgments, fines and settlement amountsincurred by them in any action or proceeding arising out of their services as adirector.  We believe that 

 

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these indemnification agreements are helpful in attracting andretaining qualified directors, and intend to enter into such agreements withMessrs. Urry and Rivera in the near future.

 

**Policies and Procedures**

Under SEC rules, publicissuers such as us must disclose certain transactions with related persons.These are transactions in which we are a participant where the amount involvedexceeds $120,000, and a member of our Board of Directors, an executive officeror a holder of more than 5% of our common stock has a direct or indirectmaterial interest.

 

To date we have notadopted a formal written policy with respect to such related-partytransactions.  However, an informal,unwritten policy has been in place whereby all such related-party transactionsare reported to, and approved by, the full Board of Directors (other than anyinterested director).  Factors consideredby the Board of Directors when deliberating such transactions include:

 

•                  whetherthe terms of such transaction are fair to us;

•                  whetherthe transaction are consistent with, and contribute to, our growth strategy;and

•                  whatimpact, if any, such transaction will have on the transfer restrictionscurrently in place with respect to our Common Stock.

The agreements and transactions listed above (other than theindemnification agreements) were all approved by the full Board of Directors(other than those directors with interests in the transactions).

 

Given the SEC’s reportingrequirements, the Board of Directors is considering whether to adopt a formalwritten policy with respect to related-party transactions.

 

**DIRECTOR INDEPENDENCE**

 

We have adopted theNASDAQ Stock Market’s standards for determining the independence ofdirectors.  Under these standards, anindependent director means a person other than an executive officer or one ofour employees or any other individual having a relationship which, in theopinion of the Board of Directors, would interfere with the exercise ofindependent judgment in carrying out the responsibilities of a director.  In addition, the following persons shall notbe considered independent:

 

•                  A director who is, or at any time duringthe past three years was, employed by us;

•                  a director who accepted or who has afamily member who accepted any compensation from us in excess of $100,000during any period of twelve consecutive months within the three years precedingthe determination of independence, other than the following:

•                  compensation for service on the Board ofDirectors or any committee thereof;

•                  compensation paid to a family member whois one of our employees (other than an executive officer); or

•                  under a tax-qualified retirement plan, ornon-discretionary compensation;

•                  a director who is a family member of anindividual who is, or at any time during the past three years was, employed byus as an executive officer;

•                  a director who is, or has a family memberwho is, a partner in, or a controlling shareholder or an executive officer of,any organization to which we made, or from which we received, payments forproperty or 

 

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                        services in the current or any of thepast three fiscal years that exceed 5% of the recipient’s consolidated grossrevenues for that year, or $200,000, whichever is more, other than thefollowing:

•                  payments arising solely from investmentsin our securities; or

•                  payments under non-discretionarycharitable contribution matching programs;

•                  a director who is, or has a family memberwho is, employed as an executive officer of another entity where at any timeduring the past three years any of our executive officers serve on thecompensation committee of such other entity; or

•                  a director who is, or has a family memberwho is, a current partner of our outside auditor, or was a partner or employeeof our outside auditor who worked on our audit at any time during any of thepast three years.

For purposes of theNASDAQ independence standards, the term “family member” means a person’sspouse, parents, children and siblings, whether by blood, marriage or adoption,or anyone residing in such person’s home.

 

The Board of Directorshas assessed the independence of each non-employee director under the independencestandards of the NASDAQ Stock Market set forth above, and has affirmativelydetermined that all four non-employee directors (Messrs. Blair, Comfort, DeSantis Cuadra and Urry) are independent.

 

**ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.**

 

# **AUDIT FEES**

The following table setsforth the fees paid to Burr, Pilger & Mayer LLP and PricewaterhouseCoopersLLP for services provided during fiscal 2007 and 2006:

 

| ** **          | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Audit Fees (1)      |       | $        | 348,265    |     | $          | 233,270 |   |
| Audit-Related  Fees |       | $        | 149,850    |     | $          | 137,475 |   |
| Tax Fees (2)        |       | —   |       | —   |       |
| All Other Fees  (3) |       | —   |       | —   |       |
| Total               |       | $        | 498,115    |     | $          | 370,745 |   |

 

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(1)                           Represents fees for professional servicesrendered in connection with the audit of our annual financial statements andreview of our quarterly financial statements.

(2)                           Represents fees for professional servicesrendered related to income tax matters.

(3)                           Represents fees for professional servicesrendered in connection with the acquisitions of Lyris Technologies, Inc.,Uptilt, Inc., ClickTracks Analytics, Inc. and Hot Banana Software, Inc.

The Audit Committee hasadopted a policy to pre-approve all audit, audit-related, tax and otherservices proposed to be provided by our independent auditor prior to engagingthe auditor for that purpose. Consideration and approval of such services generally will occur at theAudit Committee’s regularly scheduled quarterly meetings.  In situations where it is impractical to waituntil the regularly scheduled quarterly meeting, the Audit Committee maydelegate authority to approve the audit, audit-related, tax and other servicesto a member of the committee up to a certain pre-determined level as approvedby the Audit Committee.  During fiscalyears 2006 and 2007, 46 percent and 14 percent, respectively, of theAudit-Related fees described above were not pre-approved by the Audit Committee.

 

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**PART IV**

 

**ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**

 

(a) The financialstatements filed as part of this Annual Report at Item 8 are listed in theFinancial Statements and Supplementary Data on page 39 of the Original Form10-K.  All other consolidated financialschedules are omitted because they are inapplicable, not required, or theinformation is included elsewhere in the consolidated financial statements orthe notes thereto.

 

(b) The followingdocuments are filed or incorporated by reference as exhibits to this Report:

 

**EXHIBITINDEX**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                       |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                                                  |
| 2(a)(i)         |       | Stock Purchase Agreement dated as of April 2, 1999,  by and among NovaCare, Inc., NC Resources, Inc., Hanger Orthopedic Group,  Inc. and HPO Acquisition Corp. (incorporated by reference to Exhibit 2(a) to  NAHC, Inc.’s Current Report on Form 8-K filed with the Securities and  Exchange Commission on July 1, 1999.)                       |
|            |       |                                                                                                                                                                                                                                                                                                                                                  |
| 2(a)(ii)        |       | Amendment No. 1 to Stock Purchase Agreement made as  of May 19, 1999, by and among NovaCare, Inc., NC Resources, Inc., Hanger  Orthopedic Group, Inc. and HPO Acquisition Corp. (incorporated by reference  to the Exhibit 2 (b) to NAHC, Inc.’s Current Report on Form 8-K filed with  the Securities and Exchange Commission on July 1, 1999.) |
|            |       |                                                                                                                                                                                                                                                                                                                                                  |
| 2(a)(iii)       |       | Amendment No. 2 to Stock Purchase Agreement made as  of June 30, 1999, by and among NovaCare, Inc., NC Resources, Inc., Hanger  Orthopedic Group, Inc. and HPO Acquisition Corp. (incorporated by reference  to Exhibit 2(c) to NAHC, Inc.’s Current Report on Form 8-K filed with the  Securities and Exchange Commission on July 1, 1999.)     |
|            |       |                                                                                                                                                                                                                                                                                                                                                  |
| 2(b)(i)         |       | Stock Purchase Agreement dated as of June 1, 1999,  by and among NovaCare, Inc., NC Resources, Inc. and Chance Murphy, Inc.  (incorporated by reference to Exhibit 2(a) to NAHC, Inc.’s Current Report on  Form 8-K filed with the Securities and Exchange Commission on June 1, 1999.)                                                          |
|            |       |                                                                                                                                                                                                                                                                                                                                                  |
| 2(b)(ii)        |       | Amendment No. 1 to Stock Purchase Agreement made as  of June 1, 1999, by and among NovaCare, Inc., NC Resources, Inc. and Chance  Murphy, Inc. (incorporated by reference to Exhibit 2(b) to NAHC, Inc.’s  Current Report on Form 8-K filed with the Securities and Exchange Commission  on June 1, 1999.)                                       |
|            |       |                                                                                                                                                                                                                                                                                                                                                  |
| 2(c)            |       | Stockholder Agreement dated as of September 8, 1999,  among Plato Holdings, Inc., New Plato Acquisition, Inc., NC Resources, Inc.  and NovaCare, Inc. (incorporated by reference to Exhibit 2(a) to NAHC, Inc.’s  Current Report on Form 8-K filed with the Securities and Exchange Commission  on October 14, 1999.)                            |
|            |       |                                                                                                                                                                                                                                                                                                                                                  |
| 2(d)(i)         |       | Stock Purchase Agreement dated as of October 1,  1999, by and among NovaCare, Inc. NC Resources, Inc. and Select Medical  Corporation (incorporated by reference to Exhibit 2(b) to NAHC, Inc.’s  Current Report on Form 8-K filed with the Securities and Exchange Commission  on October 14, 1999.)                                            |
|            |       |                                                                                                                                                                                                                                                                                                                                                  |
| 2(d)(ii)        |       | First Amendment dated November 19, 1999, to the  Stock Purchase Agreement dated October 1, 1999, among NovaCare, Inc., NC  Resources, Inc. and Select Medical Corporation (incorporated by reference to  Exhibit 2(a) to NAHC, Inc.’s Current Report on Form 8-K filed with the  Securities and Exchange Commission on December 6, 1999.)        |

 

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|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2(d)(iii)     |   | Opinion of Warburg Dillon Read LLC dated as of  October 1, 1999 (incorporated by reference to Exhibit 99(a) to NAHC, Inc.’s  Current Report on Form 8-K filed with the Securities and Exchange Commission  on October 14, 1999.)                                                                                                                                                                                                                                                                                                                                                      |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2(e)          |   | Stock Purchase Agreement by and among Commodore  Resources, Inc., Lyris Technologies, Inc., John Buckman, Jan Hanford, The  John Buckman and Jan Hanford Trust and the Company, for certain limited  purposes contained therein, dated May 6, 2005 (incorporated by reference to  Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the  Securities and Exchange Commission on May 12, 2005.)                                                                                                                                                                        |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2(f)          |   | Agreement and Plan of Merger by and among Commodore  Resources (Nevada, Inc., Halsey Acquisition Delaware, Inc, Uptilt Inc., David  Sousa, in his capacity as Representative, and the Company, dated October 3,  2005 (incorporated by reference to Exhibit 2.1 to the Company’s Current  Report on Form 8-K filed with the Securities and Exchange Commission on  October 14, 2005.)                                                                                                                                                                                                 |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2(g)          |   | Agreement and Plan of Merger, dated as of  August 16, 2006, by and among the Company, Commodore Resources (Nevada,  Inc., Halsey Acquisition California, Inc., ClickTracks Analytics, Inc., the  Shareholders listed therein and John Marshall (as representative  (incorporated by reference to Exhibit 2.1 to the Company’s Current  Report on Form 8-K filed with the Securities and Exchange Commission on  August 22, 2006.)                                                                                                                                 |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2(h)          |   | Share Purchase Agreement, dated August 18, 2006,  by and among 1254412 Alberta ULC, an unlimited liability company formed under  the laws of the Province of Alberta, the Company, Krista Lariviere, Chris  Adams, 1706379 Ontario Inc., a corporation formed under the laws of the  Province of Ontario and 1706380 Ontario Inc., a corporation formed under the  laws of the Province of Ontario (incorporated by reference to  Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with  the Securities and Exchange Commission on August 22, 2006.) |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3(a)(i)       |   | Certificate of Incorporation of the Company  (incorporated by reference to Exhibit 3(a)(i) to the Original Form 10-K.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3(a)(ii)      |   | Certificate of Amendment to Certificate of  Incorporation of the Company (incorporated by reference to Exhibit 3(a)(ii)  to the Original Form 10-K.)                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3(a)(iii)     |   | Certificate of Ownership and Merger, merging NAHC,  Inc. with and into J. L. Halsey Corporation (incorporated by reference to  Exhibit 3(a)(iii) to the Original Form 10-K.)                                                                                                                                                                                                                                                                                                                                                                                                               |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3(b)          |   | First Amended and Restated Bylaws of the Company, as  amended as of February 14, 2007 (incorporated by reference to Exhibit 3.2 to  the Company’s Current Report on Form 8-K filed with the Securities and  Exchange Commission on February 21, 2007.)                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4(a)(i)† |   | J. L. Halsey Corporation 2005 Equity-Based  Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company’s  current report on Form 8-K filed with the Securities and Exchange Commission  on May 12, 2005.)                                                                                                                                                                                                                                                                                                                                                            |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4(a)(ii)      |   | First Amendment to the J. L. Halsey Corporation 2005  Equity-Based Compensation Plan(incorporated by reference to Exhibit 4(a)(ii)  to the Original Form 10-K.)                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

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|            |   |                                                                                                                                                                                                                                                                                                                                                     |
|-----------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10(a)†     |   | Amended and Restated Employment Agreement dated as  of September 27, 2000, between NAHC Inc. and David R. Burt (incorporated by  reference to Exhibit 10(k)(i) to NAHC, Inc.’s Annual Report on Form 10-K  for the year ended June 30, 2000.)                                                                                             |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(b)†     |   | Convertible Subordinated Note dated as of  September 27, 2000, issued by NAHC Inc. to David R. Burt (incorporated  by reference to Exhibit 10(k)(ii) to NAHC, Inc.’s Annual Report on  Form 10-K for the year ended June 30, 2000.)                                                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(c)(i)†  |   | Indemnification Agreement, dated May 4, 2000, by and  between NAHC, Inc. and David R. Burt (the “Burt Indemnification  Agreement” (incorporated by reference to Exhibit 10(f)(i) to the Company’s  Annual Report on Form 10-K for the year ended June 30, 2002.)                                                                     |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(c)(ii)† |   | Assignment and Assumption Agreement, dated as of  June 1, 2002, by and between NAHC, Inc. and J. L. Halsey Corporation,  assigning the obligations of NAHC under the Burt Indemnification Agreement to  Halsey (incorporated by reference to Exhibit 10(f)(ii) to the Company’s  Annual Report on Form 10-K for the year ended June 30, 2002.)      |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(d)†     |   | Form of Indemnification Agreement entered into by  and between the Company and each of Charles E. Finelli, William T.  Comfort, III, Andrew Richard Blair and Nicolas DeSantis Cuadra (incorporated  by reference to Exhibit 10(g) to the Company’s Annual Report on Form 10-K for  the year ended June 30, 2002.)                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(e)           |   | Stock Purchase Agreement, dated as of December 13,  2002, by and between the Company and The University of Chicago Law School  (incorporated by reference to Exhibit 10(h) to the Company’s Annual Report on  Form 10-K for the year ended June 30, 2004.)                                                                                          |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(f)†     |   | Form of Nonstatutory Stock Option Agreement under  the J. L. Halsey Corporation 2005 Equity-Based Compensation Plan  (incorporated by reference to Exhibit 10.2 to the Company’s current report on  Form 8-K filed with the Securities and Exchange Commission on May 12, 2005.)                                                                    |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(g)(i)        |   | Promissory Note from Commodore Resources, Inc., a  subsidiary of the Company, in favor of The John Buckman and Jan Hanford  Trust, dated May 12, 2005 (incorporated by reference to Exhibit 10(j) to the  Company’s Annual Report on Form 10-K for the year ended June 30, 2005.)                                                                   |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(g)(ii)       |   | Amended and Restated Promissory Note dated March 31,  2007, by Commodore Resources, Inc. in favor of The John Buckman and Jan  Hanford Trust (incorporated by reference to Exhibit 10.2 to the Company’s  Current Report on Form 8-K filed with the Securities and Exchange Commission  on April 5, 2007.)                                          |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(g)(iii)      |   | Subordination Agreement dated March 31, 2007, by and  between The John Buckman and Jan Hanford Trust and Comerica Bank  (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on  Form 8-K filed with the Securities and Exchange Commission on April 5, 2007.)                                                                |
|            |   |                                                                                                                                                                                                                                                                                                                                                     |
| 10(h)           |   | Guaranty, entered into by the Company on May 12,  2005, guaranteeing payment by Commodore Resources, Inc. to The John Buckman  and Jan Hanford Trust of the amount specified in the Promissory Note dated  May 12, 2005 (incorporated by reference to Exhibit 10(k) to the Company’s  Annual Report on Form 10-K for the year ended June 30, 2005.) |

 

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|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10(i)† |   | Employment Agreement effective May 12, 2005, between  Lyris and Luis A. Rivera (incorporated by reference to Exhibit 10(l) to the  Company’s Annual Report on Form 10-K for the year ended June 30, 2005.)                                                                                                                                                                                                                                                 |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(j)† |   | Employment Agreement effective May 12, 2005, between  Lyris and Robb Wilson (incorporated by reference to Exhibit 10(k) to the  Original Form 10-K.)                                                                                                                                                                                                                                                                                                            |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(k)† |   | Employment Agreement dated as of August 29, 2005,  between Lyris and Joseph Lambert (incorporated by reference to Exhibit 10(m)  to the Company’s Annual Report on Form 10-K for the year ended June 30,  2005.)                                                                                                                                                                                                                                           |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(l)† |   | Employment Agreement effective August 17, 2006,  between the Company and Peter Biro (incorporated by reference to Exhibit 10(l)  to the Original Form 10-K.)                                                                                                                                                                                                                                                                                                    |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(m)(i)    |   | Loan and Security Agreement, dated October 4, 2005,  by and among Comerica Bank, Commodore Resources (Nevada, Inc., Lyris  Technologies, Inc. and Uptilt, Inc. (incorporated by reference to Exhibit  10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter  ended September 30, 2005.)                                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(m)(ii)   |   | First Amendment to Loan and Security Agreement,  effective as of April 25, 2006, by and among Comerica Bank and Commodore Resources  (Nevada, Inc., Lyris Technologies, Inc. and Uptilt Inc. (incorporated by  reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for  the quarter ended March 31, 2006.)                                                                                                                            |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(m)(iii)  |   | Second Amendment to Loan and Security Agreement,  effective as of August 18, 2006, by and among Comerica Bank and Commodore  Resources (Nevada, Inc., Lyris Technologies, Inc. and Uptilt Inc.  (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report  on Form 10-Q for the quarter ended September 30, 2006.)                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(m)(iv)   |   | Third Amendment to Loan and Security Agreement,  effective as of November 30, 2006, by and among Comerica Bank, Commodore  Resources (Nevada, Inc., Lyris Technologies, Uptilt Inc., MCC Nevada, Inc.  and ClickTracks Analytics, Inc. (incorporated by reference to Exhibit 10.1 to  the Company’s Current Report on Form 8-K filed with the Securities and  Exchange Commission on December 6, 2006.)                                                    |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(m)(v)    |   | Fourth Amendment to Loan and Security Agreement,  effective as of January 30, 2007, by and among Comerica Bank and Commodore  Resources (Nevada, Inc., Lyris Technologies, Inc., Uptilt, Inc., MCC Nevada,  Inc. and ClickTracks Analytics, Inc. (incorporated by reference to Exhibit  10.1 to the Company’s Current Report on Form 8-K filed with the Securities  and Exchange Commission on March 5, 2007.)                                             |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(m)(vi)   |   | Fifth Amendment to Loan and Security Agreement,  effective as of March 31, 2007, by and among Comerica Bank and Commodore  Resources (Nevada, Inc., Lyris Technologies, Inc., Uptilt, Inc., MCC Nevada,  Inc., ClickTracks Analytics, Inc., Admiral Management Company and the Company  (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on  Form 8-K filed with the Securities and Exchange Commission on April 5,  2007.) |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10(n)       |   | Unconditional Guaranty, dated October 4, 2005,  executed by the Company in favor of Comerica Bank (incorporated by reference  to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 2005.)                                                                                                                                                                                                                   |

 

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|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
|---------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10(o)†   |   | Restricted Stock Award Agreement, dated October 11,  2005, by and between the Company and Nicolas DeSantis Cuadra (incorporated by  reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed  with the Securities and Exchange Commission on October 14, 2005.)                                                                                         |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 10(p)         |   | Promissory Note, dated August 16, 2006, in the  amount of $10,000,000 from the Company to LDN Stuyvie Partnership  (incorporated by reference to Exhibit 2.3 to the Company’s Current  Report on Form 8-K filed with the Securities and Exchange Commission on  August 22, 2006.)                                                                      |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 10(q)(i)      |   | Backstop Agreement, dated August 16, 2006, by  and between the Company and LDN Stuyvie Partnership (incorporated by  reference to Exhibit 2.4 to the Company’s Current Report on  Form 8-K filed with the Securities and Exchange Commission on  August 22, 2006.)                                                                                     |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 10(q)(ii)     |   | First Amendment to Backstop Agreement, dated as of  December 5, 2006, by and between the Company and LDN Stuyvie Partnership  (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on  Form 8-K filed with the Securities and Exchange Commission on December 6,  2006.)                                                                             |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 10(r)†   |   | Agreement and Mutual Release, dated March 8, 2007,  by and among the Company, LDN Stuyvie Partnership, Texas Addison Limited  Partnership, David R. Burt and Andrew Richard Blair (incorporated by  reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed  with the Securities and Exchange Commission on March 12, 2007.)                           |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 10(s)         |   | Agreement and Waiver, entered into as of June 8,  2007, by and among the Company, Commodore Resources (Nevada, Inc., Lyris  Technologies, Inc., ClickTracks Analytics, Inc., John Marshall and Lisa  Deverse (incorporated by reference to Exhibit 10.1 to the Company’s Current  Report on Form 8-K filed with the Securities and Exchange Commission on June  14, 2007.) |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 10(t) †* |   | Employment Agreement effective May 12, 2005, between  Lyris Technologies, Inc. and Jason Han.                                                                                                                                                                                                                                                                                   |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 10(u) †* |   | Employment Letter dated May 11, 2007, between Lyris  Technologies, Inc. and Sean Ryan.                                                                                                                                                                                                                                                                                          |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 14            |   | Code of Business Conduct and Ethics, adopted by the  Company on September 25, 2003 (incorporated by reference to Exhibit 14 to the  Company’s Annual Report on Form 10-K for the year ended June 30, 2003.)                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 21            |   | Subsidiaries of the Company (incorporated by  reference to Exhibit 21 to the Original Form 10-K)                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 31.1*         |   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a/15d-14(a)                                                                                                                                                                                                                                                                                                   |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 31.2*         |   | Certification of Chief Financial Officer pursuant to  Rule 13a-14(a/15d-14(a)                                                                                                                                                                                                                                                                                              |
|          |   |                                                                                                                                                                                                                                                                                                                                                                            |
| 32.1*         |   | Section 1350 Certification                                                                                                                                                                                                                                                                                                                                                      |

 

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| * |   | Filed herewith |
|---|--------|----------------|

 

100

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| † |   | Indicates management contracts or compensatory  plans, contracts or arrangements in which any director or named executive  officer participates.                                                                                                                      |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                  |
|   |   | Copies of the exhibits  filed with this Annual Report on Form 10-K or incorporated by reference  herein do not accompany copies hereof for distribution to our stockholders.  We will furnish a copy of any of such exhibits to any stockholder requesting  the same. |

 

101

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.
|                    |                                  |
|-------------------------|---------------------------------------|
| Dated: October 29, 2007 | J. L. HALSEY CORPORATION, INC         |
|                    |                                  |
| By:                     | /s/ Luis Rivera                       |
|                    | LUIS RIVERA                           |
|                    | Chief Executive Officer and President |
|                    |                                  |

 

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