Document:

exv10w1

Exhibit 10.1

February 11, 2011

Mark Libratore, President

Liberator Medical Holdings, Inc.

Liberator Medical Supply, Inc.

2979 SE Gran Park Way

Stuart, Florida 34997

Re:    $8,500,000.00 Committed Line of Credit

Dear Mr. Libratore:

     We are pleased to inform you that PNC Bank, National Association (the “Bank”), has approved
your request for a committed line of credit to Liberator Medical Holdings, Inc and Liberator
Medical Supply, Inc. (collectively, the “Borrower”). We look forward to this opportunity to help
you meet the financing needs of your business. All the details regarding your line of credit are
outlined in the following sections of this letter.

1. Facility and Use of Proceeds. This is a committed revolving line of credit under which
the Borrower may request and the Bank, subject to the terms and conditions of this letter, will
make advances to the Borrower from time to time until the Expiration Date, in an amount in the
aggregate at any time outstanding not to exceed $8,500,000.00 (the “Line of Credit” or the “Loan”).
The “Expiration Date” means February 11, 2013, or such later date as may be designated by the
Bank by written notice to the Borrower. Advances under the Line of Credit will be used for working
capital or other general business purposes of the Borrower.

     The availability of advances under the Line of Credit will be subject to a borrowing base
formula and other provisions as set forth in a Borrowing Base Rider dated on or about the date of
this Letter Agreement between the Borrower and the Bank, the terms of which are incorporated herein
by reference (the “Borrowing Base Rider”). At no time shall the sum of outstanding advances under
the Line of Credit exceed the Borrowing Base (as defined in the Borrowing Base Rider). Pursuant to
the Borrowing Base Rider, the Borrower will be required to deliver periodic Borrowing Base
Certificates, reporting on its accounts and inventory in accordance with defined eligibility
standards, as a condition to advances under the Line of Credit.

2. Note. The obligation of the Borrower to repay advances under the Line of Credit shall
be evidenced by a promissory note (the “Note”) in form and content satisfactory to the Bank.

     This letter (the “Letter Agreement”), the Note and the other agreements and documents executed
and/or delivered pursuant hereto, as each may be amended, modified, extended or renewed

Form 7A — Multistate Rev. 1/02

 

 

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from time to time, will constitute the “Loan Documents.” Capitalized terms not defined herein
shall have the meaning ascribed to them in the Loan Documents.

3. Interest Rate. Interest on the unpaid balance of the Line of Credit advances will be
charged at the rates, and be payable on the dates and times, set forth in the Note.

4. Repayment. Subject to the terms and conditions of this Letter Agreement, the Borrower
may borrow, repay and reborrow under the Line of Credit until the Expiration Date, on which date
the outstanding principal balance and any accrued but unpaid interest shall be due and payable.
Interest will be due and payable as set forth in the Note, and will be computed on the basis of a
year of 360 days and paid on the actual number of days that principal is outstanding.

5. Security. The Borrower must cause or has previously caused the following to be executed
and delivered to the Bank in form and content satisfactory to the Bank as security for the Loan:

     (a) guaranty and suretyship agreements, under which Practica Medical Manufacturing, Inc.,
Liberator Health and Education Services, Inc. and Liberator Health and Wellness, Inc. (individually
or collectively, the “Guarantor”) will unconditionally jointly and severally guarantee the due and
punctual payment of all indebtedness owed to the Bank by the Borrower.

     (b) a security agreement granting the Bank a first priority perfected lien on the Borrower’s
existing and future assets, wherever located, as more fully described in the security agreement.
If letter of credit rights have been assigned to the Bank, a consent to the assignment must be
executed by the issuer of the applicable letter(s) of credit.

     If all or any portion of the tangible collateral is located on property which is not owned by
the Borrower or which is subject to a mortgage in favor of another lender, the Borrower will
deliver to the Bank a Landlord’s or Mortgagee’s Waiver, as applicable, for each such location, each
of which shall be acceptable in form and content to the Bank.

     Hazard insurance must be maintained on all inventory, equipment and real property securing the
Loan in such amounts and with such coverages as are acceptable to the Bank, containing a standard
lender loss payable or mortgagee clause in favor of the Bank.

     The Loan will be cross-collateralized and cross-defaulted with all other present and future
Obligations (as defined in the Loan Documents) of the Borrower to the Bank.

6. Covenants. Unless compliance is waived in writing by the Bank, until payment in full of
the Loan and termination of the commitment for the Line of Credit:

     (a) The Borrower will promptly submit to the Bank such information as the Bank may reasonably
request relating to the Borrower’s affairs (including but not limited to annual Financial

 

 

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Statements (as hereinafter defined) and tax returns for the Borrower) and/or any security for the
Loan.

     (b) Neither the Borrower nor the Guarantor will make or permit any change in its form of
organization, the nature of its business as carried on as of the date of this Letter Agreement or
in its senior management or equity ownership.

     (c) The Borrower will notify the Bank in writing of the occurrence of any Event of Default or
an act or condition which, with the passage of time, the giving of notice or both might become an
Event of Default.

     (d) The Borrower will comply with the financial and other covenants included in Exhibit “A”
hereto.

7. Representations and Warranties. To induce the Bank to extend the Loan and upon the
making of each advance to the Borrower under the Line of Credit, the Borrower represents and
warrants as follows:

     (a) The Borrower’s latest Financial Statements provided to the Bank are true, complete and
accurate in all material respects and fairly present the financial condition, assets and
liabilities, whether accrued, absolute, contingent or otherwise, and the results of the Borrower’s
operations for the period specified therein. The Borrower’s Financial Statements have been
prepared in accordance with generally accepted accounting principles consistently applied from
period to period subject, in the case of interim statements, to normal year-end adjustments. Since
the date of the latest Financial Statements provided to the Bank, the Borrower has not suffered any
damage, destruction or loss which has materially adversely affected its business, assets,
operations, financial condition or results of operations.

     (b) There are no actions, suits, proceedings or governmental investigations pending or, to the
knowledge of the Borrower, threatened against the Borrower which could result in a material adverse
change in its business, assets, operations, financial condition or results of operations and there
is no basis known to the Borrower or its officers, directors or shareholders for any such action,
suit, proceedings or investigation.

     (c) The Borrower has filed all returns and reports that are required to be filed by it in
connection with any federal, state or local tax, duty or charge levied, assessed or imposed upon
the Borrower or its property, including unemployment, social security and similar taxes and all of
such taxes have been either paid or adequate reserve or other provision has been made therefor.

     (d) The Borrower is duly organized, validly existing and in good standing under the laws of
the state of its incorporation or organization and has the power and authority to own and operate
its assets and to conduct its business as now or proposed to be carried on, and is duly qualified,

 

 

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licensed and in good standing to do business in all jurisdictions where its ownership of property
or the nature of its business requires such qualification or licensing.

     (e) The Borrower has full power and authority to enter into the transactions provided for in
this Letter Agreement and has been duly authorized to do so by all necessary and appropriate action
and when executed and delivered by the Borrower, this Letter Agreement and the other Loan Documents
will constitute the legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their terms.

     (f) There does not exist any default or violation by the Borrower of or under any of the
terms, conditions or obligations of: (i) its organizational documents; (ii) any indenture,
mortgage, deed of trust, franchise, permit, contract, agreement, or other instrument to which it is
a party or by which it is bound; or (iii) any law, regulation, ruling, order, injunction, decree,
condition or other requirement applicable to or imposed upon the Borrower by any law or by any
governmental authority, court or agency.

8. Fees. On the date of the Note, the Borrower shall pay to the Bank a fee of $42,250.00.

9. Expenses. The Borrower will reimburse the Bank for the Bank’s out-of-pocket expenses
incurred or to be incurred at any time in conducting UCC, title and other public record searches,
and in filing and recording documents in the public records to perfect the Bank’s liens and
security interests. The Borrower shall also reimburse the Bank for the Bank’s expenses (including
the reasonable fees and expenses of the Bank’s outside and in-house counsel) in documenting and
closing this transaction, in connection with any amendments, modifications or renewals of the Loan,
and in connection with the collection of all of the Borrower’s Obligations to the Bank, including
but not limited to enforcement actions relating to the Loan.

10. Depository. The Borrower will establish and maintain at the Bank the Borrower’s
primary depository accounts.

11. Additional Provisions. Before the first advance under the Loan, the Borrower shall
execute and deliver to the Bank the Note and the other required Loan Documents and such other
instruments and documents as the Bank may reasonably request, such as certified resolutions,
incumbency certificates or other evidence of authority. The Bank will not be obligated to make any
advance under the Line of Credit if any Event of Default or event which with the passage of time,
provision of notice or both would constitute an Event of Default shall have occurred and be
continuing.

     Prior to execution of the final Loan Documents, the Bank may terminate this Letter Agreement
if a material adverse change occurs with respect to the Borrower, the Guarantor, any collateral for
the Loan or any other person or entity connected in any way with the Loan, or if the Borrower fails
to comply with any of the terms and conditions of this Letter Agreement, or if the Bank reasonably
determines that any of the conditions cannot be met.

 

 

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     This Letter Agreement is governed by the laws of the State of Florida. No modification,
amendment or waiver of any of the terms of this Letter Agreement, nor any consent to any departure
by the Borrower therefrom, will be effective unless made in a writing signed by the party to be
charged, and then such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. When accepted, this Letter Agreement and the other Loan Documents
will constitute the entire agreement between the Bank and the Borrower concerning the Loan, and
shall replace all prior understandings, statements, negotiations and written materials relating to
the Loan.

     The Bank will not be responsible for any damages, consequential, incidental, special, punitive
or otherwise, that may be incurred or alleged by any person or entity, including the Borrower and
the Guarantor, as a result of this Letter Agreement, the other Loan Documents, the transactions
contemplated hereby or thereby, or the use of proceeds of the Loan.

     THE BORROWER AND THE BANK IRREVOCABLY WAIVE ANY AND ALL RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE ARISING OUT OF THIS LETTER AGREEMENT, THE
OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED IN ANY OF SUCH DOCUMENTS AND ACKNOWLEDGE
THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

     If and when a loan closing occurs, this Letter Agreement (as the same may be amended from time
to time) shall survive the closing and will serve as our loan agreement throughout the term of the
Loan.

     To accept these terms, please sign the enclosed copy of this Letter Agreement as set forth
below and the Loan Documents and return them to the Bank within 15 days from the date of this
Letter Agreement, or this Letter Agreement may be terminated at the Bank’s option without liability
or further obligation of the Bank.

     Thank you for giving PNC Bank this opportunity to work with your business. We look forward to
other ways in which we may be of service to your business or to you personally.

	 	 	 	 	 
	Very truly yours,

PNC BANK, NATIONAL ASSOCIATION

 	 	 
	By:  	/s/  Scott S. Wilson
 	 	 
	 	Scott S. Wilson 	 	 
	 	Banking Officer 	 	 
	 

 

 

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ACCEPTANCE

With the intent to be legally bound hereby, the above terms and conditions are hereby agreed to and
accepted as of this 11 day of February, 2011.

	 	 	 	 	 
	 	BORROWER:

LIBERATOR MEDICAL HOLDINGS, INC.

 	 
	 	By:  	/s/  MARK LIBRATORE
 	 
	 	 	 	(SEAL) 	 
	 	 	Print Name:  	MARK LIBRATORE                	 
	 	 	Title:  	CEO 	 
	 

	 	 	 	 	 
	 	LIBERATOR MEDICAL SUPPLY, INC.

 	 
	 	By:  	/s/  MARK LIBRATORE
 	 
	 	 	 	(SEAL) 	 
	 	 	Print Name:  	MARK LIBRATORE                	 
	 	 	Title:  	CEO 	 
	 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

 

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	 	GUARANTOR:

PRACTICA MEDICAL

MANUFACTURING, INC.

 	 
	 	By:  	/s/  MARK LIBRATORE
 	 
	 	 	Mark Libratore                          (SEAL) 	 
	 	 	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	LIBERATOR HEALTH AND

WELLNESS, INC.

 	 
	 	By:  	/s/  MARK LIBRATORE
 	 
	 	 	Mark Libratore                                  (SEAL) 	 
	 	 	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	LIBERATOR HEALTH AND

EDUCATION SERVICES, INC.

 	 
	 	By:  	/s/  Mark Libratore
 	 
	 	 	MARK LIBRATORE                      (SEAL) 	 
	 	 	Chief Executive Officer 	 
	 

 

 

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EXHIBIT A

TO LETTER AGREEMENT

DATED FEBRUARY 11, 2011

     A. FINANCIAL REPORTING COVENANTS:

     (1) The Borrower will deliver to the Bank:

          (a) Financial Statements for its fiscal year, within 90 days after fiscal year end, audited
and certified without qualification by a certified public accountant acceptable to the Bank.

          (b) Financial Statements for each fiscal quarter, within 45 days after the first, second and
third quarters end, together with year-to-date and comparative figures for the corresponding
periods of the prior year, certified as true and correct by its chief financial officer.

          (c) With each delivery of Financial Statements, a certificate of the Borrower’s chief
financial officer as to the Borrower’s compliance with the financial covenants set forth below, if
any, for the period then ended and whether any Event of Default exists, and, if so, the nature
thereof and the corrective measures the Borrower proposes to take. This certificate shall set
forth all detailed calculations necessary to demonstrate such compliance.

     (2) The Borrower will deliver to the Bank within 20 days following the close of each month ,
the Borrower’s detailed schedule of accounts receivable and accounts payable aging
analysis and a report of the Borrower’s inventory, as established by a physical count or such other
method as may be approved by the Bank.

     “Financial Statements” means the balance sheet and statements of income and cash flows
prepared in accordance with generally accepted accounting principles in effect from time to time
(“GAAP”) applied on a consistent basis (subject in the case of interim statements to normal
year-end adjustments).

 

 

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     B. FINANCIAL COVENANTS:

     (1) The Borrower will maintain as of the end of each fiscal quarter, on a rolling four
quarter basis, a ratio of Senior Funded Debt to EBITDA of less than 2.0 to 1.

     (2) The Borrower will maintain as of the end of each fiscal quarter, on a rolling four
quarters basis, a Fixed Charge Coverage Ratio of at least 1.25 to 1.

     As used herein:

     “Current Maturities” means the scheduled payments of principal on all indebtedness for
borrowed money having an original term of more than one year (including but not limited to
amortization of capitalized lease obligations), as shown on the Borrower’s Financial Statements as
of one year prior to the date of determination.

     “EBITDA” means net income plus interest expense plus income tax expense
plus depreciation plus amortization.

     “Fixed Charge Coverage Ratio” means (i) EBITDA, divided by (ii) the sum of Current
Maturities plus interest expense plus cash taxes paid plus dividends
plus Unfunded Capital Expenditures.

     “Senior Funded Debt” means all indebtedness for borrowed money, including but not limited to
capitalized lease obligations, reimbursement obligations in respect of letters of credit, and
guaranties of any such indebtedness, but excluding Subordinated Debt.

     “Unfunded Capital Expenditures” means capital expenditures made from the Borrower’s funds
other than funds borrowed as term debt to finance such capital expenditures.

     All of the above financial covenants shall be computed and determined in accordance with GAAP
applied on a consistent basis (subject to normal year-end adjustments).

 

 

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     C. NEGATIVE COVENANTS:

     (1) The Borrower will not create, assume, incur or suffer to exist any mortgage, pledge,
encumbrance, security interest, lien or charge of any kind upon any of its property, now owned or
hereafter acquired, or acquire or agree to acquire any kind of property under conditional sales or
other title retention agreements; provided, however, that the foregoing
restrictions shall not prevent the Borrower from:

          (a) incurring liens for taxes, assessments or governmental charges or levies which shall not
at the time be due and payable or can thereafter be paid without penalty or are being contested in
good faith by appropriate proceedings diligently conducted and with respect to which it has created
adequate reserves;

          (b) making pledges or deposits to secure obligations under workers’ compensation laws or
similar legislation; or

          (c) granting additional liens or security interests to secure existing or future
indebtedness in an aggregate principal amount not to exceed $250,000.00; or

          (d) granting liens or security interests in favor of the Bank.

     (2) The Borrower will not create, incur, guarantee, endorse (except endorsements in the
course of collection), assume or suffer to exist any indebtedness, except:

          (a) indebtedness to the Bank;

          (b) open account trade debt incurred in the ordinary course of business and not past due, or

          (c) other existing or future indebtedness in an aggregate principal amount not to exceed
$250,000.00, and any refinancings thereof; provided that the amount of the refinancing indebtedness
is not more than the outstanding amount of the refinanced indebtedness, and the terms of the
refinancing indebtedness are no more favorable to the lender than the terms of the refinanced
indebtedness.

     (3) The Borrower will not liquidate, or dissolve, or merge or consolidate with any person,
firm, corporation or other entity, or sell, lease, transfer or otherwise dispose of all or any
substantial part of its property or assets, whether now owned or hereafter acquired.

     (4) The Borrower will not make acquisitions of all or substantially all of the property or
assets of any person, firm, corporation or other entity.

 

 

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     (5) Upon the occurrence of an Event of Default, the Borrower will not declare or pay any
dividends on or make any distribution with respect to any class of its equity, or purchase, redeem,
retire or otherwise acquire any of its equity.

     (6) The Borrower will not make or have outstanding any loans or advances to or otherwise
extend credit to any person, firm, corporation or other entity, except in the ordinary course of
business.exv10w2

Exhibit 10.2

Revolving Line of Credit Note
(Daily LIBOR)

			
	 	 	 
	$8,500,000.00
	 	February 11, 2011

FOR VALUE RECEIVED, LIBERATOR MEDICAL HOLDINGS, INC. and LIBERATOR MEDICAL SUPPLY, INC. (the
“Borrower”), with an address at 2979 SE Gran Park Way, Stuart, Florida 34997, promises to pay to
the order of PNC BANK, NATIONAL ASSOCIATION (the “Bank”), in lawful money of the United States of
America in immediately available funds at its offices located at 205 Datura Street, West Palm
Beach, Florida 33401, or at such other location as the Bank may designate from time to time, the
principal sum of EIGHT MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($8,500,000.00) (the
“Facility”) or such lesser amount as may be advanced to or for the benefit of the Borrower
hereunder, together with interest accruing on the outstanding principal balance from the date
hereof, all as provided below.

1. Revolving Line of Credit Advances. This is a revolving line of credit note. The
Borrower may borrow, repay and reborrow hereunder and the Bank may advance and readvance under this
Note from time to time (each an “advance” and together the “advances”) until the Expiration Date,
subject to the terms and conditions of this Note and the Loan Documents (as defined herein). The
“Expiration Date” shall mean February 11, 2013, or such later date as may be designated by the
Bank by written notice from the Bank to the Borrower. The Borrower acknowledges and agrees that in
no event will the Bank be under any obligation to extend or renew the Facility or this Note beyond
the Expiration Date. In no event shall the aggregate unpaid principal amount of advances under
this Note exceed the face amount of this Note.

2. Rate of Interest. Amounts outstanding under this Note will bear interest at a rate per
annum which is at all times equal to (A) the Daily LIBOR Rate plus (B) two hundred
seventy-five (275) basis points (2.75%). Interest hereunder will be calculated based on the actual
number of days that principal is outstanding over a year of 360 days. In no event will the rate of
interest hereunder exceed the maximum rate allowed by law.

If the Bank determines (which determination shall be final and conclusive) that, by reason of
circumstances affecting the eurodollar market generally, deposits in dollars (in the applicable
amounts) are not being offered to banks in the eurodollar market for the selected term, or adequate
means do not exist for ascertaining the Daily LIBOR Rate, then the Bank shall give notice thereof
to the Borrower. Thereafter, until the Bank notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the interest rate for all amounts outstanding under this
Note shall be equal to the Prime Rate (the “Alternate Rate”).

In addition, if, after the date of this Note, the Bank shall determine (which determination shall
be final and conclusive) that any enactment, promulgation or adoption of or any change in any
applicable law, rule or regulation, or any change in the interpretation or administration thereof
by a governmental authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any guideline, request or directive (whether
or not having the force of law) of any such authority, central bank or comparable agency shall make
it unlawful or impossible for the Bank to make or maintain or fund loans based on the Daily LIBOR
Rate, the Bank shall notify the Borrower. Upon receipt of such notice, until the Bank notifies
the Borrower that the circumstances giving rise to such determination no longer apply, the interest
rate on all amounts outstanding under this Note shall be the Alternate Rate.

For purposes hereof, the following terms shall have the following meanings:

Form 8C
— FL (No COJ) Rev. 12/09

 

 

“Business Day” shall mean any day other than a Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed for
business in West Palm Beach, Florida.

“Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by the Bank by
dividing (A) the Published Rate by (B) a number equal to 1.00 minus the percentage
prescribed by the Federal Reserve for determining the maximum reserve requirements with
respect to any eurocurrency fundings by banks on such day. The rate of interest will be
adjusted automatically as of each Business Day based on changes in the Daily LIBOR Rate
without notice to the Borrower.

“Prime Rate” shall mean the rate publicly announced by the Bank from time to time as its
prime rate. The Prime Rate is determined from time to time by the Bank as a means of
pricing some loans to its borrowers. The Prime Rate is not tied to any external rate of
interest or index, and does not necessarily reflect the lowest rate of interest actually
charged by the Bank to any particular class or category of customers.

“Published Rate” shall mean the rate of interest published each Business Day in the Wall
Street Journal “Money Rates” listing under the caption “London Interbank Offered Rates” for
a one month period (or, if no such rate is published therein for any reason, then the
Published Rate shall be the eurodollar rate for a one month period as published in another
publication selected by the Bank).

3. Advance Procedures. A request for advance made by telephone must be promptly confirmed
in writing by such method as the Bank may require. The Borrower authorizes the Bank to accept
telephonic requests for advances, and the Bank shall be entitled to rely upon the authority of any
person providing such instructions. The Borrower hereby indemnifies and holds the Bank harmless
from and against any and all damages, losses, liabilities, costs and expenses (including reasonable
attorneys’ fees and expenses) which may arise or be created by the acceptance of such telephone
requests or making such advances. The Bank will enter on its books and records, which entry when
made will be presumed correct, the date and amount of each advance, as well as the date and amount
of each payment.

4. Payment Terms. Accrued interest will be due and payable on the same day of each month.
The outstanding principal balance and any accrued but unpaid interest shall be due and payable on
the Expiration Date.

If any payment under this Note shall become due on a Saturday, Sunday or public holiday under the
laws of the State where the Bank’s office indicated above is located, such payment shall be made on
the next succeeding Business Day and such extension of time shall be included in computing interest
in connection with such payment. The Borrower hereby authorizes the Bank to charge the Borrower’s
deposit account at the Bank for any payment when due hereunder. If the Borrower revokes this
authorization for any reason whatsoever or fails to maintain a deposit account with the Bank which
may be charged, the Bank may, at its option, upon thirty (30) days notice to the Borrower, increase
the interest rate payable by the Borrower under this Note by twenty-five (25) basis points
(0.25%). Payments received will be applied to charges, fees and expenses (including
attorneys’ fees), accrued interest and principal in any order the Bank may choose, in its sole
discretion.

5. Late Payments; Default Rate. If the Borrower fails to make any payment of principal,
interest or other amount coming due pursuant to the provisions of this Note within fifteen (15)
calendar days of the date due and payable, the Borrower also shall pay to the Bank a late charge
equal to the lesser of five percent (5%) of the amount of such payment or $100.00 (the “Late
Charge”). Such fifteen (15) day period shall not be construed in
any way to extend the due date of any such payment. Upon maturity, whether by acceleration, demand
or otherwise, and at the Bank’s option upon the occurrence of any Event of Default (as hereinafter
defined) and during the continuance thereof, amounts outstanding under this Note shall bear
interest at a rate per annum (based on the actual number of days that principal is outstanding over
a year of 360 days) which shall be three percentage

-2-

 

points (3%) in excess of the interest rate in
effect from time to time under this Note but not more than the maximum rate allowed by law (the
“Default Rate”). The Default Rate shall continue to apply whether or not judgment shall be entered
on this Note. Both the Late Charge and the Default Rate are imposed as liquidated damages for the
purpose of defraying the Bank’s expenses incident to the handling of delinquent payments, but are
in addition to, and not in lieu of, the Bank’s exercise of any rights and remedies hereunder, under
the other Loan Documents or under applicable law, and any fees and expenses of any agents or
attorneys which the Bank may employ. In addition, the Default Rate reflects the increased credit
risk to the Bank of carrying a loan that is in default. The Borrower agrees that the Late Charge
and Default Rate are reasonable forecasts of just compensation for anticipated and actual harm
incurred by the Bank, and that the actual harm incurred by the Bank cannot be estimated with
certainty and without difficulty.

6. Prepayment. The indebtedness evidenced by this Note may be prepaid in whole or in part
at any time without penalty.

7. Usury. Regardless of any other provision of this Note or other Loan Documents, if for
any reason the effective interest should exceed the maximum lawful interest, the effective interest
shall be deemed reduced to, and shall be, such maximum lawful interest, and (i) the amount which
would be excessive interest shall be deemed applied to the reduction of the principal balance of
this Note and not to the payment of interest, and (ii) if the loan evidenced by this Note has been
or is thereby paid in full, the excess shall be returned to the party paying same, such application
to the principal balance of this Note or the refunding of excess to be a complete settlement and
acquittance thereof.

8. Other Loan Documents. This Note is issued in connection with a letter agreement between
the Borrower and the Bank, dated on or before the date hereof, and the other agreements and
documents executed and/or delivered in connection therewith or referred to therein, the terms of
which are incorporated herein by reference (as amended, modified or renewed from time to time,
collectively the “Loan Documents”), and is secured by the property (if any) described in the Loan
Documents and by such other collateral as previously may have been or may in the future be granted
to the Bank to secure this Note.

9. Events of Default. The occurrence of any of the following events will be deemed to be
an “Event of Default” under this Note: (i) the nonpayment of any principal, interest or other
indebtedness under this Note when due; (ii) the occurrence of any event of default or any default
and the lapse of any notice or cure period, or any Obligor’s failure to observe or perform any
covenant or other agreement, under or contained in any Loan Document or any other document now or
in the future evidencing or securing any debt, liability or obligation of any Obligor to the Bank;
(iii) the filing by or against any Obligor of any proceeding in bankruptcy, receivership,
insolvency, reorganization, liquidation, conservatorship or similar proceeding (and, in the case of
any such proceeding instituted against any Obligor, such proceeding is not dismissed or stayed
within 30 days of the commencement thereof, provided that the Bank shall not be obligated to
advance additional funds hereunder during such period); (iv) any assignment by any Obligor for the
benefit of creditors, or any levy, garnishment, attachment or similar proceeding is instituted
against any property of any Obligor held by or deposited with the Bank; (v) a default with respect
to any other indebtedness of any Obligor for borrowed money, if the effect of such default is to
cause or permit the acceleration of such debt; (vi) the commencement of any foreclosure or
forfeiture proceeding, execution or attachment against any collateral securing the obligations of
any Obligor to the Bank; (vii) the entry of a final judgment against any Obligor and the failure of
such Obligor to discharge the judgment within ten (10) days of the entry thereof; (viii) any
material adverse change in any Obligor’s business, assets, operations, financial condition or
results of operations; (ix) any Obligor ceases doing business as a going concern; (x) any
representation or warranty made by any Obligor to the Bank in any Loan Document or any other
documents now or in the future evidencing or securing the obligations of any Obligor to the Bank,
is false, erroneous or misleading in any material respect; (xi) if this Note or any guarantee
executed by any Obligor is secured, the failure of any Obligor to provide the Bank with additional
collateral if in the Bank’s opinion at any
time or times, the market value of any of the collateral securing this Note or any guarantee has
depreciated below that required pursuant to the Loan Documents or, if no specific value is so
required, then in an amount deemed material by the Bank; (xii) the revocation or attempted
revocation, in whole or in part, of any guarantee by any

-3-

 

Obligor; or (xiii) the death,
incarceration, indictment or legal incompetency of any individual Obligor or, if any Obligor is a
partnership or limited liability company, the death, incarceration, indictment or legal
incompetency of any individual general partner or member. As used herein, the term “Obligor” means
any Borrower and any guarantor of, or any pledgor, mortgagor or other person or entity providing
collateral support for, the Borrower’s obligations to the Bank existing on the date of this Note or
arising in the future.

Upon the occurrence of an Event of Default: (a) the Bank shall be under no further obligation to
make advances hereunder; (b) if an Event of Default specified in clause (iii) or (iv) above shall
occur, the outstanding principal balance and accrued interest hereunder together with any
additional amounts payable hereunder shall be immediately due and payable without demand or notice
of any kind; (c) if any other Event of Default shall occur, the outstanding principal balance and
accrued interest hereunder together with any additional amounts payable hereunder, at the Bank’s
option and without demand or notice of any kind, may be accelerated and become immediately due and
payable; (d) at the Bank’s option, this Note will bear interest at the Default Rate from the date
of the occurrence of the Event of Default; and (e) the Bank may exercise from time to time any of
the rights and remedies available under the Loan Documents or under applicable law.

10. Right of Setoff. In addition to all liens upon and rights of setoff against the
Borrower’s money, securities or other property given to the Bank by law, the Bank shall have, with
respect to the Borrower’s obligations to the Bank under this Note and to the extent permitted by
law, a contractual possessory security interest in and a contractual right of setoff against, and
the Borrower hereby grants the Bank a security interest in, and hereby assigns, conveys, delivers,
pledges and transfers to the Bank, all of the Borrower’s right, title and interest in and to, all
of the Borrower’s deposits, moneys, securities and other property now or hereafter in the
possession of or on deposit with, or in transit to, the Bank or any other direct or indirect
subsidiary of The PNC Financial Services Group, Inc., whether held in a general or special account
or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise,
excluding, however, all IRA, Keogh, and trust accounts. Every such security interest and right of
setoff may be exercised without demand upon or notice to the Borrower. Every such right of setoff
shall be deemed to have been exercised immediately upon the occurrence of an Event of Default
hereunder without any action of the Bank, although the Bank may enter such setoff on its books and
records at a later time.

11. Indemnity. The Borrower agrees to indemnify each of the Bank, each legal entity, if
any, who controls, is controlled by or is under common control with the Bank, and each of their
respective directors, officers and employees (the “Indemnified Parties”), and to defend and hold
each Indemnified Party harmless from and against any and all claims, damages, losses, liabilities
and expenses (including all fees and charges of internal or external counsel with whom any
Indemnified Party may consult and all expenses of litigation and preparation therefor) which any
Indemnified Party may incur or which may be asserted against any Indemnified Party by any person,
entity or governmental authority (including any person or entity claiming derivatively on behalf of
the Borrower), in connection with or arising out of or relating to the matters referred to in this
Note or in the other Loan Documents or the use of any advance hereunder, whether (a) arising from
or incurred in connection with any breach of a representation, warranty or covenant by the
Borrower, or (b) arising out of or resulting from any suit, action, claim, proceeding or
governmental investigation, pending or threatened, whether based on statute, regulation or order,
or tort, or contract or otherwise, before any court or governmental authority; provided,
however, that the foregoing indemnity agreement shall not apply to any claims, damages,
losses, liabilities and expenses solely attributable to an Indemnified Party’s gross negligence or
willful misconduct. The indemnity agreement contained in this Section shall survive the
termination of this Note, payment of any advance hereunder and the assignment of any rights
hereunder. The Borrower may participate at its expense in the defense of any such action or claim.

12. Miscellaneous. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder (“Notices”) must be in writing (except as may be
agreed otherwise above with respect to borrowing requests) and will be effective upon receipt.
Notices may be given in any manner to which the parties
may separately agree, including electronic mail. Without limiting the foregoing, first-class mail,
facsimile transmission and commercial courier service are hereby agreed to as acceptable methods
for giving Notices.

-4-

 

Regardless of the manner in which provided, Notices may be sent to a party’s
address as set forth above or to such other address as any party may give to the other for such
purpose in accordance with this paragraph. No delay or omission on the Bank’s part to exercise any
right or power arising hereunder will impair any such right or power or be considered a waiver of
any such right or power, nor will the Bank’s action or inaction impair any such right or power.
The Bank’s rights and remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Bank may have under other agreements, at law or in equity. No modification,
amendment or waiver of, or consent to any departure by the Borrower from, any provision of this
Note will be effective unless made in a writing signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which given. The Borrower
agrees to pay on demand, to the extent permitted by law, all costs and expenses incurred by the
Bank in the enforcement of its rights in this Note and in any security therefor, including without
limitation reasonable fees and expenses of the Bank’s counsel. If any provision of this Note is
found to be invalid, illegal or unenforceable in any respect by a court, all the other provisions
of this Note will remain in full force and effect. The Borrower and all other makers and indorsers
of this Note hereby forever waive presentment, protest, notice of dishonor and notice of
non-payment. The Borrower also waives all defenses based on suretyship or impairment of
collateral. If this Note is executed by more than one Borrower, the obligations of such persons or
entities hereunder will be joint and several. This Note shall bind the Borrower and its heirs,
executors, administrators, successors and assigns, and the benefits hereof shall inure to the
benefit of the Bank and its successors and assigns; provided, however, that the
Borrower may not assign this Note in whole or in part without the Bank’s written consent and the
Bank at any time may assign this Note in whole or in part.

This Note has been delivered to and accepted by the Bank and will be deemed to be made in the State
where the Bank’s office indicated above is located. This Note will be interpreted and the
rights and liabilities of the Bank and the Borrower determined in accordance with the laws of the
State where the Bank’s office indicated above is located, excluding its conflict of laws
rules. The Borrower hereby irrevocably consents to the exclusive jurisdiction of any state or
federal court in the county or judicial district where the Bank’s office indicated above is
located; provided that nothing contained in this Note will prevent the Bank from bringing any
action, enforcing any award or judgment or exercising any rights against the Borrower individually,
against any security or against any property of the Borrower within any other county, state or
other foreign or domestic jurisdiction. The Borrower acknowledges and agrees that the venue
provided above is the most convenient forum for both the Bank and the Borrower. The Borrower
waives any objection to venue and any objection based on a more convenient forum in any action
instituted under this Note.

13. Authorization to Obtain Credit Reports. By signing below, each Borrower who is an
individual provides written authorization to the Bank or its designee (and any assignee or
potential assignee hereof) to obtain the Borrower’s personal credit profile from one or more
national credit bureaus. Such authorization shall extend to obtaining a credit profile in
considering this Note and subsequently for the purposes of update, renewal or extension of such
credit or additional credit and for reviewing or collecting the resulting account.

14. Commercial Purpose. The Borrower represents that the indebtedness evidenced by this
Note is being incurred by the Borrower solely for the purpose of acquiring or carrying on a
business, professional or commercial activity, and not for personal, family or household purposes.

15. Florida Documentary Stamp Tax. Florida documentary stamp tax in the amount required by
law has been paid with respect to this Note and any mortgage or assignment of rents given to secure
this Note.

16. Depository. The Borrower will establish and maintain with the Bank the Borrower’s
primary depository accounts. If the Borrower fails to establish and/or maintain its primary
depository accounts with the Bank, the Bank may, at its option, upon thirty (30) days notice to the
Borrower, increase the interest rate payable by the Borrower under this Note by up to 1.00
percentage points (1.00%). The Bank’s right to increase the interest rate pursuant to this
paragraph shall be in addition to any other rights or remedies the Bank may have under this Note,
all of which are hereby reserved, and shall not constitute a waiver, release or limitation upon the
Bank’s exercise of any such rights or remedies.

-5-

 

17. WAIVER OF JURY TRIAL. The Borrower irrevocably waives any and all rights the
Borrower may have to a trial by jury in any action, proceeding or claim of any nature relating to
this Note, any documents executed in connection with this Note or any transaction contemplated in
any of such documents. The Borrower acknowledges that the foregoing waiver is knowing and
voluntary.

The Borrower acknowledges that it has read and understood all the provisions of this Note,
including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof as a document under seal, as of the date first written above,
with the intent to be legally bound hereby.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	WITNESS / ATTEST:	 	 	 	LIBERATOR MEDICAL
HOLDINGS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	/s/ SCOTT S. WILSON	 	 	 	By:	 	/s/ MARK LIBRATORE	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(SEAL)	 	 
	Print Name:

	 	SCOTT S. WILSON
	 	 	 	 	 	Print Name:
	 	MARK LIBRATORE	 	 
	Title:

	 	OFFICER
	 	 	 	 	 	Title:
	 	CEO	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	LIBERATOR MEDICAL
SUPPLY, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	/s/ SCOTT S. WILSON	 	 	 	By:	 	/s/ MARK LIBRATORE	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(SEAL)	 	 
	Print Name:

	 	SCOTT S. WILSON
	 	 	 	 	 	Print Name:
	 	MARK LIBRATORE	 	 
	Title:

	 	OFFICER
	 	 	 	 	 	Title:
	 	CEO	 	 

-6-

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