EXHIBIT 10.1
 
 

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SENIOR SECURED CREDIT FACILITY AGREEMENT
 
IN THE AMOUNT OF US$2,000,000
 
BY AND AMONG
 
PHARMAGEN, INC.,
 
as Borrower,
 
PHARMAGEN DISTRIBUTION, LLC,
PHARMAGEN LABORATORIES, INC.
PHARMAGEN NUTRICEUTICALS, INC.
as Joint and Several Guarantors,

 
AND
 
TCA GLOBAL CREDIT MASTER FUND, LP,
as Lender

 

 
February 28, 2013
 
 
 
 

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SENIOR SECURED CREDIT FACILITY AGREEMENT
 
This SENIOR SECURED CREDIT FACILITY AGREEMENT (as amended, restated, modified or
supplemented from time to time, this “Agreement”), dated as of February 28, 2013
(the “Effective Date”), is executed by and among (i) PHARMAGEN, INC., a
corporation incorporated under the laws of the State of Nevada and formerly
known as Sunpeaks Ventures, Inc., as borrower (the “Borrower”), (ii) PHARMAGEN
DISTRIBUTION, LLC, a limited liability company organized and existing under the
laws of the State of Delaware and formerly known as Healthcare Distribution
Specialists LLC, PHARMAGEN LABORATORIES, INC., a corporation incorporated under
the laws of the State of New York and formerly known as BryceRx Laboratories,
Inc., PHARMAGEN NUTRICEUTICALS, INC., a corporation incorporated under the laws
of the State of Delaware, as joint and several guarantors (collectively, the
“Guarantors” and each a “Guarantor” and together with the Borrower, the “Credit
Parties”), and (iii) TCA GLOBAL CREDIT MASTER FUND, LP, a limited partnership
organized and existing under the laws of the Cayman Islands, as lender (the
“Lender”).
 
WHEREAS, Borrower has requested that Lender extend a senior secured credit
facility to Borrower of up to Two Million and No/100 United States Dollars
(US$2,000,000) for working capital financing for Borrower and for any other
purposes permitted hereunder; and for these purposes, Lender is willing to make
certain loans and extensions of credit to Borrower of up to such amount and upon
the terms and conditions set forth herein; and
 
WHEREAS, as a material inducement for Lender to make loans and extensions of
credit to Borrower pursuant to the terms and conditions set forth herein, (i)
the Guarantors have, inter alia, agreed to execute Guarantee Agreements in favor
of Lender, whereby the Guarantors shall each jointly and severally guarantee any
and all of the Borrower’s Obligations owed under this Agreement and under any
other Loan Document and (ii) the Credit Parties have, inter alia, agreed to
execute Security Agreements in favor of Lender, whereby each Credit Party shall
grant to the Lender a first priority security interest in and lien upon all of
its existing and after-acquired tangible and intangible assets (with the
exception of Pharmagen Laboratories, Inc., which shall provide a second priority
security interest), as security for the payment and performance of any and all
Obligations owed under this Agreement and under any other Loan Document.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:
 
1. DEFINITIONS.
 
1.1 Defined Terms.  For the purposes of this Agreement, the following
capitalized words and phrases shall have the meanings set forth below.
 
(a) “Account” shall mean, individually, and “Accounts” shall mean, collectively,
any and all accounts (as such term is defined in the UCC) of any Credit Party.
 
(b) “Affiliate” (a) of Lender shall mean: (i) any entity which, directly or
indirectly, controls or is controlled by or is under common control with Lender;
and (ii) any entity administered or managed by Lender, or an Affiliate or
investment advisor thereof and which is engaged in making, purchasing, holding
or otherwise investing in commercial loans; and (b) of any Credit Party shall
mean any entity which, directly or indirectly, controls or is controlled by or
is under common control with such Credit Party.  With respect to an Affiliate of
Lender or a Credit Party, an entity shall be deemed to be “controlled by”
another entity if such other entity possesses, directly or indirectly, power to
direct or cause the direction of the management and policies of such entity,
whether by contract, ownership of voting securities, membership interests or
otherwise.
 
 
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(c) “Agreement” shall mean this Senior Secured Credit Facility Agreement by and
among the Borrower, the Guarantors and the Lender.
 
(d)  “Borrower” shall have the meaning given to it in the preamble hereof.
 
(e)  “Business Day” shall mean any day other than a Saturday, Sunday or a legal
holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in the State of New York.
 
(f) “BSA” shall have the meaning given to it in Section 14.22 hereof.
 
(g) “Capital Expenditures” shall mean expenditures (including Capital Lease
obligations which should be capitalized under GAAP) for the acquisition of fixed
assets which are required to be capitalized under GAAP.
 
(h) “Capital Lease” shall mean, as to any Person, a lease of any interest in any
kind of property or asset, whether real, personal or mixed, or tangible or
intangible, by such Person as lessee that is, or should be, in accordance with
Financial Accounting Standards Board Statement No. 13, as amended from time to
time, or, if such Statement is not then in effect, such statement of GAAP as may
be applicable, recorded as a “capital lease” on the balance sheets of Borrower
prepared in accordance with GAAP.
 
(i) “Change in Control” shall mean any sale, conveyance, assignment or other
transfer, directly or indirectly, of any ownership interest of any Credit Party,
which results in any change in the identity of the individuals or entities in
Control of any Credit Party as of the Closing Date, or the grant of a security
interest in any ownership interest of any Person, directly or indirectly
Controlling the Credit Parties, which could result in a change in the identity
of the individuals or entities in Control of the Credit Parties as of the
Closing Date.
 
(j) “Closing Date” shall mean the date upon which the Loan is initially funded.
 
(k) “Collateral” shall mean “Collateral” as defined in each of the Security
Agreements.
 
(l) “Common Stock” shall mean the common stock of the Borrower, par value $0.001
per share.
 
 
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(m) “Communication” shall have the meaning given to it in Section 14.17 hereof.
 
(n) “Confession of Judgment” shall mean the confession of judgment executed by
the Credit Parties in favor of the Lender, the form of which is attached hereto
as Exhibit A.
 
(o) “Contingent Liability” and “Contingent Liabilities” shall mean,
respectively, each obligation and liability of any Credit Party and all such
obligations and liabilities of such Credit Party incurred pursuant to any
agreement, undertaking or arrangement by which such Credit Party, either: (i)
guarantees, endorses or otherwise becomes or is contingently liable upon (by
direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise
to assure a creditor against loss) the indebtedness, dividend, obligation or
other liability of any other Person in any manner (other than by endorsement of
instruments in the course of collection), including without limitation, any
indebtedness, dividend or other obligation which may be issued or incurred at
some future time; (ii) guarantees the payment of dividends or other
distributions upon the shares or ownership interest of any other Person; (iii)
undertakes or agrees (whether contingently or otherwise): (A) to purchase,
repurchase, or otherwise acquire any indebtedness, obligation or liability of
any other Person or any property or assets constituting security therefor; (B)
to advance or provide funds for the payment or discharge of any indebtedness,
obligation or liability of any other Person (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to maintain
solvency, assets, level of income, working capital or other financial condition
of any other Person; or (C) to make payment to any other Person other than for
value received; (iv) agree to lease property or to purchase securities, property
or services from such other Person with the purpose or intent of assuring the
owner of such indebtedness or obligation of the ability of such other Person to
make payment of the indebtedness or obligation; (v) to induce the issuance of,
or in connection with the issuance of, any letter of credit for the benefit of
such other Person; or (vi) undertake or agree otherwise to assure a creditor
against loss.  The amount of any Contingent Liability shall (subject to any
limitation set forth herein) be deemed to be the outstanding principal amount
(or maximum permitted principal amount, if larger) of the indebtedness,
obligation or other liability guaranteed or supported thereby.
 
(p) “Control” or “Controlling” shall mean the possession of the power to direct,
or cause the direction of, the management and policies of a Person by contract,
voting of securities, or otherwise.
 
(q) “Credit Party(ies)” shall have the meaning given to it in the preamble
hereof.
 
(r) “Default Rate” shall mean a per annum rate of interest equal to the lower
of: (i) Eighteen Percent (18%) per annum; or (ii) the highest rate permitted by
applicable law.
 
(s) “Depreciation” shall mean the total amounts added to depreciation,
amortization, obsolescence, valuation and other proper reserves, as reflected on
Borrower’ financial statements and determined in accordance with GAAP.
 
 
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(t) “Dollars” or “$” means lawful currency of the United States of America.
 
(u) “EBIDTA” shall mean, for any period, the sum of the following: (i) Net
Income (excluding extraordinary and unusual items and income or loss
attributable to a minority equity position in any affiliated corporation or
Subsidiary) for such period; plus (ii) interest expense; plus (iii) income and
franchise taxes payable or accrued; plus (iv) Depreciation for such period; plus
(v) all other non-cash charges; plus (vi) management fees; plus (vii) costs,
fees and expenses incurred in connection with, or otherwise associated with, the
closing of the transaction contemplated by this Agreement; minus (viii) that
portion of Net Income arising out of the sale of assets outside of the Ordinary
Course of Business (to the extent not previously excluded under clause (i) of
this definition), in each case to the extent included in determining Net Income
for such period.
 
(v) “Effective Date” shall have the meaning given to it in the preamble hereof.
 
(w) “Employee Plan” includes any pension, stock bonus, employee stock ownership
plan, retirement, disability, medical, dental or other health plan, life
insurance or other death benefit plan, profit sharing, deferred compensation,
stock option, bonus or other incentive plan, vacation benefit plan, severance
plan or other employee benefit plan or arrangement, including, without
limitation, those pension, profit-sharing and retirement plans of Borrower
described from time to time in the financial statements of Borrower and any
pension plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA)
or any multi-employer plan, maintained or administered by Borrower or to which
Borrower is a party or may have any liability or by which Borrower is bound.
 
(x) “Environmental Laws” shall mean all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to Borrower’ business or
facilities owned or operated by Borrower, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes in
the environment (including, without limitation, ambient air, surface water, land
surface or subsurface strata) or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
 
(y) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
 
(z) “Event of Default” shall mean any of the events or conditions set forth in
Section 12 hereof.
 
(aa) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
 
 
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(bb)  “Funded Indebtedness” shall mean, as to any Person, without duplication:
(i) all indebtedness for borrowed money of such Person (including principal,
interest and, if not paid when due, fees and charges), whether or not evidenced
by bonds, debentures, notes or similar instruments; (ii) all obligations to pay
the deferred purchase price of property or services; (iii) all obligations,
contingent or otherwise, with respect to the maximum face amount of all letters
of credit (whether or not drawn), bankers’ acceptances and similar obligations
issued for the account of such Person (including the Letters of Credit), and all
unpaid drawings in respect of such letters of credit, bankers’ acceptances and
similar obligations; and (iv) all indebtedness secured by any Lien on any
property owned by such Person, whether or not such indebtedness has been assumed
by such Person (provided, however, if such Person has not assumed or otherwise
become liable in respect of such indebtedness, such indebtedness shall be deemed
to be in an amount equal to the fair market value of the property subject to
such Lien at the time of determination).  Notwithstanding the foregoing, Funded
Indebtedness shall not include trade payables and accrued expenses incurred by
such Person in accordance with customary practices and in the Ordinary Course of
Business of such Person.
 
(cc) “GAAP” shall mean United States generally accepted accounting principles
set forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination; provided, however, that interim financial statements or
reports shall be deemed in compliance with GAAP despite the absence of footnotes
and fiscal year-end adjustments as required by GAAP.
 
(dd) “Guarantor(s)” shall have the meaning given to it in the preamble hereof.
 
(ee) “Guarantee Agreement(s)” shall mean the guarantee agreement(s) executed by
each of the Guarantors in favor of the Lender, the form of which is attached
hereto as Exhibit B.
 
(ff) “Hazardous Materials” shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation, any that are or become classified as hazardous
or toxic under any Environmental Law).
 
(gg) “Interest Rate” shall mean a fixed rate of interest equal to Twelve Percent
(12%) per annum, calculated on the actual number of days elapsed over a 360-day
year.
 
(hh) “ITAI” shall mean the Irrevocable Transfer Agent Instructions to be entered
into by and among the Lender, the Borrower and the Borrower’s transfer agent, in
the form attached hereto as Exhibit C.
 
 
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(ii)  “Lender” shall have the meaning given to it in the preamble hereof.
 
(jj) “Lender Indemnitee(s)” shall have the meaning given to it in Section 14.19
hereof.
 
(kk) “Liabilities” shall mean, at all times, (i) the repayment of all sums due
under the Note (and all extensions, renewals, replacements, future advances and
amendments thereof) and the other Loan Documents; (ii) the performance and
observance of all terms, conditions, covenants, representations and warranties
set forth in the Loan Documents; and (iii) all liabilities of the Credit Parties
that would be shown as such on the consolidated balance sheets of the Credit
Parties prepared in accordance with GAAP.
 
(ll) “Lien” shall mean, with respect to any Person, any mortgage, pledge,
hypothecation, judgment lien or similar legal process, title retention lien, or
other lien or security interest granted by such Person or arising by judicial
process or otherwise, including, without limitation, the interest of a vendor
under any conditional sale or other title retention agreement and the interest
of a lessor under a lease of any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible, by such Person as
lessee that is, or should be, a Capital Lease on the balance sheet of such
Person prepared in accordance with GAAP.
 
(mm) “Loan” or “Loans” shall mean the aggregate of all loans made by Lender to
Borrower under and pursuant to this Agreement.
 
(nn)  “Loan Commitment” shall mean, on the Closing Date, Six Hundred Thousand
and No/100 United States Dollars (US$600,000), and in the event Borrower
requests and Lender agrees to increase the Loan Commitment pursuant to Section
2.1(b), thereafter, such aggregate additional amount up to Two Million and
No/100 United States Dollars (US$2,000,000).
 
(oo) “Loan Documents” shall mean those documents listed in Section 3.1hereof.
 
(pp) “Material Adverse Effect” shall mean (a) a material adverse change in, or a
material adverse effect upon, the assets, business, prospects, properties,
financial condition or results of operations of the Credit Parties taken as a
whole, (b) a material impairment of the ability of the Credit Parties to perform
its Obligations under any of the Loan Documents, or (c) a material adverse
effect on (i) any portion of the Collateral, (ii) the legality, validity,
binding effect or enforceability against any Credit Party of any of the Loan
Documents, (iii) the perfection or priority (subject to Permitted Liens) of any
Lien granted to Lender under any Loan Document or (iv) the rights or remedies of
Lender under any Loan Document, or (d) a material adverse effect or impairment
on the Lender’s ability to sell the Facility Fee Shares or other shares of
Borrower’s Common Stock issuable to Lender under any Loan Documents without
limitation or restriction.
 
(qq) “Material Contract” shall mean any contract or agreement to which any
Credit Party is a party or by which any Credit Party or any of their respective
assets are bound and which: (i) involves aggregate payments of Twenty-Five
Thousand Dollars ($25,000) or more to or from any Credit Party; (ii) involves
delivery, purchase, licensing or provision, by or to any Credit Party, of any
goods, services, assets or other items having a value (or potential value) over
the term of such contract or agreement of Twenty-five Thousand Dollars ($25,000)
or more or is otherwise material to the conduct of any business of any Credit
Party’s as now conducted and as contemplated to be conducted in the future;
(iii) involves a Borrower Lease; (iv) imposes any guaranty, surety or
indemnification obligations on any Credit Party; or (v) prohibits any Credit
Party from engaging in any business or competing anywhere in the world.
 
 
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(rr) “Maturity Date” shall mean the earlier of (a) June 14, 2014, unless the
date shall be extended pursuant to Section 2.3 hereof or by Lender pursuant to
any modification, extension or renewal note executed by Borrower, consented and
agreed to by the Guarantors, and accepted by Lender in its sole and absolute
discretion in substitution for the Note, (b) upon sixty (60) days written notice
from Lender (the “Early Termination Notice”), or (c) the occurrence of an Event
of Default and acceleration of all of the outstanding Note pursuant to this
Agreement.
 
(ss) “Net Income” shall mean, with respect to any period, the amount shown
opposite the caption “Net Income” or a similar caption on the consolidated
financial statements of Borrower, prepared in accordance with GAAP.
 
(tt) “Note” shall mean that certain convertible promissory note, or any
replacement, substitution or amended and restated form thereof, in the principal
amount of the Loan Commitment made by Borrower, and consented and agreed to by
the Guarantors, in favor of Lender, the form of which is attached hereto as
Exhibit D.
 
(uu) “Obligations” shall mean, now existing or in the future: (i) all loans,
principal, advances and other financial accommodations (whether primary,
contingent or otherwise), (ii) all interest accrued thereon (including interest
which would be payable as post-petition in connection with any bankruptcy or
similar Proceeding, whether or not permitted as a claim thereunder), (iii) any
fees due to Lender under this Agreement or the other Loan Documents, (iv) any
expenses incurred by Lender under this Agreement or the other Loan Documents,
(v) any and all other liabilities and obligations of each of the Credit Parties
to Lender, and (vi) the performance by the Credit Parties of all covenants,
agreements and obligations of every nature and kind on the part of the Credit
Parties to be performed under this Agreement and any other Loan Documents.
 
(vv) “OFAC” shall have the meaning given to it in Section 14.22 hereof.
 
(ww) “Ordinary Course of Business” means the Ordinary Course of Business
consistent with past custom and practice (including with respect to quantity,
quality and frequency).
 
(xx) “Organizational Identification Number” means, the organizational
identification number assigned to any Credit Party, respectively, by the
applicable governmental unit or agency of the jurisdiction of organization of
such Credit Party, if any.
 
 
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(yy) “Permitted Liens” shall mean: (i) Liens for Taxes, assessments or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and, in each
case, for which adequate reserves are maintained in accordance with GAAP and in
respect of which no Lien has been filed; (ii) Liens of carriers, warehousemen,
mechanics and materialmen arising in the Ordinary Course of Business and other
similar Liens imposed by law; (iii) Liens in the form of deposits or pledges
incurred in connection with worker’s compensation, unemployment compensation and
other types of social security (excluding Liens arising under ERISA or in
connection with surety bonds, bids, performance bonds and similar obligations)
for sums not overdue or being contested in good faith by appropriate proceedings
and not involving any advances or borrowed money or the deferred purchase price
of property or services, which do not in the aggregate materially detract from
the value of the property or assets of the Credit Parties taken as a whole or
materially impair the use thereof in the operation of the Credit Parties’
business and, in each case, for which adequate reserves are maintained in
accordance with GAAP and in respect of which no Lien has been filed; (iv) Liens
described in the financial statements referred to in Section 7.10 hereof and the
replacement, extension or renewal of any such Lien upon or in the same property
subject thereto arising out of the extension, renewal or replacement of the
indebtedness secured thereby (without increase in the amount thereof),; (v)
attachments, appeal bonds, judgments and other similar Liens, for sums not
exceeding Fifty Thousand and 00/100 Dollars ($50,000) arising in connection with
court proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings and to the extent such judgments or
awards do not constitute an Event of Default; (vi) zoning and similar
restrictions on the use of property and easements, rights of way, restrictions,
minor defects or irregularities in title and other similar Liens not interfering
in any material respect with the ordinary conduct of the business of the Credit
Parties; (vii) Liens arising in connection with Capital Leases (and attaching
only to the property being leased); (viii) Liens that constitute purchase money
security interests on any property securing indebtedness incurred for the
purpose of financing all or any part of the cost of acquiring such property,
provided that any such Lien attaches to such property within sixty (60) days of
the acquisition thereof and attaches solely to the property so acquired; (ix)
Liens granted to Lender hereunder and under the Loan Documents; (x) any interest
or title of a lessor, sublessor, licensor or sublicensor under any lease or
non-exclusive license permitted by this Agreement; (xi) Liens arising from
precautionary uniform commercial code financing statements filed under any lease
permitted by this Agreement; (xii) banker’s Liens and rights of set-off of
financial institutions arising in connection with items deposited in accounts
maintained at such financial institutions and subsequently unpaid and unpaid
fees and expenses that are charged to the Credit Parties by such financial
institutions in the Ordinary Course of Business of the maintenance and operation
of such accounts; (xiii) any Lien existing on any property prior to the
acquisition thereof by any Credit Party; and (xiv) any Lien existing on the Real
Property as of the date hereof.
 
(zz) “Permit” means any license, permit, approval, waiver, order, authorization,
right or privilege of any nature whatsoever, granted, issued, approved or
allowed by any Governmental Authority.
 
(aaa) “Person” shall mean any individual, partnership, limited liability
company, limited liability partnership, corporation, trust, joint venture, joint
stock company, association, unincorporated organization, government or agency or
political subdivision thereof, or other entity.
 
(bbb) “Premium” shall mean seven percent (7%) of the amount of the Loan
Commitment.
 
 
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(ccc)  “Principal Trading Market” shall mean the Nasdaq Global Select Market,
the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the
OTC Markets, the so-called OTC Pink Sheets, the NYSE Euronext or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.
 
(ddd) “Real Property” means any real estate, land, building, structure,
improvement, fixture or other real property of any nature whatsoever, including,
but not limited to, fee and leasehold interests and specifically including the
real property listed on Schedule 7.17.
 
(eee)  “Regulatory Change” shall mean the introduction of, or any change in any
applicable law, treaty, rule, regulation or guideline or in the interpretation
or administration thereof by any governmental authority or any central bank or
other fiscal, monetary or other authority having jurisdiction over Lender or its
lending office.
 
(fff) “Rule 144” shall mean Rule 144 or Rule 144A promulgated under the
Securities Act (or a successor rule thereto).
 
(ggg) “Sale Reconciliation” shall have the meaning given to it in Section
2.2(f)(ii) hereof.
 
(hhh) “SEC” shall mean the United States Securities and Exchange Commission.
 
(iii) “Securities Act” shall mean the Securities Act of 1933, as amended.
 
(jjj) “Security Agreement(s)” shall mean the Security Agreements executed by
each of the Credit Parties in favor of Lender, the form of which is attached
hereto as Exhibit E-1 with respect to the Borrower and the form of which is
attached hereto as Exhibit E-2 with respect to the Guarantors.
 
(kkk) “Share Value” shall have the meaning given to it in Section 2.2 hereof.
 
(lll)  “Subsidiary” and “Subsidiaries” shall mean, respectively, each and all
such corporations, partnerships, limited partnerships, limited liability
companies, limited liability partnerships or other entities of which or in which
a Person owns, directly or indirectly, fifty percent (50%) or more of: (i) the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
entity if a corporation; (ii) the management authority and capital interest or
profits interest of such entity, if a partnership, limited partnership, limited
liability company, limited liability partnership, joint venture or similar
entity; or (iii) the beneficial interest of such entity, if a trust, association
or other unincorporated organization.
 
(mmm) “UCC” shall mean the Uniform Commercial Code in effect in New York from
time to time.
 
 
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(nnn) “Validity Guaranties” shall mean the validity guaranties executed by such
officers and directors of Borrower as Lender shall require, the form of which is
attached hereto as Exhibit F.
 
1.2 Accounting Terms.  Any accounting terms used in this Agreement which are not
specifically defined herein shall have the meanings customarily given them in
accordance with GAAP.  Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to Lender pursuant hereto
shall be made and prepared, both as to classification of items and as to amount,
in accordance with GAAP as used in the preparation of the financial statements
of Borrower on the date of this Agreement.  If any changes in accounting
principles or practices from those used in the preparation of the financial
statements are hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or any
successor thereto or agencies with similar functions), which results in a
material change in the method of accounting in the financial statements required
to be furnished to Lender hereunder or in the calculation of financial
covenants, standards or terms contained in this Agreement, the parties hereto
agree to enter into good faith negotiations to amend such provisions so as
equitably to reflect such changes to the end that the criteria for evaluating
the financial condition and performance of Borrower will be the same after such
changes as they were before such changes; and if the parties fail to agree on
the amendment of such provisions, Borrower will furnish financial statements in
accordance with such changes but shall provide calculations for all financial
covenants, perform all financial covenants and otherwise observe all financial
standards and terms in accordance with applicable accounting principles and
practices in effect immediately prior to such changes.  Calculations with
respect to financial covenants required to be stated in accordance with
applicable accounting principles and practices in effect immediately prior to
such changes shall be reviewed and certified by Borrower’ accountants.
 
1.3 Other Terms Defined in UCC.  All other words and phrases used herein and not
otherwise specifically defined shall have the respective meanings assigned to
such terms in the UCC, as amended from time to time, to the extent the same are
used or defined therein.
 
1.4 Other Definitional Provisions; Construction.  Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single
number includes the plural, and vice versa.  The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and references to Article, Section, Subsection, Annex, Schedule,
Exhibit and like references are references to this Agreement unless otherwise
specified.  An Event of Default shall “continue” or be “continuing” until such
Event of Default has been waived in accordance with Section 14.3
hereof.  References in this Agreement to any party shall include such party’s
successors and permitted assigns.  References to any “Section” shall be a
reference to such Section of this Agreement unless otherwise stated.  To the
extent any of the provisions of the other Loan Documents are inconsistent with
the terms of this Agreement, the provisions of this Agreement shall govern.
 
 
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2. LOAN FACILITY.
 
2.1 Loan.
 
(a) Loan Commitment.  Subject to the terms and conditions of this Agreement and
the other Loan Documents, and in reliance upon the representations and
warranties of Borrower set forth herein and in the other Loan Documents, Lender
agrees to make such  Loans at such times as Borrower may from time to time
request, pursuant to the terms of this Agreement, until, but not including,
the  Maturity Date, and in such amounts as Borrower may from time to time
request up to the Loan Commitment; provided, however, that the aggregate
principal balance of all Loans outstanding at any time shall not exceed the Loan
Commitment; and further provided, however, that, notwithstanding anything
contained in this Agreement or any other Loan Documents to the contrary, each
Loan requested by Borrower under this Agreement shall be subject to Lender’s
approval, which approval may be given or withheld in Lender’s sole and absolute
discretion.  The Loans shall be paid directly to Borrower and used to satisfy
the required Walgreens “slotting fee” and the remainder, if any, to be used by
Borrower for ongoing working capital purposes.
 
(b) Increase to Loan Commitment.  Borrower may request and the Lender may, in
its sole and absolute discretion (employing substantially the same analysis and
metrics the Lender used when determining to originally extend credit hereunder),
agree that on such later indeterminate dates, Lender further increases the Loan
Commitment; and Lender, in its sole discretion, may, but in any event, is not
required to, make available such additional Loan Commitment increases to
Borrower provided the following conditions have been satisfied, in Lender’s sole
and absolute discretion:
 
(i) no Event of Default shall have occurred or be continuing, or result from the
applicable increase of the Loan Commitment;
 
(ii) Borrower shall have executed and delivered a new or revised Note;
 
(iii) after giving effect to such increase, the amount of the aggregate
outstanding principal balance of all Loans shall not be in excess of the Loan
Commitment;
 
(iv) Lender shall have reviewed and accepted, in its sole and absolute
discretion, the amount and type of current and historical revenues, receipts,
receivables, Accounts, collections or any other funds at any time received or
receivable by the Credit Parties in connection with its business, operations or
from any other source, or other Collateral required for the increase; and
 
(v) Lender shall have received any and all additional documents or agreements
included in Section 3 hereof as it shall require in its sole discretion.
 
(c) Loan Interest and Payments.  Borrower shall make monthly payments of
principal, interest and Premium to the Lender on the dates and in the amounts
indicated on the amortization schedule attached hereto as Schedule 2.1.  Except
as otherwise provided in this Section, the outstanding principal balance of the
Loans shall be repaid by the Borrower on or before the Maturity Date.  Principal
amounts repaid on the Note may not be re-borrowed.  The principal amount of the
Loans outstanding from time to time shall bear interest at the Interest Rate.
Any amount of principal or interest on the Loans which is not paid when due,
whether at stated maturity, by acceleration or otherwise, shall at Lender’s
option bear interest payable on demand at the Default Rate.
 
 
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(d) Optional Prepayments.  Borrower may from time to time prepay the Loan, in
whole or in part, provided, however, (i) that if the Borrower prepays more than
eighty percent (80%) of the amount of the Loan Commitment within ninety one (91)
to one hundred eighty (180) days prior to the Maturity Date, Borrower shall pay
to Lender as liquidated damages and compensation for the costs of being prepared
to make funds available hereunder an amount equal to five percent (5%) of the
outstanding Loan Commitment; or (ii) that if the Borrower prepays more than
eighty percent (80%) of the amount of the Loan within ninety (90) days prior to
the Maturity Date, Borrower shall pay to Lender as liquidated damages and
compensation for the costs of being prepared to make funds available hereunder
an amount equal to two and 50/100 percent (2.50%) of the outstanding Loan
Commitment (the “Prepayment Penalty”) except in the case of an Early Termination
Notice.
 
2.2 Fees.
 
(a) Commitment Fee. Borrower agrees to pay to Lender a commitment fee equal to
three percent (3%) of the Loan Commitment and two percent (2%) of the amount of
any increase thereof pursuant to Section 2.1(b) which shall be due and payable
on the Closing Date and on the date of any increase to the Loan Commitment
pursuant to Section 2.1(b).
 
(b) Due Diligence Fees.  Borrower agrees to pay a due diligence fee equal to
Five Thousand and No/100 United States Dollars (US$5,000), which shall be due
and payable in full on the Closing Date, or any remaining portion thereof shall
be due and payable on the Closing Date if a portion of such fee was paid upon
the execution of any term sheet related to this Agreement.
 
(c) Banking Services Fee.  Borrower agrees to hereafter pay a banking services
fee equal to ten percent (10%) of the amount of any increase of the Loan
Commitment pursuant to Section 2.1(b), such fee to be assessed at the time of
any subsequent increase of the Loan Commitment.
 
(d) Document Review and Legal Fees.  Borrower agrees to pay a document review
and legal fee equal to Twelve Thousand Five Hundred and No/100 United States
Dollars (US$12,500) which shall be due and payable in full on the Closing Date,
or any remaining portion thereof shall be due and payable on the Closing Date if
a portion of such fee was paid upon the execution of any term sheet related to
this Agreement.
 
(e) Other Fees and Expenses.  Borrower also agrees to pay to the Lender (or any
designee of the Lender), upon demand, or to otherwise be responsible for the
payment of, any and all other costs, fees and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Lender and of any
experts and agents, which the Lender may incur or which may otherwise be due and
payable in connection with: (i) the preparation, negotiation, execution,
delivery, recordation, administration, amendment, waiver or other modification
or termination of this Agreement or any other Loan Documents; (ii) any
documentary stamp taxes, intangibles taxes, recording fees, filing fees, or
other similar taxes, fees or charges imposed by or due to any Governmental
Authority in connection with this Agreement or any other Loan Documents; (iii)
the exercise or enforcement of any of the rights of the Lender under this
Agreement or the Loan Documents; (iv) the failure by any Credit Party to perform
or observe any of the provisions of this Agreement or any of the Loan Documents;
or (v) any fees associated with Lender’s annual audit of the Credit Parties’
filings, liens, encumbrances and perfected security interests.  Included in the
foregoing shall be the amount of all expenses paid or incurred by Lender in
consulting with counsel concerning any of its rights under this Agreement or any
other Loan Document or under applicable law.  All such costs and expenses, if
not so immediately paid when due or upon demand thereof, shall bear interest
from the date of outlay until paid, at the Default Rate.  All of such costs and
expenses shall be additional Obligations of the Credit Parties to Lender secured
under the Loan Documents.  The provisions of this Subsection shall survive the
termination of this Agreement.
 
 
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(f) Investment Banking Fee.
 
(i) Share Issuance.  The Borrower shall pay to Lender a fee for investment
banking and advisory services provided by the Lender to the Borrower prior to
the Closing Date by issuing to Lender that number of shares of the Borrower’s
Common Stock equal to two hundred percent (200%) of the dollar amount of One
Hundred Thousand United States Dollars (US$100,000) (such dollar amount, the
“Share Value”).  For purposes of determining the number of shares issuable to
Lender under this Section (the “Facility Fee Shares”), the Borrower’s Common
Stock shall be valued at a price equal to the lowest volume weighted average
price for the Common Stock for the five (5) Business Days immediately prior to
the date the Borrower executes this Agreement (the “Valuation Date”), as
reported by Bloomberg (the “VWAP”).  The Lender shall confirm to the Borrower in
writing, the VWAP for the Common Stock as of the Valuation Date, and the
corresponding number of Facility Fee Shares issuable to the Lender based on such
price.  The Borrower shall instruct its transfer agent to issue certificates
representing the Facility Fee Shares issuable to the Lender immediately upon the
Borrower’s execution of this Agreement, and shall cause its transfer agent (the
“Transfer Agent”) to deliver such certificates to Lender within three (3)
Business Days from the Effective Date.  In the event such certificates
representing the Facility Fee Shares issuable hereunder shall not be delivered
to the Lender within said three (3) Business Day period, same shall be an
immediate default under this Agreement and the other Loan Documents.  The
Facility Fee Shares, when issued, shall be deemed to be validly issued, fully
paid, and non-assessable shares of the Borrower’s Common Stock.  The Facility
Fee Shares shall be deemed fully earned as of the date the Borrower executes
this Agreement, regardless of the amount or number of Loans made hereunder.
 
(ii) Adjustments.  It is the intention of the Borrower and Lender that by a date
that is twelve (12) months after the Valuation Date (the “Twelve Month Valuation
Date”) the Lender shall have generated net proceeds from the sale of the
Facility Fee Shares equal to the Share Value.  The Lender shall have the right
to sell the Facility Fee Shares in the Principal Trading Market or otherwise, at
any time in accordance with applicable securities laws.  At any time the Lender
may elect after the Twelve Month Valuation Date (or prior to such Twelve Month
Valuation Date, if Lender has sold all Facility Fee Shares prior to such Twelve
Month Valuation Date), the Lender may deliver to the Borrower a reconciliation
statement showing the net proceeds actually received by the Lender from the sale
of the Facility Fee Shares (the “Sale Reconciliation”).  If, as of the date of
the delivery by Lender of the Sale Reconciliation, the Lender has not realized
net proceeds from the sale of such Facility Fee Shares equal to at least the
Share Value, as shown on the Sale Reconciliation, then the Borrower shall
immediately take all required action necessary or required in order to cause the
issuance of additional shares of Common Stock to the Lender in an amount
sufficient such that, when sold and the net proceeds thereof are added to the
net proceeds from the sale of any of the previously issued and sold Facility Fee
Shares, the Lender shall have received total net funds equal to the Share
Value.  If additional shares of Common Stock are issued pursuant to the
immediately preceding sentence, and after the sale of such additional issued
shares of Common Stock, the Lender still has not received net proceeds equal to
at least the Share Value, then the Borrower shall again be required to
immediately take all required action necessary or required in order to cause the
issuance of additional shares of Common Stock to the Lender as contemplated
above, and such additional issuances shall continue until the Lender has
received net proceeds from the sale of such Common Stock equal to the Share
Value.  In the event the Lender receives net proceeds from the sale of Facility
Fee Shares equal to the Share Value, and the Lender still has Facility Fee
Shares remaining to be sold, the Lender shall return all such remaining Facility
Fee Shares to the Borrower.  In the event additional Common Stock is required to
be issued as outlined above, the Borrower shall instruct its Transfer Agent to
issue certificates representing such additional shares of Common Stock to the
Lender immediately subsequent to the Lender’s notification to the Borrower that
additional shares of Common Stock are issuable hereunder, and the Borrower shall
in any event cause its Transfer Agent to deliver such certificates to Lender
within three (3) Business Days following the date Lender notifies the Borrower
that additional shares of Common Stock are to be issued hereunder.  In the event
such certificates representing such additional shares of Common Stock issuable
hereunder shall not be delivered to the Lender within said three (3) Business
Day period, same shall be an immediate default under this Agreement and the Loan
Documents.
 
 
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(iii) Mandatory Redemption.  On that date which is six (6) months following the
Closing Date, the Borrower shall redeem all Facility Fee Shares, and all other
shares of common stock previously issued to the Lender by Borrower in connection
with any other transaction with Lender then in Lender’s possession, for cash
equal to the Share Value (as defined in this Agreement and in each other
agreement entered into by Borrower with Lender), less any cash proceeds received
by the Lender from any previous sales of Facility Fee Shares and any previous
sales of other shares of common stock previously issued to the Lender by
Borrower in connection with any other transaction with Lender, payable by wire
transfer to an account designated by Lender.
 
(iv) Optional Redemption.  Notwithstanding anything contained in this Agreement
to the contrary, at any time the Facility Fee Shares shall become unrestricted
and remain unsold in the possession of the Lender, the Borrower may redeem any
unsold Facility Fee Shares, or any portion thereof, for a price equal to the
Share Value or, if applicable, that fractional portion of the Share Value equal
to the fraction of the Facility Fee Shares which become unrestricted and remains
unsold in the possession of the Lender as of the date of such request for
redemption.  Upon Lender’s receipt of such cash payment in accordance with the
immediately preceding sentence, the Lender shall return any then remaining
Facility Fee Shares in its possession back to the Borrower and otherwise
undertake any required actions reasonably requested by Borrower to have such
then remaining redeemed Facility Fee Shares returned to Borrower.
 
(g) Matters with Respect to Common Stock.
 
(i) Issuance of Conversion Shares.  The parties hereto acknowledge that pursuant
to the terms of the Note, Lender has the right, at its discretion, to convert
amounts due under the Note into Common Stock in accordance with the terms of the
Note.  In the event, for any reason, the Borrower fails to issue, or cause the
Transfer Agent to issue, any portion of the Common Stock issuable upon
conversion of the Note (the “Conversion Shares”) to Lender in connection with
the exercise by Lender of any of its conversion rights under the Note, then the
parties hereto acknowledge that Lender shall irrevocably be entitled to deliver
to the Transfer Agent, on behalf of itself and the Borrower, a “Conversion
Notice” (as defined in the Note) requesting the issuance of the Conversion
Shares then issuable in accordance with the terms of the Note, and the Transfer
Agent, provided they are the acting transfer agent for the Borrower at the time,
shall, and the Borrower hereby irrevocably authorizes and directs the Transfer
Agent to, without any further confirmation or instructions from the Borrower,
issue the Conversion Shares applicable to the Conversion Notice then being
exercised, and surrender to a nationally recognized overnight courier for
delivery to Lender at the address specified in the Conversion Notice, a
certificate of the Common Stock of the Borrower, registered in the name of
Lender or its designee, for the number of Conversion Shares to which Lender
shall be then entitled under the Note, as set forth in the Conversion Notice.
 
 
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(ii) Issuance of Additional Common Stock Under Section 2.2(f).  The parties
hereto acknowledge that pursuant hereto, the Borrower has agreed to issue,
simultaneously with the execution of this Agreement and in the future, certain
shares of the Borrower’s Common Stock.  In the event, for any reason, the
Borrower fails to issue, or cause its Transfer Agent to issue, any portion of
the Common Stock issuable to Lender  hererunder, either now or in the future,
then the parties hereto acknowledge that Lender shall irrevocably be entitled to
deliver to the Transfer Agent, on behalf of itself and the Borrower, a written
instruction requesting the issuance of the shares of Common Stock then issuable
in accordance herewith, and the Transfer Agent, provided they are the acting
transfer agent for the Borrower at the time, shall, and the Borrower hereby
irrevocably authorizes and directs the Transfer Agent to, without any further
confirmation or instructions from the Borrower, issue such shares of the
Borrower’s Common Stock as directed by Lender, and surrender to a nationally
recognized overnight courier for delivery to Lender at the address specified in
the Lender’s notice, a certificate of the Common Stock of the Borrower,
registered in the name of Lender, for the number of shares of Common Stock
issuable to Lender in accordance  herewith.
 
(iii) Removal of Restrictive Legends.  In the event that Lender has any shares
of the Borrower’s Common Stock bearing any restrictive legends, and Lender,
through its counsel or other representatives, submits to the Transfer Agent any
such shares for the removal of the restrictive legends thereon, whether in
connection with a sale of such shares pursuant to any exemption to the
registration requirements under the Securities Act, or otherwise, and the
Borrower and or its counsel refuses or fails for any reason to render an opinion
of counsel or any other documents, certificates or instructions required for the
removal of the restrictive legends, then: (A) to the extent such legends could
be lawfully removed under applicable laws, Borrower’s failure to provide the
required opinion of counsel or any other documents, certificates or instructions
required for the removal of the restrictive legends shall be an immediate Event
of Default under this Agreement and all other Loan Documents; and (B) the
Borrower hereby agrees and acknowledges that Lender is hereby irrevocably and
expressly authorized to have counsel to Lender render any and all opinions and
other certificates or instruments which may be required for purposes of removing
such restrictive legends, and the Borrower hereby irrevocably authorizes and
directs the Transfer Agent to, without any further confirmation or instructions
from the Borrower, issue any such shares without restrictive legends as
instructed by Lender, and surrender to a common carrier for overnight delivery
to the address as specified by Lender, certificates, registered in the name of
Lender or its designees, representing the shares of Common Stock to which Lender
is entitled, without any restrictive legends and otherwise freely transferable
on the books and records of the Borrower.
 
 
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(iv) Authorized Agent of the Borrower.  The Borrower hereby irrevocably appoints
the Lender and its counsel and its representatives, each as the Borrower’s duly
authorized agent and attorney-in-fact for the Borrower for the purposes of
authorizing and instructing the Transfer Agent to process issuances, transfers
and legend removals upon instructions from Lender, or any counsel or
representatives of Lender, as specifically contemplated herein.  The
authorization and power of attorney granted hereby is coupled with an interest
and is irrevocable so long as any Obligations of the Borrower under this
Agreement or any other Loan Documents remain outstanding, and so long as the
Lender owns or has the right to receive, any shares of the Borrower’s Common
Stock hereunder or under the Note.  In this regard, the Borrower hereby confirms
to the Transfer Agent and the Lender that it can NOT and will NOT give
instructions, including stop orders or otherwise, inconsistent with the terms of
this Agreement with regard to the matters contemplated herein, and that the
Lender shall have the absolute right to provide a copy of this Agreement to the
Transfer Agent as evidence of the Borrower’s irrevocable authority for Lender
and Transfer Agent to process issuances, transfers and legend removals upon
instructions from Lender, or any counsel or representatives of Lender, as
specifically contemplated herein, without any further instructions, orders or
confirmations from the Borrower.
 
(v) Injunction and Specific Performance.  The Borrower specifically acknowledges
and agrees that in the event of a breach or threatened breach by the Borrower of
any provision of this Section, the Lender will be irreparably damaged and that
damages at law would be an inadequate remedy if this Agreement were not
specifically enforced.  Therefore, in the event of a breach or threatened breach
of any provision of this Section by the Borrower, the Lender shall be entitled
to obtain, in addition to all other rights or remedies Lender may have, at law
or in equity, an injunction restraining such breach, without being required to
show any actual damage or to post any bond or other security, and/or to a decree
for specific performance of the provisions of this Section.
 
2.3 Renewal of  Loans; Non-Renewal of  Loans; Fees.  On the Maturity Date, so
long as no Event of Default exists, and so long as no event has occurred that,
with the passage of time, the giving of notice, or both, would constitute an
Event of Default, Borrower shall have the option to request a renewal of the
Loan Commitment and extension of the Maturity Date for one (1) additional twelve
(12) month period.  To make such request, Borrower shall give written notice to
Lender of Borrower’s request to renew the Loan Commitment and extend the
Maturity Date for an additional twelve (12) month period on or before the
Maturity Date.  Lender may elect to accept or reject Borrower’s request for a
renewal of the Loan Commitment and extension of the Maturity Date in its sole
and absolute discretion.  In the event Lender shall accept Borrower’s request
for renewal and extension, Borrower shall, immediately upon demand from Lender
and as a condition to the renewal and extension, deliver a renewal fee to Lender
equal to two percent (2%) of the then outstanding Loan Commitment.
 
 
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2.4 Interest and Fee Computation; Collection of Funds.  Interest accrued
hereunder shall be payable as set forth in Section 2.1 hereof.  Except as
otherwise set forth herein, all interest and fees shall be calculated on the
basis of a year consisting of 360 days and shall be paid for the actual number
of days elapsed.  Principal payments submitted in funds not immediately
available shall continue to bear interest until collected.  If any payment to be
made by Borrower hereunder or under the Note shall become due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day and such extension of time shall be included in computing any interest in
respect of such payment.  Any Obligations which are not paid when due (subject
to applicable grace periods) shall bear interest at the Default Rate.
 
2.5 Automatic Debit.  In order to effectuate the timely payment of any of the
Obligations when due, Borrower hereby authorizes and directs Lender, at Lender’s
option, to: (i) debit, or cause or instruct the debit of, the amount of the
Obligations to any ordinary deposit account of Borrower; or (ii) make a  Loan
hereunder to pay the amount of the Obligations.
 
2.6 Discretionary Disbursements.  Lender, in its sole and absolute discretion,
may immediately upon notice to Borrower, disburse any or all proceeds of the
Loans made or available to Borrower pursuant to this Agreement to pay any fees,
costs, expenses or other amounts required to be paid by Borrower hereunder and
not so paid.  All monies so disbursed shall be a part of the Obligations,
payable by Borrower on demand from Lender.
 
2.7 US Dollars; Currency Risk.  All payments will be in Dollars.  In the event
payments are not in Dollars, Borrower shall bear the risk of Lender’s currency
losses, and if Lender suffers a currency loss and the result is to increase the
cost to Lender or to reduce the amount of any sum received or receivable by
Lender under this Agreement or under the Note with respect thereto, then after
demand by Lender (which demand shall be accompanied by a certificate setting
forth reasonably detailed calculations of the basis of such demand), Borrower
shall pay to Lender such additional amount or amounts as will compensate Lender
for such increased cost or such reduction.  Borrower hereby authorizes Lender to
advance or cause an advance of Loans to pay for the increased costs or
reductions associated with any such currency losses.
 
 
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3. CONDITIONS OF BORROWING.
 
Notwithstanding any other provision of this Agreement, the obligation of Lender
to disburse or make all or any portion of any Loans is subject to satisfaction
of all of the following conditions precedent (unless a condition is waived in
writing by Lender) contained in this Article 3:
 
3.1 Loan Documents to be Executed by Borrower on the Closing Date.  As a
condition precedent to Lender’s disbursal or making of the Loans pursuant to
this Agreement on the Closing Date, the applicable Credit Party shall have
executed or cause to be executed and delivered to Lender the following
documents, each of which must be satisfactory to Lender and Lender’s counsel in
form, substance and execution:
 
(a) Credit Agreement.  An original of this Agreement duly executed by Borrower
and consented and agreed to by the Guarantors;
 
(b)  Note.  An original Note duly executed by Borrower and consented and agreed
to by the Guarantors;
 
(c) Security Agreement.  An original of the applicable Security Agreements dated
as of the date of this Agreement, duly executed by each Credit Party;
 
(d) Guarantee Agreement.  An original of each of the Guaranty Agreements dated
as of the date of this Agreement, duly executed by the Guarantors;
 
(e) Validity Guaranty.  An original of the Validity Guaranty dated as of the
date of this Agreement, duly executed by the executive officers and directors of
the Borrower as requested by the Lender.
 
(f) Confession of Judgment.  An original of the Confession of Judgment duly
executed by the Credit Parties;
 
(g) Irrevocable Transfer Agent Instruction Letter.  An original of the
Irrevocable Transfer Agent Instruction Letter dated as of the date of this
Agreement, duly executed by the Borrower and the Borrower’s transfer agent; and
 
(h)  Closing Statement.  An original of the Closing Statement, dated as of the
date of this Agreement, duly executed by the Borrower.
 
3.2 Organizational and Authorization Documents to be Delivered by the Credit
Parties on the Closing Date.  As a condition precedent to Lender’s disbursal or
making of the Loans pursuant to this Agreement on the Closing Date, the Credit
Parties shall have executed or cause to be executed and delivered a certificate
of an officer of each of the Credit Parties certifying and attaching (i) copies
of each Credit Parties’ respective articles of incorporation, certificate of
organization, bylaws, operating agreement or similar documents; (ii) resolutions
of each Credit Parties’ respective board of directors or managers, approving and
authorizing the execution, delivery and performance of the Loan Documents to
which it is party and the transactions contemplated thereby; (iii) resolution of
the Guarantors’ shareholders, approving and authorizing the execution, delivery
and performance of the Loan Documents to which it is party and the transactions
contemplated thereby; (iv) the signatures and incumbency of the officers of the
Credit Parties executing any of the Loan Documents, each of which the Credit
Parties hereby certify to be true and complete, and in full force and effect
without modification, it being understood that Lender may conclusively rely on
each such document and certificate until formally advised by any Credit Party of
any changes therein; and (v) good standing certificate in the state of
organization of each Credit Party and in each other state requested by Lender.
 
 
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3.3 Additional Documents to be Delivered by the Credit Parties on the Closing
Date.  As a condition precedent to Lender’s disbursal or making of the Loans
pursuant to this Agreement on the Closing Date, the Credit Parties shall have
delivered or cause to be delivered to Lender all of the following documents,
each of which must be satisfactory to Lender and Lender’s counsel in form,
substance and execution:
 
(a) Insurance.  Within thirty (30) days of the Closing Date, evidence
satisfactory to Lender of the existence of insurance required to be maintained
pursuant to Section 10.4 hereof, together with evidence that Lender has been
named as additional insured and lender’s loss payee, as applicable, on all
related insurance policies;
 
(b) Search Results.  Copies of UCC search reports, issued by the Secretary of
State of the state of incorporation of each Credit Party, dated such a date as
is reasonably acceptable to Lender, listing all effective financing statements
which name the Credit Parties, under their present name and any previous names,
as debtors, together with copies of such financing statements;
 
(c) Certificates of Good Standing.  Copies of certificates of good standing with
respect to each Credit Party, issued by the Secretary of State of the state of
incorporation of each Credit Party, dated such a date as is reasonably
acceptable to Lender, evidencing the good standing thereof;
 
(d) Opinion of Counsel.  A customary opinion of Credit Parties’ counsel, in form
reasonably satisfactory to Lender;
 
(e) Due Diligence.  Such due diligence documents and information as is requested
by the Lender;
 
(f) Perfection of Lien on Collateral.  Borrower shall have duly authorized,
executed and delivered any other related documentation necessary or advisable to
perfect the Lien on the Collateral in the jurisdiction of incorporation of the
Borrower, including, but not limited to, such UCC-1 Financing Statements and any
and all documents necessary to complete any filings which Lender shall require
in connection with this Agreement.
 
(g) Press Release Authorization.  Evidence satisfactory to the Lender that the
Borrower has authorized the Lender to publish such press releases with respect
to this Agreement and the instant transaction, including, but not limited to, a
copy of an email delivered to Marketwire.com by the Borrower whereby the
Borrower authorizes the Lender to use its name and, if applicable, stock symbol,
in connection with current or future press releases;
 
(h) JPMorgan Chase Payment Schedule.  Borrower shall deliver to Lender a copy of
such documentation evidencing the existing line of credit granted by JPMorgan
Chase Bank to Pharmagen Laboratories, Inc. (the “JPMorgan Chase Credit Line”),
including, but not limited to, a payment schedule listing the required monthly
payments to be made by Pharmagen Laboratories, Inc.;
 
 
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(i) Additional Documents.  Such other agreements, documents, instruments,
certificates, financial statements, schedules, resolutions, opinions of counsel,
notes and other items which Lender shall reasonably require in connection with
this Agreement.
 
3.4 Loan Documents to be Executed by any additional Subsidiary following the
Closing Date.  Within ten (10) days of any entity becoming a Subsidiary of the
Borrower, such Subsidiary shall have executed or cause to be executed and
delivered to Lender all of the following documents, each of which must be
satisfactory to Lender and Lender’s counsel in form, substance and execution:
 
(a) Consent and Agreement.  An original of a Consent and Agreement duly executed
by such Subsidiary, pursuant to which such Subsidiary consents and agrees to
become a “Credit Party” hereunder and to be bound by the terms and conditions of
this Agreement;
 
(b)  Note.  An original of a Consent and Agreement duly executed by such
Subsidiary, pursuant to which such Subsidiary consents and agrees to be bound by
the terms and conditions of the Note;
 
(c) Security Agreement.  An original of a Security Agreement, duly executed by
such Subsidiary;
 
(d) Guarantee Agreement.  An original of a Guarantee Agreement, duly executed by
such Subsidiary;
 
(e) Confession of Judgment.  An original of the Confession of Judgment duly
executed by such Subsidiary;
 
(f) Organizational and Authorization Documents.  A certificate of an officer of
the Subsidiary certifying and attaching (i) copies of the Subsidiary’s
respective articles of incorporation, bylaws, operating agreement, certificate
of organization or similar documents; (ii) resolutions of its respective board
of directors or managers, approving and authorizing the execution, delivery and
performance of the Loan Documents to which it will become a party and the
transactions contemplated thereby; and (iii) the signatures and incumbency of
the officers of the Subsidiary executing any of the Loan Documents;
 
(g) Search Results.  Copies of UCC search reports, issued by the Secretary of
State of the state of incorporation of the Subsidiary, dated such a date as is
reasonably acceptable to Lender, listing all effective financing statements
which name the Subsidiary, under their present name and any previous names, as
debtors, together with copies of such financing statements;
 
(h) Certificates of Good Standing.  Copies of certificates of good standing with
respect to the Subsidiary, issued by the Secretary of State of the state of
incorporation of the Subsidiary, dated such a date as is reasonably acceptable
to Lender, evidencing the good standing thereof; and
 
(i) Due Diligence.  Such due diligence documents and information as is requested
by the Lender.
 
 
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(j) Additional Documents.  Such other agreements, documents, instruments,
certificates, financial statements, schedules, resolutions, opinions of counsel,
notes and other items which Lender shall reasonably require in connection with
this Agreement.
 
3.5 Loan Documents to be Executed by Each Credit Party Upon Each Subsequent
Advance.  As a condition precedent to Lender’s disbursal or making of additional
advances of principal pursuant to this Agreement following the Closing Date, the
Credit Parties, as applicable, shall have executed or caused to be executed and
delivered to Lender (i) all of the documents in Section 2.1(b), Section 3.1,
Section 3.2, Section 3.3 and Section 3.4, applicable thereto, and such documents
shall remain in full force and effect as of the date of the subsequent principal
advance, and (ii) an additional original Note in the principal amount of the
advance being then made, duly executed by each Credit Party, satisfactory to
Lender and Lender’s counsel in form, substance and execution.
 
3.6 Payment of Fees.  Borrower shall have paid to Lender all fees, costs and
expenses, including, but not limited to, due diligence expenses, attorney’s
fees, search fees, title fees, documentation and filing fees (including
documentary stamps and taxes payable on the face amount of the applicable Note).
 
3.7 Event of Default.  No Event of Default, or event which, with notice or lapse
of time, or both, would constitute an Event of Default, shall have occurred and
be continuing.
 
3.8 Adverse Changes.  There shall not have occurred any Material Adverse Effect.
 
3.9 Litigation.  No pending claim, investigation, litigation or governmental
proceeding shall have been instituted against any Credit Party or any of their
respective officers or shareholders.
 
3.10 Representations and Warranties.  No representation or warranty of any
Credit Party contained herein or in any Loan Documents shall be untrue or
incorrect in any material respect as of the date of any Loans as though made on
such date, except to the extent such representation or warranty expressly
relates to an earlier date.
 
3.11 Due Diligence.  The business, legal and collateral due diligence review
performed by Lender, including, but not limited to, a review of the Credit
Parties’ historical performance and financial information, must be acceptable to
Lender in its sole discretion.  Lender reserves the right to increase any and
all aspects of its due diligence in Lender’s sole discretion.
 
3.12 Key Personnel Investigations.  Lender shall be satisfied, in its sole
discretion, with results from background investigations conducted on key members
of the Credit Parties’ principals and management teams.
 
3.13 Repayment of Outstanding Indebtedness.  The Credit Parties shall have
repaid in full all outstanding indebtedness secured by Collateral, other than
indebtedness giving rise to Permitted Liens.
 
 
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4. NOTES EVIDENCING LOANS.
 
The Loans shall be evidenced by the Note (together with any and all renewal,
extension, modification or replacement notes executed by Borrower and delivered
to Lender and given in substitution therefor) duly executed by Borrower, and
consented and agreed to by the Guarantors, and payable to the order of
Lender.  At the time of the initial disbursement of a Loan and at each time an
additional Loan shall be requested hereunder or a repayment made in whole or in
part thereon, an appropriate notation thereof shall be made on the books and
records of Lender.  All amounts recorded shall be, absent demonstrable error,
conclusive and binding evidence of: (i) the principal amount of the Loans
advanced hereunder; (ii) any unpaid interest owing on the Loans; and (iii) all
amounts repaid on the Loans.  The failure to record any such amount or any error
in recording such amounts shall not, however, limit or otherwise affect the
obligations of Borrower under the Note to repay the principal amount of the
Loans, together with all interest accruing thereon.
 
5. MANNER OF BORROWING.
 
5.1 Loan Requests.  Subject to Section 2.1(a) and Article 3 hereof, the Loans
shall be made available to Borrower upon Borrower’s request, from any Person
whose authority to so act has not been revoked by Borrower in writing previously
received by Lender. Borrower may make requests for borrowing no more than one
time every two weeks up to the then applicable Loan Commitment; provided,
however, that, notwithstanding anything contained in this Agreement or any other
Loan Documents to the contrary, each Loan requested by Borrower under this
Agreement shall be subject to Lender’s approval, which approval may be given or
withheld in Lender’s sole and absolute discretion.  A request for a Loan may
only be made if no default or Event of Default shall have occurred or be
continuing and shall be subject to: (i) borrowing availability under the Loan
Commitment; and (ii) other Collateral being acceptable to Lender.  In addition,
a request for a Loan must be received by no later than 11:00 a.m. eastern time
the day it is to be funded and be in a minimum amount equal to Fifty Thousand
Dollars and No/100 ($50,000.00).
 
5.2 Communications. Lender is authorized to rely on any written, verbal,
electronic, telephonic or telecopy loan requests which Lender believes in its
good faith judgment to emanate from the President or Chief Executive Officer, or
any other authorized representative of Borrower.  Borrower hereby irrevocably
confirms, ratifies and approves all such advances by Lender and hereby
indemnifies Lender against losses and expenses (including court costs,
attorneys’ and paralegals’ fees) and shall hold Lender harmless with respect
thereto.
 
6. SECURITY FOR THE OBLIGATIONS.
 
To secure the payment and performance by Borrower of the Obligations hereunder,
the Credit Parties shall grant, under and pursuant to the Security Agreements
executed by the Credit Parties dated as of the date hereof, to Lender, its
successors and assigns, a continuing, first-priority security interest (with the
exception of Pharmagen Laboratories, Inc., which shall provide a second priority
security interest) in, and assignment, transference, mortgage, conveyanyce,
pledge, hypothecation and set over to Lender, its successors and assigns, all of
the Credit Parties’ right, title and interest in and to the Collateral, whether
now owned or hereafter acquired, and all proceeds (including, without
limitation, all insurance proceeds) and products of any of the Collateral.  At
any time upon Lender’s request, the Credit Parties shall execute and deliver to
Lender any other documents, instruments or certificates requested by Lender for
the purpose of properly documenting and perfecting the security interests of
Lender in and to the Collateral granted hereunder, including any additional
security agreements, mortgages, control agreements, and financing
statements.  The Security Agreements executed by the Credit Parties shall
terminate following the full payment and performance of all of the Obligations
hereunder and under any Loan Document and upon Lender’s express written
acknowledgement of such full payment and performance being received by the
Credit Parties.
 
 
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7. REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES.
 
To induce Lender to make the Loans, the Credit Parties make the following
representations and warranties to Lender, each of which shall be true and
correct in all material respects as of the date of the execution and delivery of
this Agreement and as of the date of each Loan made hereunder, except to the
extent such representation expressly relates to an earlier date, and which shall
survive the execution and delivery of this Agreement:
 
7.1 Subsidiaries.  A list of Borrower’s subsidiaries is set forth in Schedule
7.1.
 
7.2 Borrower Organization and Name.  Each Credit Party is a corporation or
limited liability company, as applicable, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, with
full and adequate powers to carry on and conduct its business as presently
conducted.  Each Credit Party is duly licensed or qualified in all foreign
jurisdictions wherein the nature of its activities require such qualification or
licensing or in which any Collateral is located, except for those foreign
jurisdictions in which the failure to be so qualified or licensed would not
cause a Material Adverse Effect.  The exact legal name of each Credit Party is
as set forth in the first paragraph of this Agreement, and each Credit Party
does not currently conduct, nor has any Credit Party, during the last five (5)
years, conducted business under any other names or trade names, except as set
forth in Schedule 7.1.
 
7.3 Authorization; Validity.  Each Credit Party has full right, power and
authority to enter into this Agreement, to make the borrowings and execute and
deliver the Loan Documents as provided herein and to perform all of its duties
and obligations under this Agreement and the Loan Documents and no other action
or consent on the part of any Credit Party, its board of directors,
stockholders, or any other Person is necessary or required by any Credit Party
to execute this Agreement and the Loan Documents, consummate the transactions
contemplated herein and therein, and perform all of its obligations hereunder
and thereunder.  The execution and delivery of this Agreement and the Loan
Documents will not, nor will the observance or performance of any of the matters
and things herein or therein set forth, violate or contravene any provision of
law or of any Credit Party’s Articles of Incorporation, Certificate of
Organization, Bylaws, Operating Agreement or other governing documents.  All
necessary and appropriate corporate action has been taken on the part of each
Credit Party to authorize the execution and delivery of this Agreement and the
Loan Documents and the issuance of the Note and the Facility Fee Shares.  This
Agreement and the Loan Documents are valid and binding agreements and contracts
of each Credit Party, enforceable against each Credit Party in accordance with
their respective terms, except to the extent that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
enacted for the relief of debtors generally and other similar laws affecting the
enforcement of creditors’ rights generally or by equitable principles which may
affect the availability of specific performance and other equitable
remedies.  No Credit Party knows of any reason why any Credit Party cannot
perform any of its obligations under this Agreement, the Loan Documents or any
related agreements.
 
 
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7.4 Capitalization.  The authorized capital stock of Borrower consists of five
hundred seventy-five million (575,000,000) shares, of which five hundred fifty
million (550,000,000) shares are designated as common stock, par value $0.001
per share (“Common Stock”) and twenty-five million (25,000,000) shares are
designated as preferred stock, par value $0.001 per share.  As of the Closing
Date, Borrower has three hundred eighty-one million one hundred twenty-five
thousand two hundred eighty-eight (381,125,288) shares of Common Stock issued
and outstanding and three million (3,000,000) shares of preferred stock issued
and outstanding. All of the outstanding shares of capital stock of Borrower are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws and none of such outstanding shares
were issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.   As of the date of this Agreement, no shares of
Borrower’s capital stock are subject to preemptive rights or any other similar
rights or any liens, claims or encumbrances suffered or permitted by Borrower.
The Common Stock is currently quoted on the OTC Bulletin Board, under the
trading symbol “PHRX”.  The Borrower has received no notice, either oral or
written, with respect to the continued eligibility of the Common Stock for
quotation on the Principal Trading Market, and the Borrower has maintained all
requirements on its part for the continuation of such quotation.  Except as set
forth in Schedule 7.4 attached hereto and except for the securities to be issued
pursuant to this Agreement, as of the date of this Agreement: (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of any Credit Party, or contracts,
commitments, understandings or arrangements by which any Credit Party is or may
become bound to issue additional shares of capital stock of any Credit Party or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of any Credit Party; (ii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other contracts or
instruments evidencing indebtedness of the Borrower and its Subsidiaries, or by
which the Borrower and its Subsidiaries is or may become bound; (iii) there are
no financing statements filed with any Governmental Authority securing any
obligations of the Borrower and its Subsidiaries, or filed in connection with
any assets or properties of the Borrower and its Subsidiaries; (iii) there are
no outstanding registration statements with respect to Borrower or any of its
securities and there are no outstanding comment letters from the SEC, the
Principal Trading Market, or any other Governmental Authority with respect to
any securities of any Credit Party; (iv) there are no agreements or arrangements
under which any Credit Party is obligated to register the sale of any of its
securities under the Securities Act; (v) there are no financing statements filed
with any Governmental Authority securing any obligations of any Credit Party, or
filed in connection with any assets or properties of any Credit Party; (vi)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by this Agreement or any related agreement or
the consummation of the transactions described herein or therein; and (vii)
there are no outstanding securities or instruments of any Credit Party which
contain any redemption or similar provisions, and there are no contracts or
agreements by which any Credit Party is or may become bound to redeem a security
of any Credit Party (except pursuant to this Agreement).  Each Credit Party has
furnished to the Lender true, complete and correct copies of, as applicable: (I)
if a Credit Party is a corporation, such Credit Party’s Certificate of
Incorporation, as amended and as in effect on the date hereof and Credit Party’s
Bylaws, as in effect on the date hereof, and any other governing or
organizational documents, as applicable; (II) if a Credit Party is a limited
liability company, such Credit Party’s Certificate of Organization and Operating
Agreement, and any other governing or organizational documents, as applicable..
Except for the documents delivered to Lender in accordance with the immediately
preceding sentence, there are no other shareholder agreements, voting
agreements, operating agreements, or other contracts or agreements of any nature
or kind that restrict, limit or in any manner impose obligations, restrictions
or limitations on the governance of each Credit Party.
 
 
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7.5 No Conflicts; Consents and Approvals.  The execution, delivery  and
performance of this Agreement and the Loan Documents, and the consummation of
the transactions contemplated hereby and thereby, including the issuance of the
Facility Fee Shares, will not: (i) constitute a violation of or conflict with
the Articles of Incorporation, Certificate of Organization, Bylaws, Operating
Agreement or any other organizational or governing documents of the Credit
Parties; (ii) constitute a violation of, or a default or breach under (either
immediately, upon notice, upon lapse of time, or both), or conflicts with, or
gives to any other Person any rights of termination, amendment, acceleration or
cancellation of, any provision of any contract or agreement to which any Credit
Party is a party or by which any of its or their assets or properties may be
bound; (iii) constitute a violation of, or a default or breach under (either
immediately, upon notice, upon lapse of time, or both), or conflicts with, any
order, writ, injunction, decree, or any other judgment of any nature whatsoever;
(iv) constitute a violation of, or conflict with, any law, rule, ordinance or
other regulation (including United States federal and state securities laws and
the rules and regulations of any market or exchange on which the Common Stock is
quoted); or (v) result in the loss or adverse modification of, or the imposition
of any fine, penalty or other Lien, claim or encumbrance with respect to, any
Permit granted or issued to, or otherwise held by or for the use of, any Credit
Party or any of their respective assets.  No Credit Party is in violation of its
Articles of Incorporation, Certificate of Organization, Bylaws, Operating
Agreement or other organizational or governing documents, as applicable, and no
Credit Party is in default or breach (and no event has occurred which with
notice or lapse of time or both could put any Credit Party in default or breach)
under, and no Credit Party has  taken any action or failed to take any action
that would give to any other Person any rights of termination, amendment,
acceleration or cancellation of, any contract or agreement to which any Credit
Party is a party or by which any property or assets of any Credit Party are
bound or affected. No business of any Credit Party is being conducted, and shall
not be conducted, in violation of any law, rule, ordinance or other regulation.
Except as specifically contemplated by this Agreement, no Credit Party is
required to obtain any consent or approval of, from, or with any Governmental
Authority, or any other Person, in order for it to execute, deliver or perform
any of its obligations under this Agreement or the Loan Documents in accordance
with the terms hereof or thereof, or to issue the Facility Fee Shares in
accordance with the terms hereof.  All consents and approvals which any Credit
Party is required to obtain pursuant to the immediately preceding sentence have
been obtained or effected on or prior to the date hereof.
 
 
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7.6 Issuance of Securities. The Facility Fee Shares are duly authorized and,
upon issuance in accordance with the terms hereof, shall be duly issued, fully
paid and non-assessable, and free from all liens, claims, charges, taxes, or
other encumbrances with respect to the issue thereof, and will be issued in
compliance with all applicable United States federal and state securities laws
and the laws of any foreign jurisdiction applicable to the issuance
thereof.  Any shares issuable upon conversion of the Note, in accordance with
the terms of the Note, are duly authorized and, upon issuance in accordance with
the terms hereof, shall be duly issued, fully paid and non-assessable, and free
from all liens, claims, charges, taxes, or other encumbrances with respect to
the issue thereof, and will be issued in compliance with all applicable United
States federal and state securities laws and the laws of any foreign
jurisdiction applicable to the issuance thereof.  The issuance of the Facility
Fee Shares and any shares issuable upon conversion of the Note is and will be
exempt from: (i) the registration and prospectus delivery requirements of the
Securities Act; (ii) the registration and/or qualification provisions of all
applicable state and provincial securities and “blue sky” laws; and (iii) any
similar registration or qualification requirements of any foreign jurisdiction
or other Governmental Authority.
 
7.7 Compliance With Laws.  The nature and transaction of each Credit Party’s
business and operations and the use of its properties and assets, including, but
not limited to, the Collateral or any real estate owned, leased, or occupied by
each Credit Party, do not and during the term of the Loans shall not, violate or
conflict with any applicable law, statute, ordinance, rule, regulation or order
of any kind or nature, including, without limitation, the provisions of the Fair
Labor Standards Act or any zoning, land use, building, noise abatement,
occupational health and safety or other laws, any Permit or any condition,
grant, easement, covenant, condition or restriction, whether recorded or not,
except to the extent such violation or conflict would not result in a Material
Adverse Effect.
 
7.8 Environmental Laws and Hazardous Substances.  Except to the extent that any
of the following would not have a Material Adverse Effect (including financial
reserves, insurance policies and cure periods relating to compliance with
applicable laws and Permits) and are used in such amounts as are customary in
the Ordinary Course of Business in compliance with all applicable Environmental
Laws, each Credit Party represents and warrants to Lender that, to the knowledge
of each Credit Party’s officers and directors: (i) no Credit Party has
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off any of the premises of any
Credit Party (whether or not owned by any Credit Party) in any manner which at
any time violates any Environmental Law or any Permit, certificate, approval or
similar authorization thereunder; (ii) the operations of each Credit Party
comply in all material respects with all Environmental Laws and all Permits
certificates, approvals and similar authorizations thereunder; (iii) there has
been no investigation, Proceeding, complaint, order, directive, claim, citation
or notice by any Governmental Authority or any other Person, nor is any pending
or, to any Credit Party’s officers’ and directors’ knowledge, threatened against
any Credit Party under any Environmental Law; and (iv) no Credit Party has
liability, contingent or otherwise, in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Material.
 
 
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7.9 Collateral Representations.  No Person other than the Credit Parties, owns
or has other rights in the Collateral, and the Collateral is free from any Lien
of any kind, other than the Lien of Lender and Permitted Liens.
 
7.10 SEC Documents; Financial Statements. Other than as set forth in Schedule
7.10, Borrower has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC or any Governmental
Authority (all of the foregoing filed within the two (2) years preceding the
date hereof or amended after the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to as the “SEC Documents”). The
Borrower is current with its filing obligations under the Exchange Act and all
SEC Documents have been filed on a timely basis or the Borrower has received a
valid extension of such time of filing and has filed any such SEC Document prior
to the expiration of any such extension. The Borrower represents and warrants
that true and complete copies of the SEC Documents are available on the SEC
website (www.sec.gov) at no charge to Lender, and Lender acknowledges that it
may retrieve all SEC Documents from such website and Lender’s access to such SEC
Documents through such website shall constitute delivery of the SEC Documents to
Lender; provided, however, that if Lender is unable to obtain any of such SEC
Documents from such website at no charge, as result of such website not being
available or any other reason beyond Lender’s control, then upon request from
Lender, the Borrower shall deliver to Lender true and complete copies of such
SEC Documents.  The Borrower shall also deliver to Lender true and complete
copies of all draft filings, reports, schedules, statements and other documents
required to be filed with the requirements of the Exchange Act that have been
prepared but not filed with the SEC as of the date hereof. None of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.  None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have been
amended or updated in subsequent filings prior the date hereof, which amendments
or updates are also part of the SEC Documents).  As of their respective dates,
the consolidated financial statements of the Borrower and its Subsidiaries
included in the SEC Documents (the “Financial Statements”) complied in all
material respects with applicable accounting requirements and any published
rules and regulations of the SEC with respect thereto. All of the Financial
Statements have been prepared in accordance with GAAP, consistently applied,
during the periods involved (except: (i) as may be otherwise indicated in such
Financial Statements or the notes thereto; or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements), and fairly present in all material respects the
consolidated financial position of the Borrower and all of its Subsidiaries as
of the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).  To the knowledge of Borrower and its
officers, no other information provided by or on behalf of Borrower to the
Lender which is not included in the SEC Documents contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstance under which they
are or were made, not misleading.
 
 
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7.11 Absence of Certain Changes.  Since the date the last of the SEC Documents
was filed with the SEC, none of the following have occurred:
 
(a) There has been no event or circumstance of any nature whatsoever that has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect; or
 
Any transaction, event, action, development, payment, or any other matter of any
nature whatsoever entered into by any Credit Party other than in the Ordinary
Course of Business.
 
7.12 Litigation and Taxes.  There is no Proceeding pending, or to any Credit
Party’s officers’ and directors’ knowledge, threatened, against any Credit Party
or their respective officers, managers, members or shareholders, or against or
affecting any of their respective assets.  In addition, there are no outstanding
judgments, orders, writs, decrees or other similar matters or items against or
affecting any Credit Party, their respective business or assets.  No Credit
Party has received any material complaint from any customer, supplier, vendor or
employee.  Each Credit Party has duly filed all applicable income or other tax
returns, or properly requested an extension of time to do so, and has paid all
income or other taxes when due.  There is no Proceeding, controversy or
objection pending or threatened in respect of any tax returns of any Credit
Party.
 
7.13 Event of Default.  With the exception of any Event of Default disclosed in
writing to the Lender prior to the date hereof, no Event of Default has occurred
and is continuing, and no event has occurred and is continuing which, with the
lapse of time, the giving of notice, or both, would constitute such an Event of
Default under this Agreement or any of the other Loan Documents, and neither
Borrower nor its Subsidiaries is in default (without regard to grace or cure
periods) under any contract or agreement to which it is a party or by which any
of their respective assets are bound.
 
7.14 ERISA Obligations.  To each Credit Party’s officers’ and directors’
knowledge, all Employee Plans of each Credit Party meet the minimum funding
standards of Section 302 of ERISA, where applicable, and each such Employee Plan
that is intended to be qualified within the meaning of Section 401 of the
Internal Revenue Code of 1986 is qualified.  No withdrawal liability has been
incurred under any such Employee Plans and no “Reportable Event” or “Prohibited
Transaction” (as such terms are defined in ERISA), has occurred with respect to
any such Employee Plans, unless approved by the appropriate governmental
agencies.  To each Credit Party’s officers’ and directors’ knowledge, each
Credit Party has promptly paid and discharged all obligations and liabilities
arising under the ERISA of a character which if unpaid or unperformed might
result in the imposition of a Lien against any of its properties or assets.
 
7.15 Adverse Circumstances.  No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or Proceeding (or to any Credit
Party’s officers’ and directors’ knowledge, threatened litigation or Proceeding
or basis therefor) exists which: (i) could adversely affect the validity or
priority of the Liens granted to Lender under the Loan Documents; (ii) could
adversely affect the ability of any Credit Parties to perform its obligations
under the Loan Documents; (iii) would constitute a default under any of the Loan
Documents; (iv) would constitute such a default with the giving of notice or
lapse of time or both; or (v) would constitute or give rise to a Material
Adverse Effect.
 
 
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7.16 Liabilities and Indebtedness of the Borrower.  No Credit Party has any
Funded Indebtedness or any liabilities or obligations of any nature whatsoever,
except: (i) as disclosed in the financial statements delivered to the Lender as
of the date hereof; or (ii) liabilities and obligations incurred in the Ordinary
Course of Business of any Credit Party since the date of the financial
statements delivered to Lender as of the date hereof, which do not or would not,
individually or in the aggregate, exceed Ten Thousand Dollars ($10,000) or
otherwise have a Material Adverse Effect.
 
7.17 Real Estate.
 
(a) Real Property Ownership.  Except for the Borrower Leases, the Credit Parties
do not own any Real Property.
 
(b) Real Property Leases.  Except for ordinary office leases (the “Borrower
Leases”), no Credit Party leases other Real Property.  With respect to the
Borrower Leases: (i) each Credit Party has been in peaceful possession of the
property leased thereunder and neither the Credit Parties nor the landlord is in
default thereunder; (ii) no waiver, indulgence or postponement of any of the
obligations thereunder has been granted by any Credit Party or landlord
thereunder; and (iii) there exists no event, occurrence, condition or act known
to any Credit Party which, upon notice or lapse of time or both, would be or
could become a default thereunder or which could result in the termination of
the Borrower Leases, or any of them, or have a Material Adverse Effect.  No
Credit Party has violated nor breached any provision of any such Borrower
Leases, and all obligations required to be performed by any Credit Party under
any of such Borrower Leases have been fully, timely and properly
performed.  Each Credit Party has delivered to the Lender, if requested, true,
correct and complete copies of all Borrower Leases, including all modifications
and amendments thereto, whether in writing or otherwise.  No Credit Party has
received any written or oral notice to the effect that any of the Borrower
Leases will not be renewed at the termination of the term of such Borrower
Leases, or that the Borrower Leases will be renewed only at higher rents.
 
7.18 Material Contracts.  An accurate, current and complete copy of each of the
Material Contracts is included as an exhibit to the SEC filings of the Borrower,
and if requested, will be furnished to Lender, and each of the Material
Contracts constitutes the entire agreement of the respective parties thereto
relating to the subject matter thereof.  There are no outstanding offers, bids,
proposals or quotations made by any Credit Party which, if accepted, would
create a Material Contract with such Credit Party.  Each of the Material
Contracts is in full force and effect and is a valid and binding obligation of
the parties thereto in accordance with the terms and conditions thereof.  To the
knowledge of each Credit Party and its officers and directors, all obligations
required to be performed under the terms of each of the Material Contracts by
any party thereto have been fully performed by all parties thereto, and no party
to any Material Contracts is in default with respect to any term or condition
thereof, nor has any event occurred which, through the passage of time or the
giving of notice, or both, would constitute a default thereunder or would cause
the acceleration or modification of any obligation of any party thereto or the
creation of any lien, claim, charge or other encumbrance upon any of the assets
or properties of any Credit Party.  Further, no Credit Party’s  officers and
directors have received any notice, nor does any Credit Party’s officers and
directors have any knowledge, of any pending or contemplated termination of any
of the Material Contracts and, no such termination is proposed or has been
threatened, whether in writing or orally.
 
 
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7.19 Title to Assets.  Each Credit Party has good and marketable title to, or a
valid leasehold interest in, all of its assets and properties which are material
to its business and operations as presently conducted, free and clear of all
liens, claims, charges or other encumbrances or restrictions on the transfer or
use of same.  Except as would not have a Material Adverse Effect, the assets and
properties of each Credit Party are in good operating condition and repair,
ordinary wear and tear excepted, and are free of any latent or patent defects
which might impair their usefulness, and are suitable for the purposes for which
they are currently used and for the purposes for which they are proposed to be
used.
 
7.20 Intellectual Property. Each Credit Party owns or possesses adequate and
legally enforceable  rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and all other intellectual property rights
necessary to conduct its business as now conducted. No Credit Party’s officers
and directors have any knowledge of any infringement by any Credit Party of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other intellectual property rights of others, and, to the knowledge of each
Credit Party’s officers and directors, there is no claim, demand or Proceeding,
or other demand of any nature being made or brought against, or to each Credit
Party’s officers and directors knowledge, being threatened against, any Credit
Party regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service mark registrations,
trade secret or other intellectual property infringement; and no Credit Party is
aware of any facts or circumstances which might give rise to any of the
foregoing.
 
7.21 Labor and Employment Matters.  The Credit Parties are not involved in any
labor dispute or, to the knowledge of the officers and directors of each Credit
Party, is any such dispute threatened. To the knowledge of the Credit Parties
and their officers and directors, none of the employees of the any Credit Party
is a member of a union and the Credit Parties believe that its relations with
its employees are good.  To the knowledge of the Credit Parties and their
officers and directors, the Credit Parties have complied in all material
respects with all laws, rules, ordinances and regulations relating to employment
matters, civil rights and equal employment opportunities.
 
7.22 Insurance.  The Credit Parties are covered by valid, outstanding and
enforceable policies of insurance which were issued to it by reputable insurers
of recognized financial responsibility, covering its properties, assets and
business against losses and risks normally insured against by other corporations
or entities in the same or similar lines of businesses as the Credit Parties are
engaged and in coverage amounts which are prudent and typically and reasonably
carried by such other corporations or entities (the “Insurance Policies”).  Such
Insurance Policies are in full force and effect, and all premiums due thereon
have been paid.  None of the Insurance Policies will lapse or terminate as a
result of the transactions contemplated by this Agreement.  Credit Parties have
complied with the provisions of such Insurance Policies.  No Credit Party has
been refused any insurance coverage sought or applied for and no Credit Party
has any reason to believe that it will not be able to renew its existing
Insurance Policies as and when such Insurance Policies expire or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of any Credit
Party.
 
 
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7.23 Permits.  The Credit Parties possess all Permits necessary to conduct its
business, and no Credit Party has received any notice of, or is otherwise
involved in, any Proceedings relating to the revocation or modification of any
such Permits.  All such Permits are valid and in full force and effect and each
Credit Party is in full compliance with the respective requirements of all such
Permits.
 
7.24 Lending Relationship.  Borrower acknowledges and agrees that the
relationship hereby created with Lender is and has been conducted on an open and
arm’s length basis in which no fiduciary relationship exists and that Borrower
has not relied, nor is relying on, any such fiduciary relationship in executing
this Agreement and in consummating the Loans. Lender represents that it will
receive the Note payable to its order as evidence of the Loans.
 
7.25 Compliance with Regulation U.  No portion of the proceeds of the Loans
shall be used by Borrower, or any Affiliates of Borrower, either directly or
indirectly, for the purpose of purchasing or carrying any margin stock, within
the meaning of Regulation U as adopted by the Board of Governors of the Federal
Reserve System.
 
7.26 Governmental Regulation.  Borrower is not, or after giving effect to any
Loan, will not be, subject to regulation under the Public Utility Holding
Borrower Act of 1935, the Federal Power Act or the Investment Company Act of
1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.
 
7.27 Bank Accounts.  Schedule 7.27 sets forth, with respect to each account of
each Credit Party with any bank, broker, merchant processor, or other depository
institution: (i) the name and account number of such account; (ii) the name and
address of the institution where such account is held; (iii) the name of any
Person(s) holding a power of attorney with respect to such account, if any; and
(iv) the names of all authorized signatories and other Persons authorized to
withdraw funds from each such account.
 
7.28 Places of Business.  The principal place of business of each Credit Party
is set forth on Schedule 7.28 and the Credit Parties shall promptly notify
Lender of any change in such location.  The Credit Parties will not remove or
permit the Collateral to be removed from such locations without the prior
written consent of Lender, except for: (i) certain heavy equipment kept at third
party sites when conducting business or maintenance; (ii) vehicles, containers
and rolling stock; (iii) Inventory sold or leased in the Ordinary Course of
Business; and (iv) temporary removal of Collateral to other locations for repair
or maintenance as may be required from time to time in each instance in the
Ordinary Course of Business of Borrower.
 
7.29 Illegal Payments.  No Credit Party, nor any director, officer, member,
manager,  agent, employee or other Person acting on behalf of any Credit Party
has, in the course of his actions for, or on behalf of, any Credit Party: (i)
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
 
 
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7.30 Related Party Transactions.  Except for arm’s length transactions pursuant
to which Borrower makes payments in the Ordinary Course of Business upon terms
no less favorable than Borrower could obtain from third parties, and as
disclosed in the Borrower’s SEC filings, none of the officers, directors,
managers, or employees of Borrower, nor any stockholders, members or partners
who own, legally or beneficially, five percent (5%) or more of the ownership
interests of Borrower (each a “Material Shareholder”), is presently a party to
any transaction with Borrower (other than for services as employees, officers
and directors), including any contract providing for the furnishing of services
to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from, any officer, director or such employee
or Material Shareholder or, to the best knowledge of Borrower’s officers and
directors, any other Person in which any officer, director, or any such employee
or Material Shareholder has a substantial or material interest in or of which
any officer, director or employee of Borrower or Material Shareholder is an
officer, director, trustee or partner.  There are no claims, demands, disputes
or Proceedings of any nature or kind between Borrower and any officer, director
or employee of Borrower or any Material Shareholder, or between any of them,
relating to Borrower.
 
7.31 Internal Accounting Controls.  Borrower maintains a system of internal
accounting controls sufficient to provide reasonable assurance that: (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
 
7.32 Brokerage Fees.  There is no Person acting on behalf of Borrower who is
entitled to or has any claim for any brokerage or finder’s fee or commission in
connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby.
 
7.33 No General Solicitation.  Neither Borrower, nor any of its Affiliates, nor
any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or issuance of the Note, the
Facility Fee Shares or the shares issuable upon conversion of the Note.
 
7.34 No Integrated Offering.  Neither Borrower, nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Note, the Facility
Fee Shares or any securities issuable upon conversion of the Note under the
Securities Act or cause this offering of such securities to be integrated with
prior offerings by Borrower for purposes of the Securities Act.
 
7.35 Private Placement.  No registration under the Securities Act or the laws,
rules or regulation of any other Governmental Authority is required for the
issuance of the Note, the Facility Fee Shares or the shares issuable upon
conversion of the Note as contemplated hereby.
 
 
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7.36 Complete Information.  This Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials submitted to Lender in connection with or in furtherance of this
Agreement by or on behalf of Borrower fully and fairly states the matters with
which they purport to deal, and do not misstate any material fact nor,
separately or in the aggregate, fail to state any material fact necessary to
make the statements made not misleading.
 
8. REPRESENTATIONS AND WARRANTIES OF LENDER
 
Lender makes the following representations and warranties to the Credit Parties,
each of which shall be true and correct in all material respects as of the date
of the execution and delivery of this Agreement and as of the date of each Loan
made hereunder except to the extent such representation expressly relates to an
earlier date, and which shall survive the execution and delivery of this
Agreement:
 
8.1 Investment Purpose. Lender is acquiring the Note and the Facility Fee Shares
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act.
 
8.2 Accredited Investor Status. Lender is an “Accredited Investor” as that term
is defined in Rule 501(a)(3) of Regulation D promulgated under the Securities
Act.
 
8.3 Reliance on Exemptions. Lender understands that the Note and the Facility
Fee Shares are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that Borrower is relying in part upon the truth and accuracy of, and
Lender’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Lender set forth herein in order to
determine the availability of such exemptions and the eligibility of Lender to
acquire such securities.  Lender’s address is set forth in Section 14.18 hereto.
 
8.4 Information. Lender has been furnished with all materials relating to the
business, finances and operations of Borrower and information deemed material by
Lender to making an informed investment decision regarding the Note and the
Facility Fee Shares, which have been requested by Lender. Lender has been
afforded the opportunity to ask questions of Borrower and its
management.  Neither such inquiries nor any other due diligence investigations
conducted by Lender or its representatives shall modify, amend or affect
Lender’s right to rely on Borrower’s representations and warranties contained in
Section 7 above. Lender understands that its investment in the Note and the
Facility Fee Shares involves a high degree of risk. Lender is in a position
regarding Borrower, which, based upon economic bargaining power, enabled and
enables Lender to obtain information from Borrower in order to evaluate the
merits and risks of this investment. Lender has sought such accounting, legal
and tax advice, as it has considered necessary to make an informed investment
decision with respect to the Note and the Facility Fee Shares.
 
 
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8.5 No Governmental Review. Lender understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Note or the Facility Fee Shares,
or the fairness or suitability of the investment in the Note or the Facility Fee
Shares, nor have such authorities passed upon or endorsed the merits of the
offering of the Note or the Facility Fee Shares.
 
8.6 Transfer or Resale.  Lender understands that: (i) the Note and the Facility
Fee Shares have not been and are not being registered under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, or (B) Lender shall
have delivered to Borrower an opinion of counsel, in a form acceptable to
Borrower, to the effect that such securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such
registration requirements; (ii) any sale of such securities made in reliance on
Rule 144 under the Securities Act (or a successor rule thereto) (“Rule 144”) may
be made only in accordance with the terms of Rule 144 and further, if Rule 144
is not applicable, any resale of such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder; and (iii)
neither Borrower nor any other person is under any obligation to register such
securities under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
 
8.7 Legends. Lender understands that the certificates or other instruments
representing the Note and the Facility Fee Shares shall bear a restrictive
legend in substantially the following form (and a stop transfer order may be
placed against transfer of such certificates):
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, ACCEPTABLE TO COMPANY’S COUNSEL, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
 
8.8 Authorization, Enforcement.  This Agreement has been duly and validly
authorized, executed and delivered on behalf of Lender and is a valid and
binding agreement of Lender enforceable against Lender in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.
 
 
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8.9 Receipt of Documents. Lender has received and read in its entirety:  (i)
this Agreement and each representation, warranty and covenant set forth herein,
and the Loan Documents; (ii) all due diligence, filings made by the Borrower
with the Securities and Exchange Commission, and other information necessary to
verify the accuracy and completeness of such representations, warranties and
covenants to the satisfaction of the Lender; and (iii) answers to all questions
Lender submitted to Borrower regarding an investment in Borrower; and Lender has
relied on the information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
 
8.10 Due Formation of Lender. Lender is an entity that has been formed and
validly exists and has not been organized for the specific purpose of purchasing
the Note or the Facility Fee Shares and is not prohibited from doing so.
 
8.11 No Legal Advice from Borrower. Lender acknowledges that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with its own legal counsel and investment and tax advisors.  Lender is
relying solely on such counsel and advisors and not on any statements or
representations of Borrower or any of its representatives or agents for legal,
tax or investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any jurisdiction.
 
9. NEGATIVE COVENANTS.
 
9.1 Indebtedness.  The Credit Parties shall not, either directly or indirectly,
create, assume, incur or have outstanding any Funded Indebtedness (including
purchase money indebtedness), or become liable, whether as endorser, guarantor,
surety or otherwise, for any debt or obligation of any other Person, except:
 
(a) in the Ordinary Course of Business;
 
(b) the Obligations;
 
(c) endorsement for collection or deposit of any commercial paper secured in the
Ordinary Course of Business;
 
(d) obligations for taxes, assessments, municipal or other governmental charges;
provided, the same are being contested in good faith by appropriate proceedings
and are insured against or bonded over to the satisfaction of Lender;
 
(e) obligations for accounts payable, other than for money borrowed, incurred in
the Ordinary Course of Business; provided that, any management or similar fees
payable by the Credit Parties shall be fully subordinated in right of payment to
the prior payment in full of the Loans made hereunder;
 
 
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(f) obligations existing on the date hereof which are disclosed on the financial
statements referred to in Section 7.10 hereof;
 
(g) unsecured intercompany Funded Indebtedness incurred in the Ordinary Course
of Business;
 
(h) Funded Indebtedness existing on the Closing Date and set forth in the
Financial Statements, including any extensions or refinancings of the foregoing,
which do not increase the principal amount of such Funded Indebtedness as of the
date of such extension or refinancing; provided such Funded Indebtedness is
subordinated to the Obligations owed to Lender pursuant to a subordination
agreement, in form and content acceptable to Lender in its sole discretion,
which shall include an indefinite standstill on remedies and payment blockage
rights during any default;
 
(i) Funded Indebtedness consisting of Capital Lease obligations or secured by
Permitted Liens of the type described in clause (g) of the definition thereof
not to exceed $250,000 in the aggregate at any time;
 
(j) Contingent Liabilities arising with respect to customary indemnification
obligations in favor of purchasers in connection with dispositions permitted
hereunder;
 
(k) Contingent Liabilities incurred in the Ordinary Course of Business with
respect to surety and appeal bonds, performance bonds and other similar
obligations; and
 
(l) Contingent Liabilities arising under indemnity agreements to title insurers
to cause such title insurers to issue to Lender title insurance policies.
 
9.2 Encumbrances.  The Credit Parties shall not, either directly or indirectly,
create, assume, incur or suffer or permit to exist any Lien or charge of any
kind or character upon any asset of the Credit Parties; whether owned at the
Closing Date or hereafter acquired, except Permitted Liens or as otherwise
authorized by Lender in writing.
 
9.3 Investments.  The Credit Parties shall not, to the extent that such
transactions result in a Change in Control, either directly or indirectly, make
or have outstanding any new investments (whether through purchase of stocks,
obligations or otherwise) in, or loans or advances to, any other Person, or
acquire all or any substantial part of the assets, business, stock or other
evidence of beneficial ownership of any other Person except following:
 
(a) the stock or other ownership interests in a Subsidiary existing as of the
Closing Date;
 
(b) investments in direct obligations of the United States or any state in the
United States;
 
(c) trade credit extended by the Credit Parties in the Ordinary Course of
Business;
 
 
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(d) investments in securities received pursuant to any plan of reorganization or
similar arrangement upon bankruptcy or insolvency;
 
(e) investments existing on the Closing Date and set forth in the Financial
Statements;
 
(f) Contingent Liabilities permitted pursuant to Section 8.1 hereof; or
 
(g) Capital Expenditures permitted under Section 8.5 hereof.
 
9.4 Transfer; Merger.  Without the Lender’s prior written consent, which shall
not be unreasonably withheld, the Credit Parties shall not, either directly or
indirectly, permit a Change in Control, merge, consolidate, sell, transfer,
license, lease, encumber or otherwise dispose of all or any part of its property
or business or all or any substantial part of its assets, or sell or discount
(with or without recourse) any of its Notes (as defined in the UCC), Chattel
Paper, Payment Intangibles or Accounts; provided, however, that the Credit
Parties may:
 
(a) sell or lease Inventory and Equipment in the Ordinary Course of Business;
 
(b) upon not less than three (3) Business Days’ prior written notice to Lender,
any Subsidiary of Borrower may merge with (so long as Borrower remains the
surviving entity), or dissolve or liquidate into, or transfer its property to
Borrower;
 
(c) dispose of used, worn-out or surplus equipment in the Ordinary Course of
Business;
 
(d) discount or write-off overdue Accounts for collection in the Ordinary Course
of Business;
 
(e) sell or otherwise dispose (including cancellation of Funded Indebtedness) of
any Investment permitted in the Ordinary Course of Business; and
 
(f) grant Permitted Liens.
 
9.5 Capital Expenditures.  Without Lender’s prior consent, which shall not be
unreasonably withheld, the Credit Parties shall not make or incur obligations
for any Capital Expenditures in any fiscal year.
 
9.6 Issuance of Stock.  The Borrower shall not, and shall cause the Guarantors
not to, either directly or indirectly, issue or distribute any additional
capital stock, partnership interest or other securities of Borrower or the
Guarantors which would cause a Change in Control without the prior written
consent of Lender, which such consent shall not be unreasonably withheld.
 
 
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9.7 Distributions; Restricted Payments.  Without Lender’s prior consent, which
shall not be unreasonably withheld, the Borrower shall not (i) purchase or
redeem any shares of its stock or partnership interests or declare or pay any
dividends or distributions, whether in cash or otherwise, set aside any funds
for any such purpose or make any distribution to its shareholders, make any
distribution of its property or assets or make any loans, advances or extensions
of credit to, or investments in, any Affiliates, including, without limitation,
Borrower’s affiliates, officers, partners or employees, (ii) make any payments
of any Funded Indebtedness other than as permitted hereunder, or (iii) increase
the annual salary paid to any officers of Borrower.
 
9.8 Use of Proceeds.  Neither Borrower nor any of their Affiliates, shall use
any portion of the proceeds of the Loans, either directly or indirectly, for the
purpose of purchasing any securities underwritten by any Affiliate of Lender.
 
9.9 Business Activities; Change of Legal Status and Organizational
Documents.  The Credit Parties shall not: (i) engage in any line of business
other than the businesses engaged in on the Closing Date and business reasonably
related thereto; (ii) change its name, Organizational Identification Number, its
type of organization, its jurisdictions of organization or other legal
structure; or (iii) permit their Articles of Incorporation, Articles of
Incorporation Bylaws, Operating Agreement or other organizational documents to
be amended or modified in any way which could reasonably be expected to
adversely affect the interests of Lender.
 
9.10 Transactions with Affiliates.  The Credit Parties shall not enter into any
transaction with any of their Affiliates, except in the Ordinary Course of
Business and upon fair and reasonable terms that are no less favorable to the
Credit Parties than it would obtain in a comparable arm’s length transaction
with a Person not an Affiliate of the Credit Parties.
 
9.11 Bank Accounts.  Without the Lender’s prior consent, which will not be
unreasonably withheld, the Credit Parties shall not maintain any bank, deposit
or credit card payment processing accounts with any financial institution, or
any other Person, for the Credit Parties or any Affiliate of the Credit Parties,
other than the Credit Parties’ respective accounts listed in the attached
Schedule 7.27.  Specifically, no Credit Party may change, modify, close or
otherwise affect any of the other accounts listed in Schedule 7.27, without
Lender’s prior written approval, which approval may be withheld or conditioned
in Lender’s sole and absolute discretion.
 
10. AFFIRMATIVE COVENANTS.
 
10.1 Compliance with Regulatory Requirements.  Upon demand by Lender, Borrower
shall reimburse Lender for Lender’s additional costs and/or reductions in the
amount of principal or interest received or receivable by Lender if at any time
after the date of this Agreement any law, treaty or regulation or any change in
any law, treaty or regulation or the interpretation thereof by any governmental
authority charged with the administration thereof or any other authority having
jurisdiction over Lender or the Loans, whether or not having the force of law,
shall impose, modify or deem applicable any reserve and/or special deposit
requirement against or in respect of assets held by or deposits in or for the
account of the Loans by Lender or impose on Lender any other condition with
respect to this Agreement or the Loans, the result of which is to either
increase the cost to Lender of making or maintaining the Loans or to reduce the
amount of principal or interest received or receivable by Lender with respect to
such Loans.  Said additional costs and/or reductions will be those which
directly result from the imposition of such requirement or condition on the
making or maintaining of such Loans.
 
 
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10.2 Corporate Existence.  Each Credit Party shall at all times preserve and
maintain its: (i) existence and good standing in the jurisdiction of its
organization; and (ii) its qualification to do business and good standing in
each jurisdiction where the nature of its business makes such qualification
necessary (other than such jurisdictions in which the failure to be qualified or
in good standing could not reasonably be expected to have a Material Adverse
Effect), and shall at all times continue as a going concern in the business
which each Credit Party are presently conducting.
 
10.3 Maintain Property.  The Credit Parties shall at all times maintain,
preserve and keep its plants, properties and equipment, including, but not
limited to, any Collateral, in good repair, working order and condition, normal
wear and tear excepted, and shall from time to time, as the Credit Parties deem
appropriate in their reasonable judgment, make all needful and proper repairs,
renewals, replacements, and additions thereto so that at all times the
efficiency thereof shall be fully preserved and maintained.  The Credit Parties
shall permit Lender to examine and inspect such plant, properties and equipment,
including, but not limited to, any Collateral, at all reasonable times upon
reasonable notice during business hours.  During the continuance of any Event of
Default, Lender shall, at Borrower’s expense, have the right to make additional
inspections without providing advance notice.
 
10.4 Maintain Insurance.  The Credit Parties shall at all times insure and keep
insured with insurance companies acceptable to Lender, all insurable property
owned by the Credit Parties which is of a character usually insured by companies
similarly situated and operating like properties, against loss or damage from
environmental, fire and such other hazards or risks as are customarily insured
against by companies similarly situated and operating like properties; and shall
similarly insure employers’, public and professional liability risks.  Prior to
the date of the funding of any Loans under this Agreement, each Credit Party
shall deliver to Lender a certificate setting forth in summary form the nature
and extent of the insurance maintained pursuant to this Section.  All such
policies of insurance must be satisfactory to Lender in relation to the amount
and term of the Obligations and type and value of the Collateral and assets of
the Credit Parties, shall identify Lender as sole/lender’s loss payee and as an
additional insured.  In the event the Credit Parties fail to provide Lender with
evidence of the insurance coverage required by this Section or at any time
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay any premium in whole or in part relating thereto, then
Lender, without waiving or releasing any obligation or default by the Credit
Parties hereunder, may at any time (but shall be under no obligation to so act),
obtain and maintain such policies of insurance and pay such premium and take any
other action with respect thereto, which Lender deems advisable.  This insurance
coverage: (i) may, but need not, protect the Borrower’s and its Subsidiaries’
interest in such property, including, but not limited to, the Collateral; and
(ii) may not pay any claim made by, or against, the Credit Parties in connection
with such property, including, but not limited to, the Collateral.  The Credit
Parties may later cancel any such insurance purchased by Lender, but only after
providing Lender with evidence that the insurance coverage required by this
Section is in force.  The costs of such insurance obtained by Lender, through
and including the effective date such insurance coverage is canceled or expires,
shall be payable on demand by the Credit Parties to Lender, together with
interest at the Default Rate on such amounts until repaid and any other charges
by Lender in connection with the placement of such insurance.  The costs of such
insurance, which may be greater than the cost of insurance which Borrower may be
able to obtain on their own, together with interest thereon at the Default Rate
and any other charges by Lender in connection with the placement of such
insurance may be added to the total Obligations due and owing to the extent not
paid by the Credit Parties.
 
 
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10.5 Tax Liabilities.
 
(a) The Credit Parties shall at all times pay and discharge all property, income
and other taxes, assessments and governmental charges upon, and all claims
(including claims for labor, materials and supplies) against the Credit Parties
or any of their properties, Equipment or Inventory, before the same shall become
delinquent and before penalties accrue thereon, unless and to the extent that
the same are being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP are being maintained.
 
(b) The Credit Parties shall be solely responsible for the payment of any and
all documentary stamps and other taxes in connection with the execution of the
Loan Documents.
 
10.6 ERISA Liabilities; Employee Plans.  The Credit Parties shall: (i) keep in
full force and effect any and all Employee Plans which are presently in
existence or may, from time to time, come into existence under ERISA, and not
withdraw from any such Employee Plans, unless such withdrawal can be effected or
such Employee Plans can be terminated without liability; (ii) make contributions
to all of such Employee Plans in a timely manner and in a sufficient amount to
comply with the standards of ERISA, including the minimum funding standards of
ERISA; (iii) comply with all material requirements of ERISA which relate to such
Employee Plans; (iv) notify Lender immediately upon receipt by the Credit
Parties of any notice concerning the imposition of any withdrawal liability or
of the institution of any proceeding or other action which may result in the
termination of any such Employee Plans or the appointment of a trustee to
administer such Employee Plans; (v) promptly advise Lender of the occurrence of
any “Reportable Event” or “Prohibited Transaction” (as such terms are defined in
ERISA), with respect to any such Employee Plans; and (vi) amend any Employee
Plan that is intended to be qualified within the meaning of Section 401 of the
Internal Revenue Code of 1986 to the extent necessary to keep the Employee Plan
qualified, and to cause the Employee Plan to be administered and operated in a
manner that does not cause the Employee Plan to lose its qualified status.
 
10.7 Financial Statements.  Borrower shall at all times maintain a system of
accounting capable of producing its individual and consolidated financial
statements in compliance with GAAP (provided that monthly financial statements
shall not be required to have footnote disclosure, are subject to normal
year-end adjustments and need not be consolidated), and shall furnish to Lender
or its authorized representatives such information regarding the business
affairs, operations and financial condition of the Credit Parties as Lender may
from time to time request or require, including, but not limited to:
 
(a) If the  Maturity Date is extended beyond the original term, as soon as
available, and in any event, within ninety (90) days after the close of each
fiscal year, a copy of the annual audited financial statements of Borrower,
including balance sheet, statement of income and retained earnings, statement of
cash flows for the fiscal year then ended, in reasonable detail, prepared and
reviewed by an independent certified public accountant reasonably acceptable to
Lender, containing an unqualified opinion of such accountant;
 
(b) as soon as available, and in any event, within sixty (60) days after the
close of each fiscal quarter, a copy of the quarterly financial statements of
Borrower, including balance sheet, statement of income and retained earnings,
statement of cash flows for the fiscal year then ended, in reasonable detail,
prepared and certified as accurate in all material respects by the President or
Chief Financial Officer of Borrower;
 
 
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(c) as soon as available, and in any event, within thirty (30) days following
the end of each calendar month, a copy of the financial statements of Borrower
regarding such month, including balance sheet, statement of income and retained
earnings, statement of cash flows for the month then ended, in reasonable
detail, prepared and certified as accurate in all material respects by the
President or Chief Financial Officer of Borrower;
 
(d) as soon as available, and in any event, within thirty (30) days following
the end of each calendar month, a copy of a variance report which shall compare
the intended use of the loan proceeds submitted at Closing pursuant to Section
3.3(e) with the actual use of the loan proceeds set forth on the report
delivered to the Lender as of the date hereof, including explanations for
variances over or under ten percent (10%), in reasonable detail, prepared and
certified as accurate in all material respects by the President or Chief
Financial Officer of Borrower.
 
No change with respect to such accounting principles shall be made by Borrower
without giving prior notification to Lender. The Borrower represents and
warrants to Lender that the financial statements delivered to Lender at or prior
to the execution and delivery of this Agreement and to be delivered at all times
thereafter accurately reflect and will accurately reflect the financial
condition of the Credit Parties in all material respects. Lender shall have the
right at all times (and on reasonable notice so long as there then does not
exist any Event of Default) during business hours to inspect the books and
records of Borrower and make extracts therefrom.  Borrower shall at all times
comply with all reporting requirements of the SEC to the extent applicable.
 
The Borrower agrees to advise Lender immediately, in writing, of the occurrence
of any Material Adverse Effect, or the occurrence of any event, circumstance or
other happening that could be reasonably expected to lead to or become a
Material Adverse Effect.
 
10.8 Supplemental Financial Statements. Borrower shall promptly upon receipt
thereof, provide to Lender copies of interim and supplemental reports if any,
submitted to Borrower by independent accountants in connection with any interim
audit or review of the books of Borrower.
 
10.9 Field Audits. Borrower shall allow Lender, at Borrower’s sole expense (no
more than four (4) times a year at $2,000 per visit or audit, so long as no
Event of Default has occurred and is continuing), to conduct a field examination
of the assets and records of the Borrower and its Subsidiaries, the results of
which must be satisfactory to Lender in Lender’s sole and absolute
discretion.  The foregoing notwithstanding, (i) from and after the occurrence
and during the continuation of an Event of Default or any event which with
notice, lapse of time or both would become an Event of Default, or (ii) in the
event that the Borrower’s cash flow indicates more than a fifteen percent (15%)
reduction from the previous month pursuant to the monthly financial statements,
Lender may conduct field examinations in its sole discretion and such costs
shall be at the sole expense of Borrower.
 
 
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10.10 Negative EBIDTA Notice and Other Reports. Borrower shall provide prompt
written notice to Lender if the Borrower fails to comply with Section 11
herein.  In addition, Borrower shall within such period of time as Lender may
reasonably specify, deliver to Lender such other schedules and reports as Lender
may reasonably require.
 
10.11 Collateral Records. The Credit Parties shall keep full and accurate books
and records relating to the Collateral and shall mark such books and records to
indicate Lender’s Lien in the Collateral including, without limitation, placing
a legend, in form and content reasonably acceptable to Lender, on all Chattel
Paper created by each Credit Parties indicating that Lender has a Lien in such
Chattel Paper.
 
10.12 Notice of Proceedings. The Credit Parties shall, promptly, but not more
than five (5) days after knowledge thereof shall have come to the attention of
any officer or director of the Credit Parties, give written notice to Lender of
all threatened or pending actions, suits, and proceedings before any court or
governmental department, commission, board or other administrative agency which
may have a Material Adverse Effect.
 
10.13 Notice of Default.  The Credit Parties shall, promptly, but not more than
five (5) days after the commencement thereof, give notice to Lender in writing
of the occurrence of an Event of Default or of any event which, with the lapse
of time, the giving of notice or both, would constitute an Event of Default
hereunder.
 
10.14 Environmental Matters.  If any release or threatened release or other
disposal of Hazardous Substances shall occur or shall have occurred on any real
property or any other assets of the Credit Parties or Affiliate, the Credit
Parties shall cause the prompt containment and/or removal of such Hazardous
Substances and the remediation and/or operation of such real property or other
assets as necessary to comply with all Environmental Laws and to preserve the
value of such real property or other assets.  Without limiting the generality of
the foregoing, Credit Parties shall comply with any Federal or state judicial or
administrative order requiring the performance at any real property of the
Credit Parties of activities in response to the release or threatened release of
a Hazardous Substance.  To the extent that the transportation of Hazardous
Substances is permitted by this Agreement, the Credit Parties shall dispose of
such Hazardous Substances, or of any other wastes, only at licensed disposal
facilities operating in compliance with Environmental Laws.
 
10.15 Subsidiaries.  Any Subsidiary which is formed or acquired or otherwise
becomes a Subsidiary of the Credit Parties following the date hereof, within ten
(10) Business Days of such event, shall become an additional Credit Party
hereto, and the Credit Parties shall take any and all actions necessary or
advisable to cause said Subsidiary to execute a counterpart to this Agreement
and any and all other documents which the Lender shall require, including, but
not limited to, causing such party to execute those documents contained in
Section 3.4 hereof.
 
10.16 Reporting Status; Listing.  So long as this Agreement remains in effect,
and for so long as Lender owns, legally or beneficially, any of the Facility Fee
Shares or other shares of Common Stock, the Borrower shall: (i) file in a timely
manner all reports required to be filed under Principal Trading Market, and, to
provide a copy thereof to the Lender promptly after such filing, if requested;
(ii) if required by the rules and regulations of the Principal Trading Market,
promptly secure the listing of the Facility Fee Shares and any other shares of
the Borrower’s Common Stock issuable to Lender under any Loan Documents upon the
Principal Trading Market (subject to official notice of issuance) and, take all
reasonable action under its control to maintain the continued listing, quotation
and trading of its Common Stock on the Principal Trading Market, and the
Borrower shall comply in all respects with the Borrower’s reporting, filing and
other obligations under the bylaws or rules of the Principal Trading Market and
Governmental Authorities, as applicable. The Borrower shall promptly provide to
Lender copies of any notices it receives from the SEC or any Principal Trading
Market, to the extent any such notices could in any way have or be reasonably
expected to have a Material Adverse Effect.
 
 
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10.17 Rule 144.  With a view to making available to Lender the benefits of Rule
144 under the Securities Act (“Rule 144”), or any similar rule or regulation of
the SEC that may at any time permit Lender to sell the Facility Fee Shares or
other shares of Common Stock issuable to Lender under any Loan Documents to the
public without registration, the Borrower represents and warrants that: (i)
Borrower is, and has been for a period of at least ninety (90) days immediately
preceding the date hereof, subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act; (ii) Borrower has filed all required reports under
Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve (12)
months preceding the Closing Date (or for such shorter period that the Borrower
was required to file such reports); (iii) Borrower is not an issuer defined as a
“Shell Company” (as hereinafter defined); and (iv) if Borrower has, at any time,
been an issuer defined as a “Shell Company,” Borrower has: (A) not been an
issuer defined as a Shell Company for at least six (6) months prior to the
Closing Date; and (B) has satisfied the requirements of Rule 144(i) (including,
without limitation, the proper filing of “Form 10 information” at least six (6)
months prior to the Closing Date).  For the purposes hereof, the term “Shell
Company” shall mean an issuer that meets the description defined under Rule
144.  In addition, so long as Lender owns, legally or beneficially, any
securities of Borrower, Borrower shall, at its sole expense:
 
(a) Make, keep and ensure that adequate current public information with respect
to Borrower, as required in accordance with Rule 144, is publicly available;
 
(b) furnish to the Lender, promptly upon reasonable request: (A) a written
statement by Borrower that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act; and (b) such other
information as may be reasonably requested by Lender to permit the Lender to
sell any of the Facility Fee Shares or other shares of Common Stock acquired
hereunder or under the Note pursuant to Rule 144 without limitation or
restriction; and
 
(c) promptly at the request of Lender, give Borrower’s transfer agent (the
“Transfer Agent”) instructions to the effect that, upon the Transfer Agent’s
receipt from Lender of a certificate (a “Rule 144 Certificate”) certifying that
Lender’s holding period (as determined in accordance with the provisions of Rule
144) for any portion of the Facility Fee Shares or shares of Common Stock
issuable upon conversion of the Note which Lender proposes to sell (or any
portion of such shares which Lender is not presently selling, but for which
Lender desires to remove any restrictive legends applicable thereto) (the
“Securities Being Sold”) is not less than  the required holding period pursuant
to Rule 144, and receipt by the Transfer Agent of the “Rule 144 Opinion” (as
hereinafter defined) from Borrower or its counsel (or from Lender and its
counsel as permitted below), the Transfer Agent is to effect the transfer (or
issuance of a new certificate without restrictive legends, if applicable) of the
Securities Being Sold and issue to Lender or transferee(s) thereof one or more
stock certificates representing the transferred (or re-issued) Securities Being
Sold without any restrictive legend and without recording any restrictions on
the transferability of such shares on the Transfer Agent’s books and
records.  In this regard, upon Lender’s request, Borrower shall have an
affirmative obligation to cause its counsel to promptly issue to the Transfer
Agent a legal opinion providing that, based on the Rule 144 Certificate, the
Securities Being Sold may be sold pursuant to the provisions of Rule 144, even
in the absence of an effective registration statement, or re-issued without any
restrictive legends pursuant to the provisions of Rule 144, even in the absence
of an effective registration statement (the “Rule 144 Opinion”). If the Transfer
Agent requires any additional documentation in connection with any proposed
transfer (or re-issuance) by Lender of any Securities Being Sold, Borrower shall
promptly deliver or cause to be delivered to the Transfer Agent or to any other
Person, all such additional documentation as may be necessary to effectuate the
transfer (or re-issuance) of the Securities Being Sold and the issuance of an
unlegended certificate to any such Lender or any transferee thereof, all at
Borrower’s expense.  Any and all fees, charges or expenses, including, without
limitation, attorneys’ fees and costs, incurred by Lender in connection with
issuance of any such shares, or the removal of any restrictive legends thereon,
or the transfer of any such shares to any assignee of Lender, shall be paid by
Borrower, and if not paid by Borrower, the Lender may, but shall not be required
to, pay any such fees, charges or expenses, and the amount thereof, together
with interest thereon at the highest non-usurious rate permitted by law, from
the date of outlay, until paid in full, shall be due and payable by Borrower to
Lender immediately upon demand therefor, and all such amounts advanced by the
Lender shall be additional Obligations due under this Agreement and the Note and
secured under the Loan Documents.
 
 
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10.18 JPMorgan Chase Credit Line.  Pharmagen Laboratories, Inc. shall timely
make all payments to JPMorgan Chase as required pursuant to the documents
evidencing the JPMorgan Chase Credit Line.
 
11. FINANCIAL COVENANTS.
 
11.1 Revenue Covenant.
 
(a) For each calendar quarter while this Agreement remains in effect, Borrower
shall have sales revenues that are not less than seventy-five percent (75%) of
the sales revenues shown on the Borrower’s SEC filings for the immediately prior
quarter or fiscal year, as applicable.
 
(b) For each calendar year while this Agreement remains in effect, Borrower
shall have sales revenues that are greater than the sales revenues shown on the
prior year’s Financial Statements.
 
11.2 Loan to Value Ratio.  At all times following one-hundred twenty (120) days
of the Closing Date, the ratio of the Loan Commitment to the value of the
Collateral, such value to be based on the financial information and
documentation delivered by the Borrower to the Lender from time to time and to
be determined by the Lender in its sole discretion, shall be no more than 1.00
to 2.00.
 
12. EVENTS OF DEFAULT.
 
Borrower, without notice or demand of any kind, shall be in default under this
Agreement upon the occurrence of any of the following events (each an “Event of
Default”):
 
12.1 Nonpayment of Obligations.  Any amount due and owing on the Note or any of
the Obligations, whether by its terms or as otherwise provided herein, is not
paid on the date such amount is due.
 
12.2 Misrepresentation.  Any written warranty, representation, certificate or
statement of any Credit Party in this Agreement, the Loan Documents or any other
agreement with Lender shall be false or misleading in any material respect when
made or deemed made.
 
12.3 Nonperformance.  Any failure by a Credit Party to perform or default in the
performance of any covenant, condition or agreement contained in this Agreement
(not otherwise addressed in this Article 11), which failure to perform or
default in performance continues for a period of thirty (30) days after
Borrower’s officers or directors receive notice or knowledge from any source of
such failure to perform or default in performance (provided that if the failure
to perform or default in performance is not capable of being cured, in Lender’s
sole discretion, then the cure period set forth herein shall not be applicable
and the failure or default shall be an immediate Event of Default hereunder).
 
 
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12.4 Default under Loan Documents.  Any failure to perform or default in the
performance by a Credit Party that continues after applicable grace and cure
periods under any covenant, condition or agreement contained in any of the other
Loan Documents or any other agreement with Lender, all of which covenants,
conditions and agreements are hereby incorporated in this Agreement by express
reference.
 
12.5 Default under Other Obligations.  Any default by Borrower in the payment of
principal, interest or any other sum for any other obligation beyond any period
of grace provided with respect thereto or in the performance of any, other term,
condition or covenant contained in any agreement (including, but not limited to,
any capital or operating lease or any agreement in connection with the deferred
purchase price of property), the effect of which default is to cause or permit
the holder of such obligation (or the other party to such other agreement) to
cause such obligation or agreement to become due prior to its stated maturity,
to terminate such other agreement, or to otherwise modify or adversely affect
such obligation or agreement in a manner that could have a Material Adverse
Effect on Borrower.
 
12.6 Assignment for Creditors.  Any Credit Party makes an assignment for the
benefit of creditors, fails to pay, or admits in writing its inability to pay
its debts as they mature; or if a trustee of any substantial part of the assets
of such Credit Party is applied for or appointed, and in the case of such
trustee being appointed in a proceeding brought against such Credit Party, such
Credit Party, by any action or failure to act indicates its approval of, consent
to, or acquiescence in such appointment and such appointment is not vacated,
stayed on appeal or otherwise shall not have ceased to continue in effect within
sixty (60) days after the date of such appointment.
 
12.7 Bankruptcy.  Any proceeding involving a Credit Party, is commenced by or
against a Credit Party under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law or statute of
the federal government or any state government, and in the case of any such
proceeding being instituted against a Credit Party: (i) the Credit Party, by any
action or failure to act, indicates its approval of, consent to or acquiescence
therein; or (ii) an order shall be entered approving the petition in such
proceedings and such order is not vacated, stayed on appeal or otherwise shall
not have ceased to continue in effect within sixty (60) days after the entry
thereof.
 
12.8 Judgments.  The entry of any judgment, decree, levy, attachment,
garnishment or other process, or the filing of any Lien against the property of
a Credit Party for an amount in excess of $50,000 and which is not fully covered
by insurance and such judgment or other process would have a Material Adverse
Effect on the ability of the Credit Party to perform under this Agreement or
under Loan Documents, as determined by Lender in its sole discretion, unless
such judgment or other process shall have been, within sixty (60) days from the
entry thereof: (i) bonded over to the satisfaction of Lender and appealed; (ii)
vacated; or (iii) discharged.
 
 
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12.9 Material Adverse Effect.  A Material Adverse Effect shall occur.
 
12.10 Change in Control.  Except as permitted under this Agreement, any Change
in Control shall occur; provided, however, a Change in Control shall not
constitute an Event of Default if: (i) it arises out of an event or circumstance
beyond the reasonable control of Borrower (for example, but not by way of
limitation, a transfer of ownership interest due to death or incapacity); and
(ii) within sixty (60) days after such Change in Control, Borrower provides
Lender with information concerning the identity and qualifications of the
individual or individuals who will be in Control, and such individual or
individuals shall be acceptable to Lender, in Lender’s sole discretion.
 
12.11 Collateral Impairment.  The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against, any
of the Collateral or any collateral under a separate security agreement securing
any of the Obligations, and such judgment or other process shall not have been,
within thirty (30) days from the entry thereof: (i) bonded over to the
satisfaction of Lender and appealed; (ii) vacated; or (iii) discharged, or the
loss, theft, destruction, seizure or forfeiture, or the occurrence of any
material deterioration or impairment of any of the Collateral or any of the
Collateral under any security agreement securing any of the Obligations, or any
material decline or depreciation in the value or market price thereof (whether
actual or reasonably anticipated), which causes the Collateral, in the sole
opinion of Lender acting in good faith, to become unsatisfactory as to value or
character, or which causes Lender to reasonably believe that it is insecure and
that the likelihood for repayment of the Obligations is or will soon be
impaired, time being of the essence.  The cause of such deterioration,
impairment, decline or depreciation shall include, but is not limited to, the
failure by the Credit Parties to do any act deemed reasonably necessary by
Lender to preserve and maintain the value and collectability of the Collateral.
 
12.12 Adverse Change in Financial Condition. The determination in good faith by
the Lender that a material adverse change has occurred in the financial
condition or operations of any Credit Party, or the Collateral, which change
could have a Material Adverse Effect on the prospect for the Borrower to fully
and punctually realize the full benefits conferred on Lender by this Agreement,
or the prospect of repayment of all Obligations.
 
12.13 Adverse Change in Value of Collateral. The determination in good faith by
the Lender that the security for the Obligations is or has become inadequate.
 
12.14 Prospect of Payment or Performance. The determination in good faith by
Lender that the prospect for payment or performance of any of the Obligations is
impaired for any reason.
 
13. REMEDIES.
 
Upon the occurrence and during the continuance of an Event of Default, Lender
shall have all rights, powers and remedies set forth in the Loan Documents, in
any written agreement or instrument (other than this Agreement or the Loan
Documents) relating to any of the Obligations or any security therefor, or as
otherwise provided at law or in equity.  Without limiting the generality of the
foregoing, Lender may, at its option, upon the occurrence and during the
continuance of an Event of Default, declare its commitments to Borrower to be
terminated and all Obligations to be immediately due and payable; provided,
however, that upon the occurrence of an Event of Default under either Section
12.6, “Assignment for Creditors”, or Section 12.7, “Bankruptcy”, all commitments
of Lender to Borrower shall immediately terminate and all Obligations shall be
automatically due and payable, all without demand, notice or further action of
any kind required on the part of Lender.  The Credit Parties hereby waive any
and all presentment, demand, notice of dishonor, protest, and all other notices
and demands in connection with the enforcement of Lender’s rights under the Loan
Documents, and hereby consent to, and waive notice of release, with or without
consideration, of the Credit Parties or of any Collateral, notwithstanding
anything contained herein or in the Loan Documents to the contrary.
 
 
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No Event of Default shall be waived by Lender, except and unless such waiver is
in writing and signed by Lender.  No failure or delay on the part of Lender in
exercising any right, power or remedy hereunder shall operate as a waiver of the
exercise of the same or any other right at any other time; nor shall any single
or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder.  There shall be no obligation on the part of Lender to exercise any
remedy available to Lender in any order. The remedies provided for herein are
cumulative and not exclusive of any remedies provided at law or in equity.  Each
Credit Party agrees that in the event that a Credit Party fails to perform,
observe or discharge any of its Obligations or liabilities under this Agreement,
the Note, and other Loan Documents, or any other agreements with Lender, no
remedy of law will provide adequate relief to Lender, and further agrees that
Lender shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
 
Upon the occurrence of an Event of Default, in addition to any other rights or
remedies the Lender may have under the Loan Documents or applicable law, the
Lender shall have the right, but not the obligation, to cause the Confession of
Judgment to be entered into a court of competent jurisdiction, provided,
however, that the Lender shall give the Borrower five (5) days written notice of
its intent to file the Confession of Judgment, during which period the Borrower
shall have the opportunity to cure the applicable defaults.
 
14. MISCELLANEOUS.
 
14.1 Obligations Absolute.  None of the following shall affect the Obligations
of the Credit Parties to Lender under this Agreement or Lender’s rights with
respect to the Collateral:
 
(a) acceptance or retention by Lender of other property or any interest in
property as security for the Obligations;
 
(b) release by Lender of all or any part of the Collateral or of any party
liable with respect to the Obligations (other than Borrower);
 
(c) release, extension, renewal, modification or substitution by Lender of the
Note, or any note evidencing any of the Obligations; or
 
(d) failure of Lender to resort to any other security or to pursue the Credit
Parties or any other obligor liable for any of the Obligations before resorting
to remedies against the Collateral.
 
14.2 Entire Agreement.  This Agreement and the other Loan Documents: (i) are
valid, binding and enforceable against the Credit Parties and Lender in
accordance with its provisions and no conditions exist as to their legal
effectiveness; (ii) constitute the entire agreement between the parties; and
(iii) are the final expression of the intentions of the Credit Parties and
Lender.  No promises, either expressed or implied, exist between the Credit
Parties and Lender, unless contained herein or in the Loan Documents.  This
Agreement and the Loan Documents supersede all negotiations, representations,
warranties, commitments, offers, contracts (of any kind or nature, whether oral
or written) prior to or contemporaneous with the execution hereof.
 
14.3 Amendments; Waivers.  No amendment, modification, termination, discharge or
waiver of any provision of this Agreement or of the Loan Documents, or consent
to any departure by the Credit Parties therefrom, shall in any event be
effective unless the same shall be in writing and signed by Lender, and then
such waiver or consent shall be effective only for the specific purpose for
which given.
 
14.4 WAIVER OF DEFENSES. THE CREDIT PARTIES WAIVE EVERY PRESENT AND FUTURE
DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE CREDIT PARTIES MAY
HAVE AS OF THE DATE HEREOF TO ANY ACTION BY LENDER IN ENFORCING THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.  THE CREDIT PARTIES WAIVE ANY IMPLIED COVENANT OF
GOOD FAITH AND RATIFY AND CONFIRM WHATEVER LENDER MAY DO PURSUANT TO THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AS OF THE DATE OF THIS
AGREEMENT.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER GRANTING ANY
FINANCIAL ACCOMMODATION TO BORROWER.
 
 
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14.5 WAIVER OF JURY TRIAL. LENDER AND EACH OF THE CREDIT PARTIES, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY
WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS AGREEMENT, THE NOTE, ANY LOAN DOCUMENT OR ANY OF THE
OBLIGATIONS, THE COLLATERAL, OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR
COURSE OF DEALING IN WHICH LENDER AND THE CREDIT PARTIES ARE ADVERSE
PARTIES.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER GRANTING ANY
FINANCIAL ACCOMMODATION TO BORROWER.
 
14.6 MANDATORY FORUM SELECTION.  ANY DISPUTE ARISING UNDER, RELATING TO, OR IN
CONNECTION WITH THE AGREEMENT OR RELATED TO ANY MATTER WHICH IS THE SUBJECT OF
OR INCIDENTAL TO THE AGREEMENT (WHETHER OR NOT SUCH CLAIM IS BASED UPON BREACH
OF CONTRACT OR TORT) SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION AND VENUE OF
THE STATE AND/OR FEDERAL COURTS LOCATED IN BROWARD COUNTY, FLORIDA.  THIS
PROVISION IS INTENDED TO BE A “MANDATORY” FORUM SELECTION CLAUSE AND GOVERNED BY
AND INTERPRETED CONSISTENT WITH FLORIDA LAW.
 
14.7 Assignability. Lender may at any time assign Lender’s rights in this
Agreement, the Note, any Loan Document, the Obligations, or any part thereof and
transfer Lender’s rights in any or all of the Collateral, and Lender thereafter
shall be relieved from all liability with respect to such Collateral.  In
addition, Lender may at any time sell one or more participations in the Loans.
The Credit Parties may not sell or assign this Agreement, any Loan Document or
any other agreement with Lender, or any portion thereof, either voluntarily or
by operation of law, nor delegate any of its duties of obligations hereunder or
thereunder, without the prior written consent of Lender, which consent may be
withheld in Lender’s sole and absolute discretion.  This Agreement shall be
binding upon Lender and the Credit Parties and their respective legal
representatives, successors and permitted assigns.  All references herein to
Borrower, Guarantors or Credit Party shall be deemed to include any successors,
whether immediate or remote.  In the case of a joint venture or partnership, the
term “Borrower”, “Guarantors” or “Credit Party” shall be deemed to include all
joint venturers or partners thereof, who shall be jointly and severally liable
hereunder.
 
14.8 Confidentiality. Each of the parties hereto shall keep confidential any
information obtained from the other party (except information publicly available
or in such party’s domain prior to disclosure of such information from the other
party hereto, and except as required by applicable laws) and shall promptly
return to the other party all schedules, documents, instruments, work papers and
other written information without retaining copies thereof, previously furnished
by it as a result of this Agreement or in connection herewith.
 
14.9 Publicity.  Lender shall have the right to approve, before issuance, any
press release or any other public statement with respect to the transactions
contemplated hereby; provided, however, that Borrower shall be entitled, without
the prior approval of Lender, to issue any press release or other public
disclosure with respect to such transactions required under applicable
securities or other laws or regulations.  Notwithstanding the foregoing,
Borrower shall use their best efforts to consult Lender in connection with any
such press release or other public disclosure prior to its release and Lender
shall be provided with a copy thereof upon release thereof.  Borrower shall have
the right to review, before issuance, any press release of Lender with respect
to the transactions contemplated hereby.
 
 
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14.10 Binding Effect.  This Agreement shall become effective upon execution by
Borrower, the Guarantors and Lender.
 
14.11 Governing Law.  Except in the case of the Mandatory Forum Selection clause
set forth in Section 14.6 hereof, this Agreement, the Loan Documents and the
Note shall be shall be construed and interpreted in accordance with the laws of
the State of Nevada without regard to the principles of conflicts of laws.
 
14.12 Enforceability.  Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by, unenforceable or
invalid under any jurisdiction, such provision shall as to such jurisdiction, be
severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
 
14.13 Survival of Borrower’s Representations.  All covenants, agreements,
representations and warranties made by the Credit Parties herein shall,
notwithstanding any investigation by Lender, be deemed material and relied upon
by Lender and shall survive the making and execution of this Agreement and the
Loan Documents and the issuance of the Note and the Facility Fee Shares, and
shall be deemed to be continuing representations and warranties until such time
as the Credit Parties have fulfilled all of its Obligations to Lender, and
Lender has been paid in full. Lender, in extending financial accommodations to
Borrower, is expressly acting and relying on the aforesaid representations and
warranties.
 
14.14 Extensions of Lender’s Commitment and the Note.  This Agreement shall
secure and govern the terms of any extensions or renewals of Lender’s commitment
hereunder and the Note pursuant to the execution of any modification, extension
or renewal note executed by Borrower and accepted by Lender in its sole and
absolute discretion in substitution for the Note.
 
14.15 Time of Essence.  Time is of the essence in making payments of all amounts
due Lender under this Agreement and in the performance and observance by the
Credit Parties of each covenant, agreement, provision and term of this
Agreement.
 
14.16 Counterparts.  This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
 
14.17 Electronic Signatures. Lender is hereby authorized to rely upon and accept
as an original any Loan Documents or other communication which is sent to Lender
by facsimile, telegraphic or other electronic transmission (each, a
“Communication”) which Lender in good faith believes has been signed by the
Credit Parties and has been delivered to Lender by a properly authorized
representative of the Credit Parties, whether or not that is in fact the
case.  Notwithstanding the foregoing, Lender shall not be obligated to accept
any such Communication as an original and may in any instance require that an
original document be submitted to Lender in lieu of, or in addition to, any such
Communication.
 
 
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14.18 Notices.  Any notices, consents, waivers, or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and in each case properly addressed to the party to receive the same in
accordance with the information below, and will be deemed to have been
delivered: (i) if mailed by certified mail, return receipt requested, postage
prepaid and properly addressed to the address below, then three (3) business
days after deposit of same in a regularly maintained U.S. Mail receptacle; or
(ii) if mailed by Federal Express, UPS or other nationally recognized overnight
courier service, next business morning delivery, then one (1) business day after
deposit of same in a regularly maintained receptacle of such overnight courier;
or (iii) if hand delivered, then upon hand delivery thereof to the address
indicated on or prior to 5:00 p.m., EST, on a Business Day.  Any notice hand
delivered after 5:00 p.m., EST, shall be deemed delivered on the following
Business Day.  Notwithstanding the foregoing, notice, consents, waivers or other
communications referred to in this Agreement may be sent by facsimile, e-mail,
or other method of delivery, but shall be deemed to have been delivered only
when the sending party has confirmed (by reply e-mail or some other form of
written confirmation) that the notice has been received by the other party.  The
addresses and facsimile numbers for such communications shall be as set forth
below, unless such address or information is changed by a notice conforming to
the requirements hereof.  No notice to or demand on the Credit Parties in any
case shall entitle the Credit Parties to any other or further notice or demand
in similar or other circumstances:
 

  If to the Credit Parties:    9337 Fraser Avenue
Silver Spring, MD 20910
Attention:  Mackie Barch
Facsimile: (240) 235-4370
          With a copy to:   The Lebrecht Group, APLC   (which shall not
constitute notice)   406 W. South  Jordan Parkway, Suite 160
South Jordan, UT  84095
Attention: Brian A. Lebrecht, Esq.
Facsimile: (801) 983-4958
          If to Lender:    TCA Global Credit Master Fund, LP
1404 Rodman Street
Hollywood, FL 33020
Attention: Robert Press
Facsimile: (786) 323-1651
          With a copy to:   Lucosky Brookman LLP   (which shall not constitute
notice)   33 Wood Avenue South, 6th Floor
Iselin, NJ 08830
Attention: Seth A. Brookman, Esq.
Facsimile: (732) 395-4401

 
 
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14.19 Indemnification.  Each Credit Party agrees to defend, protect, indemnify
and hold harmless Lender and all of its officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (each, a “Lender Indemnitee” and
collectively, the “Lender Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and distributions of any kind or nature (including,
without limitation, the disbursements and the reasonable fees of counsel for
each Lender Indemnitee thereto), which may be imposed on, incurred by, or
asserted against, any Lender Indemnitee (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations, including, without limitation, securities, Environmental Laws and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any of the Loan Documents, or any act, event or transaction related
or attendant thereto, the preparation, execution and delivery of this Agreement
and the Loan Documents, including, but not limited to, the making or issuance
and management of the Loans, the use or intended use of the proceeds of the
Loans, the enforcement of Lender’s rights and remedies under this Agreement, the
Loan Documents, the Note, any other instruments and documents delivered
hereunder, or under any other agreement between any Credit Party and Lender;
provided, however, that the Credit Parties shall not have any obligations
hereunder to any Lender Indemnitee with respect to matters caused by or
resulting from the willful misconduct or gross negligence of such Lender
Indemnitee.  To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, the Credit Parties shall satisfy such undertaking to the maximum extent
permitted by applicable law.  Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Lender
Indemnitee on demand, and, failing prompt payment, shall, together with interest
thereon at the Default Rate from the date incurred by each Lender Indemnitee
until paid by Borrower, be added to the Obligations of the Credit Parties and be
secured by the Collateral.  The provisions of this Section shall survive the
satisfaction and payment of the other Obligations and the termination of this
Agreement.
 
14.20 Release.  In consideration of the mutual promises and covenants made
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound hereby, the
Credit Parties hereby agree to fully, finally and forever release and forever
discharge and covenant not to sue Lender, and/or and its parent companies,
subsidiaries, affiliates, divisions, and their respective attorneys, officers,
directors, agents, shareholders, members, employees, predecessors, successors,
assigns, personal representatives, partners, heirs and executors from any and
all debts, fees, attorneys’ fees, liens, costs, expenses, damages, sums of
money, accounts, bonds, bills, covenants, promises, judgments, charges, demands,
claims, causes of action, suits, liabilities, expenses, obligations or contracts
of any kind whatsoever, whether in law or in equity, whether asserted or
unasserted, whether known or unknown, fixed or contingent, under statute or
otherwise, from the beginning of time through the Closing Date, including,
without  limiting the generality of the foregoing, any and all claims relating
to or arising out of any financing transactions, credit facilities, debentures,
security agreements, and other agreements including, without limitation, each of
the Loan Documents, entered into by the Credit Parties with Lender and any and
all claims that the Credit Parties does not know or suspect to exist, whether
through ignorance, oversight, error, negligence, or otherwise, and which, if
known, would materially affect their decision to enter into this Agreement or
the related Loan Documents.
 
 
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14.21 Interpretation.  If any provision in this Agreement requires judicial or
similar interpretation, the judicial or other such body interpreting or
construing such provision shall not apply the assumption that the terms hereof
shall be more strictly construed against one party because of the rule that an
instrument must be construed more strictly against the party which itself or
through its agents prepared the same.  The parties hereby agree that all parties
and their agents have participated in the preparation hereof equally.
 
14.22 Compliance with Federal Law.  The Credit Parties shall: (i) ensure that no
Person who owns a controlling interest in or otherwise controls a Credit Party
is or shall be listed on the Specially Designated Nationals and Blocked Person
List or other similar lists maintained by the Office of Foreign Assets Control
(“OFAC”), the Department of the Treasury, included in any Executive Orders or
any other similar lists from any government, foreign or national; (ii) not use
or permit the use of the proceeds of the Loans to violate any of the foreign
asset control regulations of OFAC or any enabling statute or Executive Order
relating thereto, or any other similar national or foreign governmental
regulations; and (iii) comply, and cause each of such Credit Party’s
Subsidiaries to comply, with all applicable Lender Secrecy Act (“BSA”) laws and
regulations, as amended.  As required by federal law and Lender’s policies and
practices, Lender may need to obtain, verify and record certain customer
identification information and documentation in connection with opening or
maintaining accounts or establishing or continuing to provide services.
 
14.23 Non-U.S. Status. THE LENDER IS A NON-U.S. PERSON AS THAT TERM IS DEFINED
IN THE UNITED STATES INTERNAL REVENUE CODE. IT IS HEREBY AGREED AND UNDERSTOOD
THAT THE OBLIGATIONS HEREUNDER MAY BE SOLD OR RESOLD ONLY TO NON-U.S. PERSONS.
THE INTEREST PAYABLE HEREUNDER IS PAYABLE ONLY OUTSIDE THE UNITED STATES. ANY
U.S. PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES INCOME TAX LAW.
 
[ signature page follows ]
 
 
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IN WITNESS WHEREOF, the Borrower and the Lender have executed this Credit
Agreement as of the date first above written.
 
 
BORROWER:

PHARMAGEN, INC.

By:          /s/ Mackie Barch
Name:     Mackie Barch
Title:       Chief Executive Officer

 
LENDER:

TCA GLOBAL CREDIT MASTER FUND, LP

By:          TCA Global Credit Fund GP, Ltd.
Its:          General Partner

By:          /s/ Robert Press
Name:     Robert Press
Title:       Director
 
 
 
[ signature page 1 of 2 ]
 
 
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CONSENT AND AGREEMENT
 
The undersigned, referred to in the foregoing senior secured credit facility
agreement as a guarantor, hereby consents and agrees to said senior
secured  credit facility agreement and to the payment of the amounts
contemplated therein, documents contemplated thereby and to the provisions
contained therein relating to conditions to be fulfilled and obligations to be
performed by it pursuant to or in connection with said senior secured  credit
facility agreement to the same extent as if the undersigned were a party to said
senior secured  credit facility agreement.
 
GUARANTOR:
 

PHARMAGEN DISTRIBUTION, LLC
 
 
By:          /s/ Mackie Barch
Name:     Mackie Barch
Title:       Chief Executive Officer
 
 
PHARMAGEN LABORATORIES, INC.
 
 
By:          /s/ Mackie Barch
Name:     Mackie Barch
Title:       Chief Executive Officer
 
 
PHARMAGEN NUTRICEUTICALS, INC.
 
 
By:          /s/ Mackie Barch
Name:     Mackie Barch
Title:       Chief Executive Officer
 

 
[ signature page 2 of 2 ]
 
 
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INDEX OF EXHIBITS
 

Exhibit A Form of Confession of Judgment Exhibit B Form of Guaranty Exhibit C
Form of Irrevocable Transfer Agent Instructions Exhibit D Form of Note Exhibit
E-1 Form of Security Agreement (Borrower) Exhibit E-2 Form of Security Agreement
(Subsidiary/Guarantor) Exhibit F Form of Validity Guaranty             INDEX OF
SCHEDULES         Schedule 2.1 Payment Schedule Schedule 7.1 Subsidiaries
Schedule 7.4 Outstanding Securities Schedule 7.10 Financial Statements Schedule
7.27 Bank Accounts and Deposit Accounts Schedule 7.28 Places of Business

 

 
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Exhibit A

Form of Confession of Judgment
 
 
 
 
 
57

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Exhibit B

Form of Guarantee
 
 
 
 
 
58

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Exhibit C

Form of Irrevocable Transfer Agent Instructions
 
 
 
 
 
59

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Exhibit D

Form of Note
 
 
 
 
 
60

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 Exhibit E-1
 
Form of Security Agreement (Borrower)
 
 
 
 
 
 
61

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Exhibit E-2
 
Form of Security Agreement (Subsidiary)
 
 

 
 
 
62

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Exhibit F

Form of Validity Guarantee
 
 
 
 
 
 
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Schedule 2.1

Payment Schedule

Days
 
Date
 
Payment #
   
Principle Bal
   
interest pmt
   
principal pmt
   
Total Int
   
Premium
   
Total payment
     
29-Mar-13
                                          75  
14-Jun-13
              $ 15,000.00           $ 15,000.00           $ 15,000.00      
14-Jul-13
  1     $ 600,000.00     $ 6,000.00     $ 47,309.27     $ 21,000.00     $
3,500.00     $ 71,809.27      
14-Aug-13
  2     $ 552,690.73     $ 5,526.91     $ 47,782.37     $ 26,526.91     $
3,500.00     $ 128,618.55      
14-Sep-13
  3     $ 504,908.36     $ 5,049.08     $ 48,260.19     $ 31,575.99     $
3,500.00     $ 185,427.82      
14-Oct-13
  4     $ 456,648.17     $ 4,566.48     $ 48,742.79     $ 36,142.47     $
3,500.00     $ 242,237.09      
14-Nov-13
  5     $ 407,905.38     $ 4,079.05     $ 49,230.22     $ 40,221.53     $
3,500.00     $ 299,046.37      
14-Dec-13
  6     $ 358,675.16     $ 3,586.75     $ 49,722.52     $ 43,808.28     $
3,500.00     $ 355,855.64      
14-Jan-14
  7     $ 308,952.64     $ 3,089.53     $ 50,219.75     $ 46,897.80     $
3,500.00     $ 412,664.91      
14-Feb-14
  8     $ 258,732.89     $ 2,587.33     $ 50,721.94     $ 49,485.13     $
3,500.00     $ 469,474.19      
14-Mar-14
  9     $ 208,010.95     $ 2,080.11     $ 51,229.16     $ 51,565.24     $
3,500.00     $ 526,283.46      
14-Apr-14
  10     $ 156,781.78     $ 1,567.82     $ 51,741.46     $ 53,133.06     $
3,500.00     $ 583,092.73      
14-May-14
  11     $ 105,040.33     $ 1,050.40     $ 52,258.87     $ 54,183.46     $
3,500.00     $ 639,902.01      
14-Jun-14
  12     $ 52,781.46     $ 527.81     $ 52,781.46     $ 54,711.28     $ 3,500.00
    $ 696,711.28  

 
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Schedule 7.1

Subsidiaries
 
Pharmagen Distribution, LLC
Pharmagen Laboratories, Inc.
Pharmagen Nutriceuticals, Inc.

 
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Schedule 7.4

Outstanding Securities
 
Convertible debt

The Company issued $1,050,000 of convertible debentures to Lysander Overseas
Inc.  It includes various maturities from March 2014 to May 2014 with interest
accruing at a rate of 10% annually.  Specifically, $775,000 was issued in March
2012 and $225,000 was issued in May 2012.  The investor is entitled to convert
into common stock at a conversion price equal to 80% of the average closing
price of the common stock.  The average closing price is the ten consecutive
trading days prior to conversion.  In the event the stock trades above $0.30 for
a period of ten consecutive trading days, the company may at its option convert
all or part of the convertible debt into common stock.  The debt is unsecured.

 
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Schedule 7.10
 
Financial Statements
 

 
Incorporated by reference from SEC Documents
 

 
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 Schedule 7.27
 
Bank Accounts and Deposit Accounts
 
Bank:  Eaglebank
 
Account Name:  Amerisure Business Checking
 
Routing Number:  055003298
 
Account Number:  0200100816
 

 
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Schedule 7.28
 
Places of Business
 
9337 Fraser Avenue
Silver Spring, MD 20910

2413 Linden Lane
Silver Spring, MD 20910

30 Buxton Farms Road
Stamford, CT 06905

 
 
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