Document:

Micromem Technologies Inc. - Exhibit 4.1 - Prepared By TNT Filings Inc.

  

  

EXHIBIT 4.1

MICROMEM TECHNOLOGIES INC.

2007 DIRECTORS, OFFICERS AND EMPLOYEES

STOCK OPTION PLAN

 

1.

PURPOSE OF THE PLAN

1.1

The purpose of the Plan is to attract, retain and motivate persons with the required training, experience and leadership as directors, officers, employees and key service providers of the Corporation and its Subsidiaries and to advance the interests of the Corporation by providing such persons with the opportunity, through share options, to acquire an increased proprietary interest in the Corporation. This Plan shall serve to amend and restate the Corporation’s 2006 Stock Option Plan which was approved by shareholders on June 28, 2006.

2.

DEFINED TERMS

Where used herein, the following terms shall have the following meanings, respectively:

2.1

"Board" shall mean the board of directors of the Corporation;

2.2

"Corporation" means Micromem Technologies Inc.;

2.3

"Eligible Person" means:

(i)

any director, officer or employee of the Corporation or any Subsidiary, or any other Service Provider (an "Eligible Individual"); or

(ii)

a corporation of which an Eligible Individual is an employee or shareholder (an "Employee Corporation");

2.4

"Insider" means any insider, as such term is defined in Subsection 1(1) of the Securities Act (Ontario), of the Corporation;

2.5

"Market Price" at any date in respect of the Shares means the closing sale price of the Shares on the OTC Bulletin Board (or other stock exchange on which the Shares are listed and posted for trading from time to time as may be selected for such purpose by the Board) on the trading day immediately preceding such date. In the event that the Shares did not trade on such trading day, the Market Price shall be the average of the bid and ask prices in respect of the Shares at the close of trading on such trading day. In the event that the Shares are not listed and posted for trading on any stock exchange or quotation system, the Market Price shall be the fair market value of the Shares as determined by the Board in its sole discretion;

2.6

"Option" means an option to purchase Shares granted to an Eligible Person under the Plan;

2.7

"Option Price" means the price per Share at which Shares may be purchased under an Option, as the same may be adjusted from time to time in accordance with Article 8 hereof;

2.8

"Optioned Shares" means the Shares issuable pursuant to an exercise of Options;

2.9

"Optionee" means an Eligible Person to whom an Option has been granted and who continues to hold such Option;

2.10

"Plan" means this Micromem Technologies Inc. Stock Option Plan, as the same may be further amended or varied from time to time;

2.11

"Service Provider" means:

(i)

an employee or Insider of the Corporation or any Subsidiary; or

(ii)

any other person or company engaged to provide ongoing management or consulting services for the Corporation or for any entity controlled by the Corporation;

2.12

"Shares" means the common shares of the Corporation or, in the event of an adjustment contemplated by Article 8 hereof, such other shares or securities to which an Optionee may be entitled upon the exercise of an Option as a result of such adjustment; and

2.13

"Subsidiary" means any corporation which is a subsidiary, as such term is defined in Subsection 1(2) of the Business Corporations Act (Ontario), of the Corporation.

3.

ADMINISTRATION OF THE PLAN

3.1

The Plan shall be administered by the Board.

3.2

The Board shall have the power, where consistent with the general purpose and intent of the Plan and subject to the specific provisions of the Plan:

(a)

to establish policies and to adopt rules and regulations for carrying out the purposes, provisions and administration of the Plan;

(b)

to interpret and construe the Plan and to determine all questions arising out of the Plan or any Option, and any such interpretation, construction or determination made by the Board shall be final, binding and conclusive for all purposes;

(c)

to determine the number of Shares covered by each Option;

(d)

to determine the Option Price of each Option;

(e)

to determine the time or times when Options will be granted and exercisable;

(f)

to determine if the Shares which are issuable on the exercise of an Option will be subject to any restrictions upon the exercise of such Option; and

(g)

to prescribe the form of the instruments relating to the grant, exercise and other terms of the Options.

3.3

The Board may, in its discretion, require as conditions to the grant or exercise of any Option that the Optionee shall have:

(a)

represented, warranted and agreed in form and substance satisfactory to the Corporation that he or she is acquiring and will acquire such Option and the Shares to be issued upon the exercise thereof or, as the case may be, is acquiring such Shares, for his or her own account, for investment and not with a view to or in connection with any distribution, that he or she has had access to such information as is necessary to enable him or her to evaluate the merits and risks of such investment and that he or she is able to bear the economic risk of holding such Shares for an indefinite period;

(b)

agreed to restrictions on transfer in form and substance satisfactory to the Corporation and to an endorsement on any option agreement or certificate representing the Shares making appropriate reference to such restrictions (including any notation required by any securities regulatory authority, stock exchange or trading facility having jurisdiction); and

(c)

agreed to indemnify the Corporation in connection with the foregoing.

3.4

Any Option granted under the Plan shall be subject to the requirement that, if at any time counsel to the Corporation shall determine that the listing, registration or qualification of the Shares subject to such Option upon any securities exchange or under any law or regulation of any jurisdiction, or the consent or approval of any securities exchange or any governmental or regulatory body, is necessary as a condition of, or in connection with, the grant or exercise of such Option or the issuance or purchase of Shares thereunder, such Option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board. Nothing herein shall be deemed to require the Corporation to apply for or to obtain such listing, registration, qualification, consent or approval.

3.5

This Plan shall be read and interpreted consistently with all
applicable laws, rules, regulations and policies of any securities regulatory
authority, stock exchange or trading facility having jurisdiction and, to the
extent of any inconsistency between the terms of this Plan and the provisions of
such laws, rules, regulations and policies, the provisions of such laws, rules,
regulations and policies shall prevail

4.

SHARES SUBJECT TO THE PLAN

Options may be granted in respect of authorized and unissued Shares, provided that the aggregate number of Shares reserved for issuance upon the exercise of all Options granted under the Plan, subject to any adjustment of such number pursuant to the provisions of Article 8 hereof, shall not exceed 15,600,000 or such greater number of Shares as may be determined by the Board and approved, if required, by the shareholders of the Corporation and by any relevant stock exchange or other regulatory authority (including shares issuable pursuant to options previously granted and that are outstanding under the 2006 Stock Option Plan). Optioned Shares in respect of which Options are not exercised shall be available for subsequent Options. No fractional Shares may be purchased or issued under the Plan.

5.

ELIGIBILITY; GRANT; TERMS OF OPTIONS

5.1

Options may be granted to any Eligible Person in accordance with this Article 5.

5.2

Options may be granted by the Corporation to the extent that they have been approved by the Board.

5.3

Subject as herein and otherwise specifically provided in this Article 5, the number of Shares subject to each Option, the Option Price of each Option, the expiration date of each Option, the extent to which each Option is exercisable from time to time during the term of the Option and other terms and conditions relating to each such Option shall be determined by the Board or a director or officer of the Corporation designated by the Board to make such determination.

5.4

Each Option granted under this Plan shall be exercisable for a maximum period of ten (10) years from the date the Option is granted to the Optionee. Subject to this section 5.4, the Board shall, at the time of granting an Option, determine the time or times when an Option or a part of an Option shall be exercisable.

5.5

Subject to any adjustments pursuant to the provisions of Article 8 hereof, the Option Price of any Option shall in no circumstances be lower than the Market Price on the date on which the grant of the Option is approved by the Board unless otherwise permitted under applicable laws, rules and regulations and the rules of any stock exchange or trading facility through which the Shares may be traded from time to time. If, as and when any Shares have been duly purchased and paid for under the terms of an Option, such Shares shall be conclusively deemed allotted and issued as fully paid non-assessable Shares at the price paid therefore.

5.6

An Option is personal to the Optionee and non-assignable (whether by operation of law or otherwise), except as provided for herein. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of an Option contrary to the provisions of the Plan, or upon the levy of any attachment or similar process upon an Option, the Option shall, at the election of the Corporation, cease and terminate and be of no further force or effect whatsoever.

6.

TERMINATION OF EMPLOYMENT, DEATH

6.1

Subject to Sections 6.2 and 6.3 hereof and to any express resolution passed by the Board with respect to an Option, an Option and all rights to purchase Shares pursuant thereto shall expire and terminate immediately upon the Optionee who holds such Option ceasing to be an Eligible Person.

6.2

If, before the expiry of an Option in accordance with the terms thereof, an Optionee shall cease to be an Eligible Person (an "Event of Termination") for any reason other than the termination for "cause" of his or her employment with the Corporation or any Subsidiary then the Optionee may:

(a)

exercise the Option to the extent that he or she was entitled to do so at the time of such Event of Termination, at any time up to and including, but not after, the forty-fifth (45th) day after the date of such Event of Termination, or prior to the close of business on the expiration date of the Option, whichever is earlier; and

(b)

with the prior written consent of the Board, which consent may be withheld arbitrarily in the Corporation's sole discretion, exercise any part of the Option which was not exercisable at the time of the occurrence of the Event of Termination at any time up to and including, but not after, the ninetieth (90th) day after the date of such Event of Termination, or prior to the close of business on the expiration date of the Option, whichever is earlier, to purchase all or any of the Optioned Shares as the Board may designate but not exceeding the number of Optioned Shares the Optionee would have otherwise been entitled to purchase pursuant to the Option had the Optionee's status as an Eligible Person been maintained for the term of the Option.

6.3

If an Optionee dies before the expiry of an Option in accordance with the terms thereof, the Optionee's legal representative(s) may, subject to the terms of the Option and the Plan:

(a)

exercise the Option to the extent that the Optionee was entitled to do so at the date of his or her death at any time up to and including, but not after, the date which is one year after the date of death of the Optionee, or prior to the close of business on the expiration date of the Option, whichever is earlier; and

(b)

with the prior written consent of the Board, exercise at any time up to and including, but not after, the date which is one year after the date of death of the Optionee, or prior to the close of business on the expiration date of the Option, whichever is earlier, any part of the Option which was not exercisable at the time of the Optionee's death to purchase all or any of the Optioned Shares as the Board may designate but not exceeding the number of Optioned Shares the Optionee would have otherwise been entitled to purchase had the Optionee survived.

6.4

For greater certainty, Options shall not be affected by any change of employment of the Optionee or by the Optionee ceasing to be a director of the Corporation provided that the Optionee continues to be an Eligible Person.

6.5

For the purposes of this Article 6, a determination by the Corporation that an Optionee was discharged for "cause" shall be binding on the Optionee; provided, however, that such determination shall not be conclusive of the Optionee's potential entitlement to damages for the loss of the right to exercise an Option in the event that a court of competent jurisdiction ultimately determines that the discharge was without "cause".

6.6

If the Optionee is an Employee Corporation, the references to the Optionee in this Article 6 shall be deemed to refer to the Eligible Individual associated with the Employee Corporation.

6.7

If an Optionee has been terminated "for cause" or does not exercise his or her options in accordance with the provisions of sections 6.2 or 6.3 as the case may be, the number of options not exercised shall be added to the number of options remaining available to be granted under the Plan.

7.

EXERCISE OF OPTIONS

7.1

Subject to the provisions of the Plan, an Option may be exercised from time to time by delivery to the Corporation at its registered office of a written notice of exercise addressed to the Secretary of the Corporation specifying the number of Shares with respect to which the Option is being exercised and accompanied by payment in full, by cash or certified cheque, of the Option Price of the Shares then being purchased. Certificates for such Shares shall be issued and delivered to the Optionee within a reasonable time following the receipt of such notice and payment.

7.2

Notwithstanding any of the provisions contained in the Plan or in any Option, the Corporation's obligation to issue Shares to an Optionee pursuant to the exercise of any Option shall be subject to:

(a)

completion of such registration or other qualification of such Shares or obtaining approval of such governmental or regulatory authority as the Corporation shall determine to be necessary or advisable in connection with the authorization, issuance or sale thereof;

(b)

the admission of such Shares to listing on any stock exchange on which the Shares may then be listed;

(c)

the receipt from the Optionee of such representations, warranties, agreements and undertakings, as the Corporation determines to be necessary or advisable in order to safeguard against the violation of the securities laws of any jurisdiction; and

(d)

the satisfaction of any conditions on exercise prescribed pursuant to Section 3.4 hereof.

7.3

Options shall be evidenced by a share option agreement, instrument or certificate in such form not inconsistent with this plan as the Board may from time to time determine as provided for under Subsection 3.2 (g), provided that the substance of Article 5 be included therein.

8.

CERTAIN ADJUSTMENTS

8.1

In the event of any subdivision or redivision of the Shares into a greater number of Shares at any time after the grant of an Option to any Optionee and prior to the expiration of the term of such Option, the Corporation shall deliver to such Optionee at the time of any subsequent exercise of his or her Option in accordance with the terms hereof, in lieu of the number of Shares to which he or she was theretofore entitled upon such exercise, but for the same aggregate consideration payable therefor, such number of Shares as such Optionee would have held as a result of such subdivision or redivision if, on the record date thereof, the Optionee had been the registered holder of the number of Shares to which he or she was theretofore entitled upon such exercise.

8.2

In the event of any consolidation of the Shares into a lesser number of Shares at any time after the grant of an Option to any Optionee and prior to the expiration of the term of such Option, the Corporation shall deliver to such Optionee at the time of any subsequent exercise of his or her Option in accordance with the terms hereof, in lieu of the number of Shares to which he or she was theretofore entitled upon such exercise, but for the same aggregate consideration payable therefor, such number of Shares as such Optionee would have held as a result of such consolidation if, on the record date thereof, the Optionee had been the registered holder of the number of Shares to which he or she was theretofore entitled upon such exercise.

8.3

If at any time after the grant of an Option to any Optionee and prior to the expiration of the term of such Option, the Shares shall be reclassified, reorganized or otherwise changed, otherwise than as specified in Sections 8.1 and 8.2 or, subject to the provisions of Subsection 9.2(a) hereof, the Corporation shall consolidate, merge or amalgamate with or into another corporation (the corporation resulting or continuing from such consolidation, merger or amalgamation being herein called the "Successor Corporation"), or the Corporation shall pay a stock dividend (other than any dividends in the ordinary course), the Optionee shall be entitled to receive upon the subsequent exercise of his or her Option in accordance with the terms hereof and shall accept in lieu of the number of Shares to which he or she was theretofore entitled upon such exercise but for the same aggregate consideration payable therefor, the aggregate number of shares of the appropriate class and/or other securities of the Corporation or the Successor Corporation (as the case may be) and/or other consideration from the Corporation or the Successor Corporation (as the case may be) that the Optionee would have been entitled to receive as a result of such reclassification, reorganization or other change or, subject to the provisions of Subsection 9.2(a) hereof, as a result of such consolidation, merger, amalgamation, or stock dividend, if on the record date of such reclassification, reorganization, other change or stock dividend, or the effective date of such consolidation, merger or amalgamation or dividend payment, as the case may be, he or she had been the registered holder of the number of Shares to which he or she was theretofore entitled upon such exercise.

8.4

In the event the Corporation should declare and pay a special cash dividend or other distribution out of the ordinary course, a special dividend in specie on the Shares, or a stock dividend other than in the ordinary course, the Option Price of all Options outstanding on the record date of such dividend or other distribution shall be reduced by an amount equal to the cash payment or other distribution or the fair market value of the dividend in specie or stock dividend or other distribution, as determined by the Board in its sole discretion.  Any such reduction in the Option Price shall be subject to regulatory approval and the Option Price shall not be less than $0.01 per Share.

9.

AMENDMENT OR DISCONTINUANCE OF THE PLAN

9.1

The Board may amend or discontinue the Plan at any time, provided, however, that no such amendment may materially and adversely affect any Option previously granted to an Optionee without the consent of the Optionee, except to the extent required by law. Any such amendment shall, if required, be subject to the prior approval of, or acceptance by, any stock exchange on which the Shares are listed and posted for trading. For greater certainty, the Board may, by resolution duly passed, amend this Plan to reduce the number of shares in respect of which options have not been granted at the date of such resolution and that are subject to this Plan, to meet the requirements of any stock exchange or regulatory authority.

9.2

Notwithstanding anything contained to the contrary in this Plan or in any resolution of the Board in implementation thereof:

(a)

in the event the Corporation proposes to amalgamate, merge or consolidate with any other corporation (other than a wholly-owned Subsidiary) or to liquidate, dissolve or wind-up, or in the event an offer to purchase or repurchase the Shares of the Corporation or any part thereof shall be made to all or substantially all holders of Shares of the Corporation, the Corporation shall have the right, upon written notice thereof to each Optionee holding Options under the Plan, to permit the exercise of all such Options within the 20 day period next following the date of such notice and to determine that upon the expiration of such 20 day period, all rights of the Optionees to such Options or to exercise same (to the extent not theretofore exercised) shall ipso facto terminate and cease to have further force or effect whatsoever;

(b)

in the event of the sale by the Corporation of all or substantially all of the assets of the Corporation as an entirety or substantially as an entirety so that the Corporation shall cease to operate as an active business, any outstanding Option may be exercised as to all or any part of the Optioned Shares in respect of which the Optionee would have been entitled to exercise the Option in accordance with the provisions of the Plan at the date of completion of any such sale at any time up to and including, but not after the earlier of:  (i) the close of business on that date which is thirty (30) days following the date of completion of such sale; and (ii) the close of business on the expiration date of the Option; but the Optionee shall not be entitled to exercise the Option with respect to any other Optioned Shares;

(c)

subject to the rules of any relevant stock exchange or other regulatory authority, the Board may, by resolution, advance the date on which any Option may be exercised or extend the expiration date of any Option. The Board shall not, in the event of any such advancement or extension, be under any obligation to advance or extend the date on or by which Options may be exercised by any other Optionee; and

(d)

the Board may, by resolution, but subject to applicable regulatory requirements, decide that any of the provisions hereof concerning the effect of termination of the Optionee's employment shall not apply to any Optionee for any reason acceptable to the Board.

Notwithstanding the provisions of this Article 9, should changes be required to the Plan by any securities commission, stock exchange or other governmental or regulatory body of any jurisdiction to which the Plan or the Corporation now is or hereafter becomes subject, such changes shall be made to the Plan as are necessary to conform with such requirements and, if such changes are approved by the Board, the Plan as amended, shall be filed with the records of the Corporation and shall remain in full force and effect in its amended form as of and from the date of its adoption by the Board.

10.

MISCELLANEOUS PROVISIONS

10.1

An Optionee shall not have any rights as a shareholder of the Corporation with respect to any of the Shares covered by such Option until the date of issuance of a certificate for Shares upon the exercise of such Option, in full or in part, and then only with respect to the Shares represented by such certificate or certificates. Without in any way limiting the generality of the foregoing, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such share certificate is issued.

10.2

Nothing in the Plan or any Option shall confer upon an Optionee any right to continue or be reelected as a director of the Corporation or any right to continue in the employ of the Corporation or any Subsidiary, or affect in any way the right of the Corporation or any Subsidiary to terminate his or her employment at any time; nor shall anything in the Plan or any Option be deemed or construed to constitute an agreement, or an expression of intent, on the part of the Corporation or any Subsidiary to extend the employment of any Optionee beyond the time which he or she would normally be retired pursuant to the provisions of any present or future retirement plan of the Corporation or any Subsidiary, or beyond the time at which he or she would otherwise be retired pursuant to the provisions of any contract of employment with the Corporation or any Subsidiary.

10.3

Notwithstanding Section 5.8 hereof, Options may be transferred or assigned between an Eligible Individual and the related Employee Corporation provided the assignor delivers notice to the Corporation prior to the assignment.

10.4

The Plan and all matters to which reference is made herein shall be governed by and interpreted in accordance with the laws of the Province of Ontario, the laws of Canada and the laws of the United States of America applicable therein.

11.

SHAREHOLDER AND REGULATORY APPROVAL

11.1

The Plan shall be subject to ratification by the shareholders of the Corporation to be effected by a resolution passed at a meeting of the shareholders of the Corporation, and to acceptance by any other relevant regulatory authority. Any Options granted prior to such ratification and acceptance shall be conditional upon such ratification and acceptance being given and no such Options may be exercised unless and until such ratification and acceptance are given.

DATED this 28th day of June, 2007.sheet.pdf -- Converted by SECPublisher 4.0, created by BCL Technologies Inc., for SEC Filing

 

 

 

 

 

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

 

 

 

 

 

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

RECITALS 

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

AGREEMENT 

     The parties agree as follows:

     1. DEFINITIONS AND
CONSTRUCTION. 

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

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

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

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

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

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

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

- 1 - 

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

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

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

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

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

          “Cash”
means unrestricted cash and cash equivalents. 

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

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

          “Closing
Date” means the date of this Agreement. 

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

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

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

- 2 - 

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

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

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

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

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

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

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

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

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

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

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

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

- 3 - 

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

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

              
(a) Copyrights, Trademarks and Patents; 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

- 4 - 

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

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

          “Parent”
means Lyris, Inc. 

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

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

          “Permitted
Indebtedness” means: 

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

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

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

               (d) Subordinated
Debt;

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

               (f) Indebtedness of a
Borrower to another Borrower; 

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

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

          “Permitted
Investment” means: 

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

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

- 5 - 

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

               (d) Investments accepted in
connection with Permitted Transfers; 

               (e) Investments by a Borrower
in another Borrower; 

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

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

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

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

          “Permitted
Liens” means the following: 

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

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

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

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

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

- 6 - 

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

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

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

               (a) Inventory in the ordinary
course of business; 

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

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

               (d) any property to a
Borrower; 

               (e) worn-out or obsolete
Equipment; or 

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

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

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

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

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

          “Revolving
Maturity Date” means March 31, 2012.

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

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

- 7 - 

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

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

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

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

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

     2. LOAN AND TERMS OF
PAYMENT. 

          2.1 Credit
Extensions. 

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

               (b) Advances Under
Revolving Line. 

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

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

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

- 8 - 

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

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

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

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

- 9 - 

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

          2.3 Interest Rates,
Payments, and Calculations. 

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

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

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

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

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

          2.5 Fees. Borrowers shall pay to Bank the following: 

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

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

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

- 10 - 

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

     3. CONDITIONS OF LOANS. 

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

               (a) this Agreement;

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

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

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

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

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

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

               (h) agreement to provide
insurance; 

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

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

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

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

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

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

- 11 - 

     4. CREATION OF SECURITY INTEREST.

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

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

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

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

- 12 - 

     5. REPRESENTATIONS AND
WARRANTIES. 

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

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

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

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

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

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

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

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

- 13 - 

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

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

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

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

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

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

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

     6. AFFIRMATIVE COVENANTS. 

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

- 14 - 

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

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

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

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

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

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

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

- 15 - 

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

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

          6.5 Insurance. 

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

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

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

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

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

- 16 - 

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

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

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

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

          6.8 Intellectual Property
Rights. 

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

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

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

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

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

- 17 - 

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

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

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

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

     7. NEGATIVE COVENANTS. 

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

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

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

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

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

- 18 - 

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

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

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

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

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

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

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

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

     8. EVENTS OF DEFAULT. 

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

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

- 19 - 

          8.2 Covenant
Default. 

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

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

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

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

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

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

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

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

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

- 20 - 

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

     9. BANK’S RIGHTS AND
REMEDIES. 

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

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

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

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

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

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

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

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

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

- 21 - 

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

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

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

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

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

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

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

- 22 - 

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

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

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

     10. NOTICES. 

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

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

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

- 23 - 

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

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

     12. REFERENCE PROVISION. 

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

          12.1 Mechanics. 

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

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

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

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

- 24 - 

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

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

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

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

          12.5 THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES,
DISPUTES AND CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A
REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND
VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS
REFERENCE PROVISION WILL APPLY TO ANY
CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY
RELATED TO, THIS AGREEMENT OR THE OTHER COMERICA DOCUMENTS. 

     13. CO-BORROWERS. 

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

- 25 - 

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

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

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

          13.5 Right to Settle,
Release. 

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

- 26 - 

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

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

     14. GENERAL PROVISIONS. 

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

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

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

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

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

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

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

- 27 - 

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

 

 

[Balance of Page Intentionally Left Blank]

 

 

 

 

 

 

 

- 28 -

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

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

[Signature Page to Loan and Security Agreement] 

	DEBTOR  	 	LYRIS,
      INC.  
	 		
	SECURED
      PARTY:  	                 
    	COMERICA
      BANK  

EXHIBIT A-1 

COLLATERAL DESCRIPTION ATTACHMENT 
TO
LOAN AND SECURITY AGREEMENT 

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

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

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

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

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

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

	DEBTOR  		LYRIS
      TECHNOLOGIES INC.  
	 		
	SECURED
      PARTY:  	                 
    	COMERICA
      BANK  

EXHIBIT A-2 

COLLATERAL DESCRIPTION ATTACHMENT 
TO
LOAN AND SECURITY AGREEMENT 

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

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

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

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

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

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

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

EXHIBIT A-3 

COLLATERAL DESCRIPTION ATTACHMENT 
TO
LOAN AND SECURITY AGREEMENT 

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

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

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

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

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

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

3 

EXHIBIT B 

TECHNOLOGY & LIFE SCIENCES
DIVISION 

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

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

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

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

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

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

EXHIBIT C 

COMPLIANCE CERTIFICATE

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

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

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

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

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

**EBITDA shall
be calculated (i) on a trailing twelve (12) month basis and shall exclude one
(1) time impairment charges at all times until November 30, 2008 and (ii) on an
annualized rolling three (3) month basis thereafter. At all times prior to
November 30, 2008, the current portion of all Indebtedness to Bank shall be
excluded from the denominator of the Fixed Charge Coverage covenant.

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

Exhibit D 

LIBOR Addendum To Amended and
Restated Loan and Security Agreement 

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

2.
Definitions. 

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

		  		               
      Base LIBOR  	
	      	LIBOR
      =  	         	100% - LIBOR
      Reserve Percentage  	

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

_________________________________________
BORROWERS’ INITIALS

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

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

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

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

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

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

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

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

SCHEDULE OF EXCEPTIONS 

Permitted Indebtedness (Section 1.1) 

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

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

Permitted Investments (Section 1.1) 

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

Intercompany investments among Borrowers.

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

Permitted Liens (Section 1.1) 

Lyris Technologies, Inc.

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

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

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

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

Prior Names (Section 5.5) 

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

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

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

Litigation (Section 5.6) 

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

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

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

Inbound Licenses (Section 5.12)

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

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

2. Digital Impact license. 

3. By Product 

     1) ListManager 

a. Oracle
versions requires user to acquire an Oracle license 

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

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

     (2) MailShield Server 

a. Oracle
versions requires user to acquire an Oracle license 

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

     (3) MailEngine – requires no other
licenses to operate 

4. Description of licenses required,
General: 

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

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

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

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

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

	
      Corporation Resolutions
      and Incumbency Certification 
Authority to Procure Loans 

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

Copy of Resolutions: 

Be it Resolved, That: 

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

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

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

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

(PLEASE SUPPLY GENUINE SIGNATURES OF
AUTHORIZED SIGNERS BELOW) 

	NAME (Type
      or Print)  	      	TITLE  	      	SIGNATURE  
	 		 		 
	 		 		 
	 		 		 
	 		 		 
	 		 		 
	 		 		 

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

		 
		Secretary,
      LYRIS, INC.  

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

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

	
      Corporation Resolutions and
      Incumbency Certification 
Authority to Procure
      Loans  

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

Copy of Resolutions: 

Be it Resolved, That: 

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

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

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

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

(PLEASE SUPPLY GENUINE SIGNATURES OF
AUTHORIZED SIGNERS BELOW) 

	NAME (Type
      or Print)  	      	TITLE  	      	SIGNATURE  
	 		 		 
	 		 		 
	 		 		 
	 		 		 
	 		 		 
	 		 		 

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

		 
		Secretary, LYRIS
      TECHNOLOGIES INC.  

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

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

	
      Corporation Resolutions and
      Incumbency Certification 
Authority to Procure
      Loans  

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

Copy of Resolutions: 

Be it Resolved, That: 

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

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

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

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

(PLEASE SUPPLY GENUINE SIGNATURES OF
AUTHORIZED SIGNERS BELOW) 

	NAME (Type
      or Print)  	      	TITLE  	      	SIGNATURE  
	 		 		 
	 		 		 
	 		 		 
	 		 		 
	 		 		 
	 		 		 

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

		 
		Secretary,
      COMMODORE RESOURCES (NEVADA), INC.  

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

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

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

 

USA PATRIOT ACT 
NOTICE

OF 
CUSTOMER IDENTIFICATION 

     IMPORTANT INFORMATION ABOUT
PROCEDURES FOR OPENING A NEW ACCOUNT 

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

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

COMERICA BANK 
Member FDIC

ITEMIZATION OF AMOUNT FINANCED

DISBURSEMENT INSTRUCTIONS 
(Revolver) 

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

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

Amounts paid to others on your behalf:

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

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

	 		 
	Signature  	 	Signature  

AGREEMENT TO PROVIDE INSURANCE

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

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

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

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

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

     I/We understand that the policy must
contain: 

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

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

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

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

INSURANCE INFORMATION 

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

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

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

 	 

	COMERICA
      BANK 	 
	                     Member FDIC 	AUTOMATIC DEBIT
      AUTHORIZATION 
	 	 

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

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

	COMERICA
      BANK 	 
	                     Member FDIC 	AUTOMATIC DEBIT
      AUTHORIZATION 
	 	 

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

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

COMERICA BANK 

		COMERICA
      BANK  
	 	CLIENT
      AUTHORIZATION  
	Fax:  	 

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

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

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

	DEBTOR: 		LYRIS,
      INC.  
	 		
	SECURED
      PARTY:  	                 
    	COMERICA
      BANK  

EXHIBIT A 

COLLATERAL DESCRIPTION ATTACHMENT 
TO
UCC NATIONAL FORM FINANCING STATEMENT 

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

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

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

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

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

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

	DEBTOR  		LYRIS
      TECHNOLOGIES INC.  
	 		
	SECURED
      PARTY:  	                 
    	COMERICA
      BANK  

EXHIBIT A 

COLLATERAL DESCRIPTION ATTACHMENT 
TO
UCC NATIONAL FORM FINANCING STATEMENT 

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

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

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

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

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

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

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

EXHIBIT A 

COLLATERAL DESCRIPTION ATTACHMENT 
TO
UCC NATIONAL FORM FINANCING STATEMENT 

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

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

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

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

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

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

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