Document:

Unassociated Document

    EXHIBIT
      10.79

    
 

    J.
      ARON & COMPANY

    

    May
      30,
      2008

    
 

    
      	
              TekOil
                and Gas Gulf Coast, LLC

            	
              Via
                Telecopy and Certified Mail No.7160 3901 9842 8489
                8854

            
	
              25050
                I-45 North, Suite 525

            	
              Return
                Receipt Requested

            
	
              The
                Woodlands, Texas 77380

            	 
	
              Attn:
                Mr. Mark Western

            	 
	 	 
	
              TekOil
                & Gas Corporation

            	
              Via
                Telecopy and Certified Mail No. 7160 3901 9842 8489
                8861

            
	
              25050
                I-45 North, Suite 525

            	
              Return
                Receipt Requested

            
	
              The
                Woodlands, Texas 77380

            	 
	
              Attn:
                Mr. Mark Western

            	 
	 	 
	
              Mr.
                Mark Western

            	
              Via
                Telecopy and Certified Mail No. 7160 3901 9842 8489
                8878

            
	
              5036
                Dr. Phillips Blvd, #232

            	
              Return
                Receipt Requested

            
	
              Orlando,
                Florida 32819

            	 

    

    

    
      	
              Re:

            	
              NOTICE
                OF FORECLOSURE SALE (this “Foreclosure
                Notice”)
                in connection with the following documents:

            

    

    

    
      	 	
              (a)

            	
              Credit
                and Guaranty Agreement dated as of May 11, 2007 (as amended, the
                “Credit
                Agreement”),
                executed by TekOil and Gas Gulf Coast, LLC, a Delaware limited company
                (“Borrower”),
                TekOil & Gas Corporation, a Delaware corporation (“Parent”),
                the lenders party to the Credit Agreement (“Lenders”),
                J. Aron & Company, as Lead Arranger and as Syndication Agent, and J.
                Aron & Company, as Administrative Agent for such Lenders
                (“Administrative
                Agent”).
                Capitalized terms used herein and not otherwise defined shall have
                the
                meanings set forth in the Credit Agreement.

            
	 	 	 
	 	
              (b)

            	
              Note
                dated as of May 11, 2007, executed by Borrower payable to the order
                of
                Administrative Agent, in the principal amount of
                $50,000,000;

            
	 	 	 
	 	
              (c)

            	
              Pledge
                Agreement dated as of May 11, 2007 executed between Parent and
                Administrative Agent; and

            
	 	 	 
	 	
              (d)

            	
              Limited
                Guaranty dated October 24, 2007, (the “Limited
                Guaranty”)
                executed by Mark S. Western (“Western”)
                in favor of Administrative Agent for the benefit of the Lenders.
                

            

    

    

     

      
        

      

    

    

    Borrower,
      Parent and Western:

    

    Administrative
      Agent has notified Borrower, Parent, and Western of the existence of certain
      Events of Default under the Credit Agreement, which Events of Default are
      continuing. Additionally, by correspondence dated May 29, 2008,
      you were
      each informed that - among other things - (A) all Obligations, including the
      unpaid principal amount of and accrued interest on the Loans (collectively,
      the
      "Past
      Due Sums"),
      were
      then (and remain) immediately due and payable, and (B) Administrative Agent
      has
      been instructed by Lenders to enforce any and all Liens and security interests
      created pursuant to the Security Documents. Accordingly, this letter will serve
      as notice to you of the following:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    May 30, 2008

    Page 2

    

    

    1. Payment
      of the Past Due Sums has not been made and the Past Due Sums remain unpaid
      and
      immediately due and payable. There are currently no modification, renewal,
      extension, or settlement agreements between Borrower, Parent or Western and
      Administrative Agent with regard to the Past Due Sums, and all proposals made
      in
      that regard for any of the foregoing are hereby rejected.

    

    2. Enclosed
      is a notification being sent to you and the persons copied by this letter of
      the
      intended disposition of the Collateral (hereafter defined). In addition, you
      are
      hereby notified as follows:

    

    To: TekOil
      & Gas Corporation

    

       
      From: J.
      Aron
& Company, as Administrative Agent, 1000 Louisiana, Suite 550, Houston,
      Texas 77002, Attn. John Howie, Phone 713-658-2682.

    

    Administrative
      Agent will sell the Collateral referenced on the attached Exhibit
      A,
      to the
      highest qualified bidder in public as follows:

     

       
      Day and Date: Tuesday
      ,
      June 10, 2008

       
      Time:  11:00
      a.m.,
      Houston, Texas time

       
      Place: Offices
      of Haynes and Boone, LLP, 1221 McKinney, Suite 2100, Houston, TX 77010

    

    You
      are
      entitled to an accounting of the unpaid indebtedness secured by the property
      that Administrative Agent intends to sell. You may request an accounting by
      calling Administrative Agent at 713-658-2682.

    

    If
      any
      party who receives this letter is a debtor in a bankruptcy proceeding subject
      to
      the provisions of the United States Bankruptcy Code (Title
      11
      of the
United
      States Code,
      the
“Code”),
      then
      this letter is merely intended to be written notice that formal demand has
      been
      made in compliance with the Transaction Documents and applicable law. In such
      event, this letter is neither an act to collect, assess, or recover a claim
      against such party, nor is this letter intended to violate any provisions of
      the
      Code. All claims that Administrative Agent and each Lender assert against such
      party will be properly asserted in compliance with the Code and such party’s
      respective bankruptcy proceedings.

    

    Under
      no
      circumstances or contingencies shall the interest accrued, charged, or collected
      under, or in connection with, the Credit Agreement and the other Transaction
      Documents exceed the maximum amount of interest permitted by applicable law.
      In
      addition, all of Administrative Agent’s and each Lenders’ claims, demands, and
      accruals regarding the Obligations, whenever made, whether for principal,
      interest, or otherwise, are intended to comply in all respects, both
      independently and collectively, with all applicable usury laws and are
      accordingly limited so that applicable usury laws are not violated.

    

    Nothing
      contained in this letter is intended to waive any Default or Event of Default,
      or waive any rights, remedies, or recourses available to Administrative Agent
      or
      any Lender, nor be an election of remedies resulting from any default with
      respect to the Credit Agreement and the other Transaction Documents. This
      Foreclosure Notice is delivered to Borrower, Parent and Western on behalf of
      the
      Administrative Agent and the Lenders and is not intended and shall not be
      construed to be delivered for the benefit of any third party. You may contact
      Administrative Agent at 1000 Louisiana, Suite 550, Houston, Texas 77002,
      Attention: John Howie (713) 658-2682, regarding any questions that you may
      have,
      including the outstanding balance of the Past Due Sums as of any particular
      date.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      May 30, 2008

      Page 2

    

    

    Sincerely,

    J.
      ARON & COMPANY,

    as
      Lead
      Arranger, Syndication Agent, 

    Administrative
      Agent, Lender Counterparty and a Lender

    

    

    
      	
              By:

            	
              /s/
                Susan Rudov

            
	 	
              Authorized
                Signatory

            

    

    

    
      	
              cc:

            	
              John
                Howie, J.
                Aron & Company

            
	 	
              Charlie
                Beckham, Haynes and Boone, LLP

            
	 	 
	 	
              Baker
                & Hostettler LLP

            
	 	
              SunTrust
                Center

            
	 	
              200
                S. Orange Ave, Suite 2300

            
	 	
              Orlando,
                FL 32802

            
	 	
              Attention:
                Ken Wright

            
	 	
              Telecopier:
                407 841-0168

            
	 	 
	 	
              Neligan
                Foley LLP

            
	 	
              325
                North St. Paul, Suite 3600

            
	 	
              Dallas,
                Texas 75201

            
	 	
              Attention:
                Nick Foley

            
	 	
              Telecopier:
                214 840 5301

            

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    TO

    NOTICE
      OF FORECLOSURE SALE

    

    

    The
      Collateral subject to this Foreclosure Notice is, based on pledge documentation
      executed by TekOil & Gas Corporation (“Pledgor”),
      composed of all of Pledgor's
      right,
      title and interest in, to and under the following, in each case whether now
      owned or existing or hereafter acquired or arising and wherever located (all
      of
      which being hereinafter collectively referred to as the "Collateral"):

    

    (a) Pledged
      Membership Interests; and

     

    
      	 	
              (b)

            	
              all
                Proceeds, products, accessions, and profits of or in respect of any
                of the
                foregoing.

            

    

     

    "Pledged
      Membership Interests"
      shall
      mean all membership interest in TekOil and Gas Gulf Coast, LLC, whether now
      outstanding or issued hereafter including as listed below and the certificates,
      if any, representing such membership interests and any interest of Pledgor
      on
      the books and records of such limited liability company or on the books and
      records of any securities intermediary pertaining to such interest and all
      dividends, distributions, cash, warrants, rights, options, instruments,
      securities and other property or proceeds from time to time received, receivable
      or otherwise distributed in respect of or in exchange for any or all of such
      membership interests.

     

    
      	
              Pledgor

            	
              Limited
                Liability Company

            	
              Certificated
                (Y/N)

            	
              Certificate
                No. (if any)

            	
              %
                of Outstanding Membership Interests of the Limited Liability
                Company

            
	
              Tekoil
                & Gas Corporation

            	
              Tekoil
                and Gas Gulf Coast, LLC

            	
              N

            	
              N/A

            	
              75%

            

    

    

     

    "Proceeds"
      shall
      mean: (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments
      or
      distributions made with respect to any Pledged Membership Interest and (iii)
      whatever is receivable or received when Collateral or proceeds are sold,
      exchanged, collected or otherwise disposed of, whether such disposition is
      voluntary or involuntary.

     

    "UCC"
      shall
      mean the Uniform Commercial Code as in effect from time to time in the State
      of
      New York or, when the context implies, the Uniform Commercial Code as in effect
      from time to time in any other applicable jurisdiction.EXHIBIT 10.1  

      THIS
        LOAN
        AND SECURITY AGREEMENT IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION
        AGREEMENT, DATED AS OF MAY ___, 2008, AMONG NPIL PHARMA INC., RXELITE, INC.
        AND
        CASTLERIGG MASTER INVESTMENTS LTD.

       

    

    LOAN
      AND SECURITY AGREEMENT

     

    THIS
      AGREEMENT, made this ___ day of May, 2008, is by and between NPIL PHARMA INC.,
      a
      Delaware corporation (the “Lender”)
      and
      RXELITE, INC., a Delaware corporation (the “Borrower”).

     

    RECITALS

     

    Borrower
      has requested that the Lender make a term loan available to Borrower, and the
      Lender is willing to make such loan available to Borrower on the terms and
      conditions set forth in this Agreement.

     

    SECTION
      1. DEFINITIONS

     

    As
      used
      herein:

     

    “Accounts”,
      “Chattel Paper”, Documents”, “Equipment”, “General Intangibles”, “Inventory”
and
      “Instruments”
      shall
      have the same respective meanings as are given to those terms in the
      UCC.

     

    “Affiliates”
      means
      as
      to any Person (A) any Person which, directly, or indirectly through one or
      more
      intermediaries, controls, is controlled by or is under common control with
      such
      Person, or (B) any Person who is a director or executive officer (i) of such
      Person, (ii) of any Subsidiary of such Person or (iii) of any Person described
      in clause (A) above. For purposes of this definition, “control” of a Person
      shall mean the power, direct or indirect, (i) to vote or direct the voting
      of
      more than twenty five percent (25%) of the outstanding shares of voting stock
      of
      such Person, or (ii) to direct or cause the direction of the management and
      policies of such Person whether by contract or otherwise. In no event shall
      the
      Lender be deemed to be an Affiliate of the Borrower.

     

    “Agreement”
      means
      this Loan and Security Agreement, as it may be amended, restated, renewed or
      extended from time to time.

     

    “Borrower
      Distributions” means
      (i)
      any dividend or other distribution, whether in cash, in kind, or otherwise,
      on
      account of or with respect to, or (ii) the application of any funds, property
      or
      assets to the purchase, redemption or other retirement of, any of Borrower’s
      equity interests or any warrants, options or other rights with respect to any
      of
      Borrower’s equity interests.

     

    “Business
      Day” means
      any
      day on which the state banks and national banking associations in New York,
      New
      York are open for the conduct of ordinary business.

     

    “Capitalized
      Lease” means
      a
      lease that is required to be capitalized for financial reporting purposes in
      accordance with GAAP.

     

    “Capitalized
      Lease Obligation” means
      Indebtedness represented by obligations under a Capitalized Lease, and the
      amount of such Indebtedness shall be the capitalized amount of such obligations
      determined in accordance with GAAP.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Closing”
      means
      the
      valid execution and delivery of the Note, this Agreement, and the other Loan
      Documents to the Lender.

     

    “Collateral”
      has
      the
      meaning set forth in Section
      4.1.

     

    “Constituent
      Documents” means,
      with respect to any Person, the governing legal documents of such Person, such
      as Person’s charter, certificate of incorporation, articles of organization,
      operating agreement, certificate of limited partnership, or Partnership
      Agreement.

     

    “Default
      Rate”
      means a
      rate per annum equal to the Term Rate plus two percent (2%).

     

    “Event
      of Default” has
      the
      meaning set forth in Section
      8.1.

     

    “Financial
      Statements” means
      any
      financial statements submitted to Lender in connection with the Loan.

     

    “Financing
      Statements” means
      any
      one or more filings made pursuant to the UCC to perfect the security interests
      in the Collateral granted to Lender pursuant to Section
      4 hereof.

     

    “Fiscal
      Year” means,
      with respect to the Borrower, the calendar year period of January 1 through
      December 31.

     

    “GAAP”
      means
      generally accepted accounting principles as used in the United States applied
      on
      a consistent basis as in effect from time to time.

     

    “Indebtedness”
      means,
      as
      to any Person, all items of indebtedness whether matured or unmatured,
      liquidated or unliquidated, direct or contingent, joint or several, including
      without limitation:

     

    (a) All
      indebtedness guaranteed, directly or indirectly, in any manner, or endorsed
      (other than for collection or deposit in the ordinary course of business) or
      discounted with recourse;

     

    (b) All
      indebtedness in effect guaranteed, directly or indirectly, through agreements,
      contingent or otherwise: (1) to purchase such indebtedness; or (2) to purchase,
      sell or lease (as lessee or lessor) property, products, materials or supplies
      or
      to purchase or sell services, primarily for the purpose of enabling the debtor
      to make payment of such indebtedness or to assure the owner of the indebtedness
      against loss; or (3) to supply funds to or in any other manner invest in the
      debtor;

     

    (c) All
      indebtedness secured by (or for which the holder of such indebtedness has a
      right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
      pledge, lien, security interest or other charge or encumbrance upon property
      owned or acquired subject thereto, whether or not the liabilities secured
      thereby have been assumed; and

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (d) All
      indebtedness incurred as the lessee of facilities, goods or services under
      leases that, in accordance with generally accepted accounting principles
      consistently applied, should be reflected on such Person’s balance
      sheet.

     

    “Interest
      Rate”
      means
      the Term Rate.

     

    “Laws”
      means
      all
      ordinances, statutes, rules, regulations, order, injunctions, writs or decrees
      of any government or political subdivision or agency thereof, or any court
      of
      similar entity established by any thereof.

     

    “Loan”
      means
      the
      term loan in the amount equal to the Loan Commitment made to Borrower by Lender
      hereunder.

     

    “Loan
      Commitment”
      means an
      amount equal to $3,000,000.00; provided that,
      so long
      as no Unmatured Default or Event of Default has occurred and is continuing
      and
      subject to Lender’s sole discretion, the Loan Commitment may be increased, upon
      the written request of Borrower, by $2,000,000.00; provided that the Loan
      Commitment shall at no time exceed $5,000,000.00.

     

    “Loan
      Documents” means
      this Agreement, the Subordination Agreement, the Note and any other document
      executed or delivered by or on behalf of the Borrower evidencing or securing
      the
      Obligations.

     

    “Loan
      Termination Date” means
      the
      earlier of (a) six (6) months after the maturity date of the Senior Notes,
      or
      (b) immediately after redemption of 100% of the Senior Note pursuant to the
      terms set forth in the Senior Note.

     

    “Long
      Term Debt” means
      any
      Indebtedness which, by its terms, matures more than one (1) year from the date
      of any calculation thereof, and/or which is renewable or extendable at the
      option of the obligor to a date more than one (1) year from the date of such
      calculation.

     

    “Material
      Adverse Change” means
      a
      material adverse change in the business or conditions (financial or otherwise)
      in the result of operations or prospects of the Borrower taken as a whole,
      or in
      the value of the Collateral.

     

    “Material
      Adverse Effect” means,
      when referring to the taking of an action or the omission to take an action,
      that such action, if taken, or omission, would have a material adverse effect
      on
      the business, condition (financial or otherwise) results of operations or
      prospects of such Person, taken as a whole, or would materially impair the
      value
      of the Collateral.

     

    “Minrad
      Contract”
      means
      that certain Exclusive Manufacturing and Distribution Agreement, dated as of
      June 9, 2004, by and between RxElite Holdings Inc. and Minrad International,
      Inc., as amended to date.

     

    “Note”
      means
      one
      or more promissory notes substantially in the form of Exhibit
      A
      attached
      hereto, duly executed and delivered to Lender by Borrower, as the same may
      be
      renewed, extended or modified from time to time.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    “Obligations”
      means
      all
      of the obligations of the Borrower:

     

    (a)
      To
      pay
      the principal of and interest on the Note in accordance with the terms thereof
      and to satisfy all the Borrower’s other liabilities to the Lender hereunder,
      whether now existing or hereafter incurred, matured or unmatured, direct or
      contingent, joint or several, including any extension, modifications,
      amendments, restatements and renewals thereof and substitutions
      therefor;

     

    (b) To
      repay
      the Lender all amounts advanced by the Lender hereunder on behalf of the
      Borrower, including without limitation advances for overdrafts, principal or
      interest payments to prior secured parties, mortgagees, or lienors, or for
      taxes, levies, insurance, rent, repairs to or maintenance or storage of any
      of
      the Collateral; and

     

    (c) To
      reimburse the Lender, on demand, for all of the Lender’s reasonable
      out-of-pocket expenses and costs, including the reasonable fees and expenses
      of
      its counsel, in connection with the enforcement of this Agreement and the
      documents required hereunder, including, without limitation, any proceeding
      brought or threatened to enforce payment of any of the obligations referred
      to
      in the foregoing paragraphs (a) and (b), or any suits or claims against Lender
      whatsoever as a result of Lender’s execution of this Agreement and making of its
      Loan, all as more specifically set forth in Sections
      9.4 and 9.7
      hereof;
      and in addition, to reimburse the Lender for its expenses and reasonable
      attorneys’ fees in connection with the preparation, administration, amendment,
      modification or waiver of the Agreement and the other Loan
      Documents.

     

    “Permitted
      Liens” means:

     

    (a) Liens
      in
      favor of Lender;

     

    (b) Liens
      for
      taxes, assessments, or similar charges, incurred in the ordinary course of
      business that are not delinquent;

     

    (c) Pledges
      or deposits made in the ordinary course of business to secure payment of
      workmen’s compensation, or to participate in any fund in connection with
      workmen’s compensation, unemployment insurance, old-age pensions or other social
      security programs;

     

    (d) Liens
      of
      mechanics, materialmen, warehousemen, carriers, or other like liens, securing
      obligations in the ordinary course of business that are not
      delinquent;

     

    (e) Good
      faith pledges or deposits made in the ordinary course of business to secure
      performance of bids, tenders, contracts (other than for the repayment of
      borrowed money) or leases, or to secure statutory obligations, or surety,
      appeal, indemnity, performance or other similar bonds required in the ordinary
      course of business;

     

    (f) Encumbrances
      consisting of zoning restrictions, easements or other restrictions on the use
      of
      real property, none of which materially impairs the use of such property by
      the
      Borrower in the operations of its business, and none of which is violated in
      any
      material respect by existing or proposed structures or land use;

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (g) Existing
      liens set forth or described on Schedule
      5.6,
      attached hereto and made a part hereof, and renewals thereof;

     

    (h) Statutory
      and common law landlord’s liens arising under any lease; 

     

    (i) The
      interests of lessees of any property of Borrower;

     

    (j) The
      following, if the validity or amount thereof is being contested in good faith
      by
      appropriate and lawful proceedings, so long as levy and execution thereon have
      been stayed and continue to be stayed; if Borrower has posted such security
      as
      may be required by Laws or as is reasonably satisfactory to Lender:

     

    (i) Claims
      or
      liens for taxes, assessments or charges due and payable and subject to interest
      or penalty;

     

    (ii) Claims,
      liens and encumbrances upon, and defects of title to, real or personal property,
      including any attachment of personal or real property or other legal process
      prior to adjudication of a dispute on the merits;

     

    (iii) Claims
      or
      liens of mechanics, materialmen, warehousemen, carriers, or other like liens;
      and

     

    (iv) Adverse
      judgments on appeal;

     

    (k) Purchase
      Money Liens securing Purchase Money Indebtedness incurred in compliance with
      Section
      7.4;
      and

     

    (l) Liens
      granted to Castlerigg Master Investments Ltd. (as collateral agent for the
      holders of the Senior Note) to secure the obligations of Borrower under the
      Senior Note and the other documents relating thereto.

     

    “Person”
      means
      any
      individual, corporation, partnership, association, joint-stock company, estate,
      trust, unincorporated organization, limited liability company, joint venture,
      court or government or political subdivision or agency thereof.

     

    “Purchase
      Money Indebtedness” means

     

    (a) Indebtedness
      created to secure the payment of all or any part of the purchase price of any
      property,

     

    (b) any
      Indebtedness incurred at the time of or within 30 days prior to or after the
      acquisition of any property for the purpose of financing all or any part of
      the
      purchase price thereof, and

     

    (c) any
      renewals, extensions or refinancings thereof, but not any increases in the
      principal amounts thereof outstanding at the time of any such renewal, extension
      or refinancing.

     

    “Purchase
      Money Lien” means
      any
      lien securing Purchase Money Indebtedness, but only if such lien shall at all
      times be confined solely to the property the purchase price of which was
      financed through the incurrence of the Purchase Money Indebtedness secured
      by
      such lien.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    “Records”
      means
      correspondence, memoranda, tapes, books, discs, paper, magnetic storage and
      other documents or information of any type, whether expressed in ordinary or
      machine language.

     

    “Senior
      Note”
      means
      that certain senior secured promissory note, dated December 31, 2007, issued by
      the Borrower to Castlerigg Master Investments Ltd. in the principal amount
      of
      $10,500,000, as amended, restated or otherwise modified, including, without
      limitation, any replacement notes.

     

    “Subordination
      Agreement”
      means
      that certain Subordination Agreement of even date herewith, by and among the
      Borrower, the Lender and Castlerigg Master Investments Ltd., as amended,
      restated or otherwise modified.

     

    “Subsidiary”
      of
      a
      Person means any Person of which more than 50% of the outstanding voting
      securities or other equity interests in such Person shall, at the time of
      determination, be owned directly or indirectly through one or more Persons,
      and
“Subsidiaries”
      means
      more than one of such Persons.

     

    “Term
      Rate”
      means a
      fixed rate of interest equal to 15% per annum.

     

    “Vaporizers”
      means
      those certain anesthetic vaporizers purchased after the date hereof and owned
      by
      Borrower with the proceeds of the Loan hereunder.

     

    “UCC”
      means
      the
      Uniform Commercial Code as in effect on the date hereof in the State of
      Delaware, as it may be amended from time to time; provided that if by reason
      of
      mandatory provisions of law, the perfection or the effect of perfection or
      non-perfection of a security interest in any Collateral is governed by the
      Uniform Commercial Code as in effect in a jurisdiction other than Delaware,
      “UCC”
      means
      the
      Uniform Commercial Code as in effect in such other jurisdiction for purposes
      of
      the provisions hereof relating to such perfection or effect of perfection or
      non-perfection.

     

    “Unmatured
      Default” means
      an
      event which but for the lapse of time or the giving of notice, or both, would
      constitute an Event of Default

     

    SECTION
      2. THE LOAN.

    

    Concurrently
      with the execution of this Agreement, Lender shall make the Loan available
      to
      Borrower under the following terms:

     

    2.1 Loan.
      Upon
      the Closing Date, the Lender shall make available to Borrower a term loan with
      a
      principal amount of $3,000,000 to be paid at Closing. Amounts re-paid hereunder
      shall not be permitted to be re-borrowed.

     

    2.2 Use
      of
      Proceeds.
      The
      Loan shall be used only for the purchase of the Vaporizers.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    2.3 Term
      Note.
      The
      obligations of Borrower under the Loan shall be evidenced by one or more Notes
      in the form attached hereto as Exhibit
      A.

     

    2.4
      Interest
      Rates and Payments.

     

    (a) Interest
      shall be charged and paid on the Loan from the date of the initial advance
      until
      the Loan is paid at the Term Rate.

     

    (b) Interest
      shall be computed on the basis of a 360-day year counting the actual number
      of
      days elapsed, and shall be due and payable, subject to the Subordination
      Agreement, upon the earlier of (i) each December 31 occurring after the date
      hereof, or (ii), upon demand by the Lender.

     

    (c) Notwithstanding
      the foregoing, upon the occurrence of an Event of Default and during the
      continuation thereof, interest may be charged at the Default Rate if the Lender
      so elects, regardless of whether the Lender has elected to exercise any other
      remedies under Section
      8
      hereof,
      including, without limitation, acceleration of the maturity of the outstanding
      principal of the Note. All such interest shall be paid at the time of and as
      a
      condition precedent to the curing of any such default to the extent any right
      to
      cure is given.

     

    (d) From
      time
      to time, the Lender shall send the Borrower statements of all amounts due
      hereunder which statements, absent manifest error, shall be considered correct
      and conclusively binding on the Borrower unless the Borrower notifies the Lender
      to the contrary within one hundred eighty (180) days of its receipt of any
      statement to which it objects. All sums payable to the Lender hereunder shall
      be
      paid in immediately available funds prior to 12:00 noon eastern standard time
      on
      the date when such sums are due and payable. Any amounts received by the Lender
      after 12:00 noon eastern standard time on any Business Day shall be deemed
      to
      have been received on the next Business Day.

     

    (e) Subject
      to Section 2.6, the entire principal balance of the Loan, together with all
      interest accrued thereon and all other amounts owing which constitute the
      Obligations, shall be due and payable in full on the earlier of (1) the Loan
      Termination Date, or (2) demand by the Lender.

     

    (f) All
      agreements herein made are expressly limited so that in no event whatsoever
      shall the interest and loan charges agreed to be paid to the Lender for the
      use
      of the money advanced or to be advanced pursuant to this Agreement exceed the
      maximum amounts collectible under applicable laws in effect from time to time.
      If for any reason whatsoever the interest or loan charges paid or contracted
      to
      be paid in respect of the Loan shall exceed the maximum amounts collectible
      under applicable laws in effect from time to time, then, ipso facto,
      the
      obligation to pay such interest and/or loan charges shall be reduced to the
      maximum amounts collectible under applicable laws in effect from time to time,
      and any amounts collected by the Lender that exceeds such maximum amounts shall
      be applied to the reduction of the principal balance of the Loan and/or refunded
      to Borrower so that at no time shall the interest or loan charges paid or
      payable in respect of the Loan exceed the maximum amounts permitted from time
      to
      time by applicable law. This provision shall control every other provision
      herein and in any and all other agreements and instruments now existing or
      hereafter arising between Borrower and the Lender with respect to the
      Loan.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    2.5 Prepayment.
      Subject
      to the Subordination Agreement, the Borrower may, upon two (2) Business Day’s
      prior written notice to the Lender, prepay the Loan in whole or in
      part.

     

    2.6 Subordination. Notwithstanding
      anything to the contrary herein, payment of the Obligations shall, to the extent
      set forth in the Subordination Agreement, be subordinate and junior in right
      of
      payment to the prior payment in full of all obligations under the Senior Note,
      the provisions of which Subordination Agreement are incorporated herein by
      reference and made a part hereof. 

     

    SECTION
      3. CONDITIONS PRECEDENT

     

    The
      obligation of the Lender to fund the Loan is subject to the following conditions
      precedent:

     

    3.1 Conditions
      to Initial Advance.
      The
      Borrower shall have delivered to the Lender prior to the initial disbursement
      of
      the Loan the following:

     

    (a) This
      Agreement;

     

    (b) The
      Note;

     

    (c) UCC-1
      Financing Statement to be filed at the office of the Delaware Secretary of
      State
      and such other offices as Lender may require;

     

    (d) Copies
      of
      the resolutions of the Board of Directors of the Borrower, certified by the
      Borrower’s secretary as of the date of Closing, authorizing the execution,
      delivery and performance of this Agreement and, as applicable, the Loan
      Documents and each other document to be delivered pursuant hereto;

     

    (e) A
      copy,
      certified as of the most recent date practicable, by the Delaware Secretary
      of
      State of Borrower’s certificate of incorporation together with a certificate
      dated the date of the Closing of Borrower’s secretary to the effect that such
      documents have not been amended since the date of the Secretary of State’s
      certification;

     

    (f) A
      copy of
      Borrower’s Bylaws certified by Borrower’s secretary as of the date of the
      Closing;

     

    (g) A
      certificate dated as of the date of the Closing of the secretary of the Borrower
      as to the incumbency and signatures of its officers executing the Loan
      Documents;

     

    (h) A
      Certificate, as of the most recent date practicable, of the Delaware Secretary
      of State as to the existence and good standing of Borrower;

     

    (i) The
      Subordination Agreement, in form and substance satisfactory to Lender, executed
      by Borrower, Lender and Castlerigg Master Investments Ltd. 

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    (j) A
      certificate, dated the date of the Closing, signed by the president, vice
      president, chief financial officer, or corporate controller of the Borrower
      to
      the effect that:

     

    (i) The
      representations and warranties set forth within Section
      5 are
      true
      as of the date of the Closing;

     

    (ii) No
      Event
      of Default or Unmatured Default has occurred as of such date; and

     

    (iii) All
      of
      the Loan Documents are in full force and effect.

     

    3.2 Legal
      Matters.
      At the
      time of the Closing and thereafter, all legal matters incidental to the Loan
      shall be satisfactory to Lender and its counsel.

     

    SECTION
      4. COLLATERAL SECURITY

     

    4.1 Composition
      of the Collateral.
      The
      property in which a security interest is granted pursuant to the provisions
      of
Sections
      4.2 and 4.3
      shall
      constitute the “Collateral”. The Collateral, together with all of the Borrower’s
      other property of any kind, both real and personal, held by, assigned to,
      mortgaged to or conveyed in favor of the Lender, shall stand as one general,
      continuing collateral security for all Obligations and may be retained by the
      Lender until all Obligations have been satisfied in full.

     

    4.2 Rights
      in Property Held by the Lender.
      As
      security for the prompt satisfaction of all Obligations, the Borrower hereby
      grants the Lender a lien on and a security interest in, all amounts that may
      be
      owing from time to time by the Lender to the Borrower in any capacity,
      including, but without limitation, any balance or share belonging to the
      Borrower of any deposit or other account with the Lender, which lien and
      security interest shall be independent of any right of set-off which the Lender
      may have.

     

    4.3 Rights
      in Property of the Borrower.
      As
      further security for the prompt satisfaction of all Obligations, the Borrower
      hereby grants the Lender a lien upon and security interest in all of the
      following, wherever located, whether now owned or hereafter acquired, together
      with all substitutions, replacements, improvements, accessions or appurtenances
      thereto, and proceeds (including, without limitation, insurance proceeds)
      thereof:

     

    (a) Accounts;

    (b)
       Chattel
      Paper;

    (c)
       Documents;

    (d)
       Equipment;

    (e)
       General
      Intangibles;

    (f)
       Instruments;

    (g)
       Inventory;
      and

    (h) All
      Records pertaining thereto or to any other Collateral; and 

    (i) any
      other
      personal property, whether tangible or intangible, now owned or hereafter
      acquired by Borrower.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    4.4 Priority
      of Liens.
      The
      foregoing liens shall be first priority liens except for (a) liens with respect
      to the Senior Note, and (b) any Permitted Liens on assets which have priority
      or
      would have priority by the operation of Laws.

     

    4.5 Financing
      Statements.

     

    (a) The
      Borrower will pay or reimburse the Lender for all costs and taxes of filing
      or
      recording the same in such public offices as the Lender may designate, and
      reimburse the Lender for performing subsequent verification searches following
      Closing in each applicable jurisdiction.

     

    (b) The
      Borrower hereby authorizes the Lender to file any Financing Statement and to
      perform all other acts that the Lender deems appropriate to perfect and continue
      the Lender’s security interest in, and to protect and preserve, the
      Collateral.

     

    SECTION
      5. REPRESENTATIONS AND WARRANTIES

     

    To
      induce
      the Lender to enter into this Agreement, the Borrower represents and warrants
      to
      Lender as follows:

     

    5.1 Due
      Organization and Qualification.
      Except
      as set forth on Schedule
      5.1
      hereto,
      the Borrower is a corporation duly organized, validly existing and in good
      standing under the Laws of the State of Delaware; the Borrower has no
      Subsidiaries; the Borrower has the lawful power to own its properties and to
      engage in the business it conducts, and is duly qualified and in good standing
      in the jurisdictions wherein the nature of the business transacted by it or
      property owned by it makes such qualification necessary;

     

    5.2 No
      Conflicting Agreement.
      The
      Borrower is not in default with respect to any existing Indebtedness, and the
      making and performance of the Loan Documents will not (immediately, or with
      the
      passage of time or the giving of notice, or both):

     

    (a) Violate
      any provisions of the Constituent Documents of the Borrower, any provisions
      of
      any other documents related to the existing Indebtedness of Borrower (other
      than
      violations that have been waived in writing), or violate any Laws, or result
      in
      a default under any material contract, agreement, or instrument to which the
      Borrower is a party or by which the Borrower or any of its property is bound;
      or

     

    (b) Result
      in
      the creation or imposition of any security interest in, or lien or encumbrance
      upon, any of the assets of the Borrower except in favor of the
      Lender;

     

    5.3 Capacity.
      The
      Borrower has the power and authority to enter into and perform the Loan
      Documents and to incur the Obligations herein and therein provided for, and
      have
      taken all action necessary to authorize the execution, delivery, and performance
      of the Loan Documents;

     

    5.4 Binding
      Obligations.
      The
      Loan Documents are valid, binding, and enforceable in accordance with their
      respective terms subject to the general principles of equity (regardless of
      whether such question is considered in a proceeding in equity or at law) and
      to
      applicable bankruptcy, insolvency, moratorium, fraudulent or preferential
      conveyance and other similar laws affecting generally the enforcement of
      creditors’ rights;

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    5.5 Litigation. Except
      as
      set forth on Schedule
      5.5
      hereto,
      there is no pending or, to Borrower’s knowledge, threatened order, notice,
      claim, litigation, proceeding or investigation against or affecting the Borrower
      that could reasonably be expected to result in a Material Adverse
      Effect;

     

    5.6 Title.
      Except
      as set forth on Schedule
      5.6
      hereto,
      the Borrower has good and marketable title to all of its assets, subject to
      no
      security interest, encumbrance or lien, or the claims of any other Person except
      for Permitted Liens and other liens securing Indebtedness, in the aggregate,
      of
      less than $10,000;

     

    5.7 Financial
      Statements.
      The
      Financial Statements, including any schedules and notes pertaining thereto,
      have
      been prepared in accordance with GAAP consistently applied, and fully and fairly
      present (subject, in the case of interim Financial Statements to normal,
      year-end adjustments and the absence of notes) the financial condition of the
      Borrower at the dates thereof and the results of operations for the periods
      covered thereby, and there has been no Material Adverse Change from December
      31,
      2007 to the date hereof;

     

    5.8 Licenses;
      Compliance with Laws.
      Except
      to the extent that the failure to comply would not result in a Material Adverse
      Effect, the Borrower, has complied with all applicable Laws with respect to:
      (1)
      any licenses, restrictions, specifications, or other requirement pertaining
      to
      services that the Borrower performs; (2) the conduct of its business; (3) the
      use, maintenance, and operation of the real and personal properties owned or
      leased by it; and (4) health, safety, worker’s compensation, and equal
      employment opportunity;

     

    5.9 Consents;
      Governmental Approvals.
      Each
      consent, approval or authorization of, or filing, registration or qualification
      with, any Person required to be obtained or effected by the Borrower in
      connection with the execution and delivery of the Loan Documents or the
      undertaking or performance of any obligation thereunder has been duly obtained
      or effected; further, no authorization, consent, approval or other action by,
      and no notice to or filing with, any governmental authority or regulatory body
      is required for the due execution, delivery or performance by the Borrower
      of
      any Loan Documents to which it is or will be a party, except for approvals
      which
      have been obtained and are in full force and effect;

     

    5.10 Survival.
      All of
      the representations and warranties set forth in Section
      5 shall
      be
      true and correct when made and shall survive until all Obligations are satisfied
      in full.

     

    SECTION
      6. AFFIRMATIVE COVENANTS

     

    The
      Borrower hereby covenants as follows:

     

    6.1 Use
      of
      Proceeds.
      The
      Borrower will use the proceeds of the Loan only for the purposes permitted
      in
Section
      2.2,
      and
      will furnish the Lender such evidence as it may reasonably require with respect
      to such use.

     

    6.2 Financial
      Statements and Reports.
      The
      Borrower will furnish the Lender:

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (a) As
      soon
      as available and in any event within 90 days after the end of each Fiscal Year
      of Borrower: (i) statements of cash flows of the Borrower for such Fiscal Year;
      (ii) income statements of the Borrower for such Fiscal Year; and (iii) balance
      sheets of the Borrower as of the end of such Fiscal
      Year -
      all in
      reasonable detail, setting forth the corresponding figures as at the end of
      and
      for the previous year, including supporting schedules, and audited by
      independent public accountants of recognized standing, selected by Borrower
      and
      reasonably satisfactory to Lender, and prepared in accordance with
      GAAP;

     

    (b) As
      soon
      as available and in any event within 45 days after the close of each of the
      first three fiscal quarters of each Fiscal Year of the Borrower: (i) statements
      of cash flows of the Borrower for such year-to-date period; (ii) income
      statements of the Borrower for such quarterly period; and (iii) balance sheets
      of the Borrower as of the end of such quarterly period - all in reasonable
      detail, subject to year-end audit adjustments and certified by the president
      or
      principal financial officer of the Borrower to have been prepared in accordance
      with GAAP consistently applied, except for any inconsistencies explained in
      such
      certificate;

     

    (c) As
      soon
      as available and in any event within 30 days after the close of each month
      in
      each Fiscal Year of Borrower: (i) statements of cash flows of the Borrower
      for
      such year-to-date period; (ii) income statements of the Borrower for such
      monthly period; and (iii) balance sheets of the Borrower as of the end of such
      monthly period - all in reasonable detail, subject to year-end audit adjustments
      and certified by the president or principal financial officer of the Borrower
      to
      have been prepared in accordance with GAAP consistently applied, except for
      any
      inconsistencies explained in such certificate;

     

    (d) Contemporaneously
      with the delivery of the financial statements referred to in paragraphs (a),
      (b)
      and (c) above, a certificate of the president or chief financial officer of
      the
      Borrower stating that: (i) such officer has individually reviewed the provisions
      of this Agreement; (ii) a review of the activities of the Borrower during such
      reporting period has been made by such officer or under such officer’s
      supervision, with a view to determining whether the Borrower has fulfilled
      its
      obligations under this Agreement; and (iii) to the best of such officers’
knowledge after a reasonable investigation, the Borrower has observed and
      performed each undertaking contained in this Agreement and is not in default
      in
      the observance or performance of any of the provisions hereof or, if the
      Borrower shall be so in default, specifying all such defaults and events of
      which such officer may have knowledge;

     

    (e) Immediately
      upon receipt of the same by Borrower, copies of all management letters and
      any
      other reports which are submitted to the Borrower by its independent accountants
      in connection with any annual or interim audit of the Records of the Borrower
      by
      such accountants;

     

    (f) On
      or
      before April 30 of each year, a proforma budget (including both projected
      maintenance Capital Expenditures and other Capital Expenditures) for such Fiscal
      Year, in form reasonably satisfactory to the Lender; and

     

    (g) From
      time
      to time such additional information regarding the financial condition or
      business of the Borrower as the Lender may reasonably request.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    6.3 Taxes;
      Copies of Returns.
      The
      Borrower will pay, prior to delinquency, all taxes, assessments and charges
      or
      levies imposed upon it or on any of its property or which it is required to
      withhold or pay over, except where contested in good faith by appropriate
      proceedings with adequate security therefor having been set aside in a manner
      satisfactory to Lender. The Borrower will pay or cause to be paid, all such
      taxes, assessments, charges or levies forthwith whenever foreclosure on any
      lien
      that attaches (or security therefor) appears imminent. Within ten (10) days
      of
      Lender’s request therefor, the Borrower will furnish the Lender with copies of
      federal income tax returns filed.

     

    6.4 Records
      and Inspection.
      The
      Borrower will, upon the request by the Lender, make available during regular
      business hours any of its business Records for inspection by duly authorized
      representatives of the Lender, and will furnish the Lender any information
      regarding their business affairs and financial condition within a reasonable
      time after written request therefor.

     

    6.5 Maintenance
      of Existence; Compliance with Laws; Licenses.
      The
      Borrower will take all necessary steps to renew, keep in full force and effect,
      and preserve their corporate existence, good standing, and franchises, and
      will
      comply in all respects with all present and future Laws applicable to them
      except to the extent that a failure to do so would not have or cause to occur
      a
      Material Adverse Effect.

     

    6.6 Ordinary
      Course; Pledge of Notes.
      The
      Borrower will keep accurate and complete Records of its Accounts, consistent
      with sound business practices. The Borrower will collect its Accounts only
      in
      the ordinary course of business. 

     

    6.7 Notice
      of Default.
      The
      Borrower will notify Lender immediately if it becomes aware of the occurrence
      of
      any Event of Default or of any fact, condition or event that only with the
      giving of notice or passage of time or both, could reasonably be expected to
      become an Event of Default, or of the failure of the Borrower to observe any
      of
      its undertakings hereunder.

     

    6.8 Notice
      of Name Change or State of Incorporation.
      The
      Borrower will notify Lender, with a copy to Castlerigg Master Investments Ltd.,
      thirty (30) days in advance of any change in (i) the name of the Borrower,
      or
      (ii) any change in the state of incorporation of Borrower. Prior to establishing
      any new place of business, if requested by Lender, Borrower will deliver to
      Lender a landlord’s agreement in form and substance satisfactory to
      Lender.

     

    6.9 Exclusivity.
      In
      further consideration for the execution of this Agreement by Lender and as
      an
      inducement for the Lender to make the Loan available to Borrower, during the
      period of time that the Loan is outstanding, Borrower agrees that Borrower
      shall
      notify the Lender of any Proposed Equity Offering (as defined below), at the
      time such proposal is made but in no event less than fifteen (15) days prior
      to
      the closing of such Proposed Equity Offering. Subject to the right of first
      refusal granted to Castlerigg Master Investments, Ltd. pursuant to Section
      4(o)(iii) of that certain Securities Purchase Agreement, dated as of December
      31, 2007 (the “Securities
      Purchase Agreement”),
      the
      Lender shall have the right to purchase up to 100% of the shares not purchased
      by Castlerigg Master Investments, Ltd. on the same terms and conditions as
      offered in the Proposed Equity Offering. If the Lender does not respond within
      15 business days of being notified of such a Proposed Equity Offering, or
      declines to purchase all or a portion of such securities, then that portion
      which is not purchased by Lender may be offered to other parties on terms no
      less favorable to the Borrower for a period of 120 calendar days.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    In
      addition, subject to the provisions contained in Section 4(o)(ii) of the
      Securities Purchase Agreement and the provisions contained in that certain
      Registration Rights Agreement dated as of December 31, 2007 by and between
      the
      Borrower and Castlerigg Master Investments, Ltd., the Borrower will grant the
      Lender any rights of first refusal or registration rights granted to subsequent
      purchasers of the Borrower’s equity securities to the extent that such
      subsequent rights are superior, in good faith judgment of the Lender, to those
      granted in connection with this Agreement.

     

    Proposed
      Equity Offering shall mean an offering by the Borrower of (a) shares of common
      stock or preferred stock (whether now authorized or hereafter authorized and
      issued in any context), (b) shares of common stock issued or issuable upon
      conversion of any preferred stock, or (c) shares of common stock issued or
      issuable upon exercise or conversion, as applicable, of stock options, warrants
      or other convertible securities of the Borrower, to any party. Notwithstanding
      the foregoing, a Proposed Equity Offering shall not include securities issued:
      (a) pursuant to any compensatory stock or option plan duly adopted for such
      purpose by the members of the board of directors of the Borrower, (b) upon
      the
      exercise or exchange of or conversion of any securities exercisable or
      exchangeable for or convertible into shares of common stock of the Borrower
      issued and outstanding on the date of this Agreement, (c) pursuant to strategic
      acquisitions or (d) to secure equipment financing.

     

    6.10 Covenant
      to Negotiate in Good Faith.
      In
      further consideration for the execution of this Agreement by Lender and as
      an
      inducement for the Lender to make the Loan available to Borrower, Borrower
      agrees to negotiate with Lender, in good faith, additional terms with respect
      to
      Lender’s investment in the Borrower, subject to the rights of the holder of the
      Senior Note.

     

    SECTION
      7. NEGATIVE COVENANTS

     

    Borrower
      hereby covenants and agrees as follows:

     

    7.1 Merger
      or Reorganization.
      Borrower will not enter into any merger, consolidation, reorganization or
      recapitalization except as permitted under the Senior Note as in effect on
      the
      date hereof.

     

    7.2 Sale
      of Assets.
      Except
      as otherwise permitted under the Senior Note, Borrower will not sell, transfer,
      lease or otherwise dispose of all or any material part of its assets; provided,
      however, that Borrower may in the ordinary course of business (i) replace
      damaged, obsolete or worn Equipment with Equipment of similar value and use,
      or
      (ii) dispose of assets representing no more than 5% of its consolidated total
      assets.

     

    7.3 Encumbrances.
      The
      Borrower will not: (1) mortgage, pledge, grant or permit to exist a security
      interest in or lien upon any of its assets of any kind, now owned or hereafter
      acquired, except for Permitted Liens, or (2) except for any restrictions set
      forth in the Senior Notes, covenant or agree with any Person other than the
      Lender not to mortgage, pledge, or grant a security-interest in or a lien upon
      its assets; provided that Borrower may make such covenant or agreement with
      respect to assets securing Purchase Money Indebtedness or Capitalized Lease
      Obligations incurred in accordance with Section
      7.4
      of this
      Agreement.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    7.4 Debts
      and Other Obligations.
      The
      Borrower will not incur, create, assume, or permit to exist any Indebtedness
      except: (1) the Loan, (2) Indebtedness evidenced by the Senior Note, (3) trade
      Indebtedness incurred in the ordinary course of business; (4) Indebtedness
      secured by Permitted Liens; and (5) Capitalized Lease Obligations and/or
      Purchase Money Indebtedness to the extent permitted under the Senior Notes.
      Except for the Senior Notes, Borrower will not prepay, in whole or in part,
      any
      existing Indebtedness of the Borrower if at the time such payment is due or
      is
      otherwise made, or after giving effect to such payment, an event constituting
      an
      Unmatured Default or Event of Default has occurred and is
      continuing.

     

    7.5 Borrower
      Distributions.
      The
      Borrower will not make any Borrower Distributions without the prior express
      written consent of the Lender, other than (i) as otherwise required under the
      Senior Note, and (ii) the redemption of up to 350,000 shares of common stock
      held by former holders of the Series A Preferred Stock of RxElite Holdings
      Inc.
      that is due within fifty (50) days of December 31, 2008 at a redemption price
      of
      $4.00 per share, until payment in full of all Obligations of the Borrower
      outstanding pursuant to the Loan Documents.

     

    SECTION
      8. DEFAULT

     

    8.1 Events
      of Default.
      The
      occurrence of any one or more of the following events shall constitute an “Event
      of Default” hereunder:

     

    (a) The
      Borrower shall fail to pay within one (1) Business Day of the date when due
      any
      installment of principal or interest payable hereunder, or shall fail to pay
      within two (2) Business Days of written notice any fee payable
      hereunder.

     

    (b) The
      Borrower shall fail to observe or perform any obligation or covenant to be
      observed or performed by it, jointly or severally, under any of the Loan
      Documents; provided,
      however,
      if such
      failure is not related to the breach of any negative covenant in Section
      7
      of this
      Agreement, Borrower shall have fifteen (15) days after such Person’s knowledge
      of such breach to cure or cause to be cured such failure.

     

    (c) The
      Borrower shall fail to pay any Indebtedness for borrowed money (whether direct
      or indirect, including guarantees of borrowed money due from Subsidiaries)
      due
      any Person other than Lender and such failure shall continue beyond any
      applicable grace period and shall equal or exceed, either individually or in
      the
      aggregate, $100,000.00 in amount.

     

    (d) A
      Material Adverse Effect shall result from any breach of or event of default
      arising under any agreement binding the Borrower, as determined by Lender in
      its
      reasonable discretion.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    (e) Any
      financial statement, representation, warranty or certificate made or furnished
      by Borrower in connection with this Agreement or the Loan, or as inducement
      to
      the Lender to enter into this Agreement, or in any separate statement or
      document to be delivered hereunder to the Lender, shall be materially false,
      incorrect, or incomplete when made, in light of the circumstances under which
      it
      was made.

     

    (f) The
      Borrower shall admit its inability to pay debts as they mature, or shall make
      an
      assignment for the benefit of its or any of its creditors.

     

    (g) Proceedings
      in bankruptcy, or for reorganization of Borrower or for the readjustment of
      any
      of its debts, under the United States Bankruptcy Code, as amended, or any part
      thereof, or under any other Laws, whether state or federal, for the relief
      of
      debtors, now or hereafter existing, shall be commenced by the Borrower or shall
      be commenced against the Borrower and not dismissed within thirty (30) days
      of
      such an involuntary filing.

     

    (h) A
      receiver or trustee shall be appointed for the Borrower or for any substantial
      part of its assets, or any proceedings shall be instituted for the dissolution
      or the full or partial liquidation of the Borrower.

     

    (i) The
      Borrower shall discontinue its business or materially change the nature of
      its
      business.

     

    (j) A
      judgment creditor of the Borrower shall obtain possession of any Collateral
      or
      other assets by any means, including, but without limitation, levy, distraint,
      replevin or self-help.

     

    (k) Any
      proceeding shall be instituted against the Borrower, which is likely (taking
      into account the probability of an adverse determination and the exhausting
      of
      all appeals) to have a Material Adverse Effect, as determined by Lender in
      its
      reasonable discretion.

     

    (l) The
      Borrower shall default beyond any applicable grace period in any other
      Indebtedness (excluding the Obligations) owed to the Lender, or any of them,
      or
      under any other agreements for credit or borrowed money it may have with Lender,
      jointly or severally, directly or indirectly, whether matured or
      unmatured.

     

    (m) RxElite
      Holdings Inc. or any other party to the Minrad Contract defaults thereunder
      or
      the Minrad Contract is terminated.

     

    8.2 Acceleration.
      Upon
      the occurrence of any of such Events of Default, the Lender may, at its option,
      immediately terminate the obligation to make any further advances and/or declare
      the principal and interest accrued on the Note and all other Obligations to
      be
      immediately due and payable, whereupon, subject to the terms of the
      Subordination Agreement, the same shall become forthwith due and payable,
      without presentment, demand, protest, or any notice of any kind except as set
      forth above; provided,
      that in
      the case of the Events of Default specified in clause (f), (g) or (h) above
      with
      respect to Borrower, without any notice to Borrower or any act by the Lender,
      the Note and all other Obligations shall, subject to the terms of the
      Subordination Agreement, become immediately due and payable without presentment,
      demand, protest or other notice of any kind, all of which are waived by the
      Borrower. In addition, and regardless of whether the Note has been accelerated,
      the Lender may upon the occurrence of any Event of Default elect to charge
      interest at the Default Rate set forth in the Note.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    8.3 Remedies.
      After
      any acceleration, as provided for in Section
      8.2,
      the
      Lender, subject to the terms of the Subordination Agreement, shall have, in
      addition to the rights and remedies given it by the Loan Documents, all those
      allowed by all applicable Laws, including, but without limitation, the UCC
      as
      enacted in any jurisdiction in which any Collateral may be located. Without
      limiting the generality of the foregoing, the Lender may, subject to the terms
      of the Subordination Agreement, immediately, without demand of performance
      and
      without other notice (except as specifically required by the Loan Documents)
      or
      demand whatsoever to the Borrower, all of which are hereby expressly waived,
      and
      without advertisement, sell at public or private sale, in any manner and at
      any
      location authorized by Laws, or otherwise realize upon, the whole, or, from
      time
      to time, any part of the Collateral, or any interest which the Borrower may
      have
      therein. After deducting from the proceeds of sale or other disposition of
      the
      Collateral all expenses (including all reasonable expenses for legal services),
      the Lender shall apply such proceeds toward the satisfaction of the Obligations.
      Any remainder of the proceeds after satisfaction in full of the Obligations
      shall be distributed as required by applicable Laws. Notice of any sale or
      other
      disposition shall be given to the Borrower at least ten (10) days before the
      time of any intended public sale or of the time after which any intended private
      sale or other disposition of the Collateral is to be made, which the Borrower
      hereby agrees shall be reasonable notice of such sale or other disposition.
      The
      Borrower agrees to assemble, or to cause to be assembled, at its own expense,
      the Collateral at such place or places as the Lender shall designate. At any
      such sale or other disposition, the Lender may, to the extent permissible under
      applicable Laws, purchase the whole or any part of the Collateral, free from
      any
      right of redemption on the part of the Borrower, which right is hereby expressly
      waived and released.

     

    Without
      limiting the generality of any of the rights and remedies conferred upon the
      Lender under this Section
      8.3,
      the
      Lender may, to the full extent permitted by applicable Laws and subject to
      the
      terms of the Subordination Agreement:

     

    (a) Enter
      upon the premises of the Borrower, exclude therefrom the Borrower, any
      Subsidiary or any officer or employee thereof, and take immediate possession
      of
      the Collateral, either personally or by means of a receiver appointed by a
      court
      of competent jurisdiction, using all necessary and lawful self-help to do
      so;

     

    (b) At
      the
      Lender’s option, use, operate, manage and control the Collateral in any lawful
      manner;

     

    (c) Collect
      and receive all receivables, rents, income, revenue, earnings, issues and
      profits therefrom; and

     

    (d) Maintain,
      repair, renovate, alter or remove the Collateral as the Lender may determine
      in
      its discretion.

     

    SECTION
      9. MISCELLANEOUS

     

    9.1 Construction.
      The
      provisions of this Agreement shall be in addition to those of any guaranty,
      pledge or security agreement, note or other evidence of liability held by the
      Lender, all of which shall be construed as complementary to each other;
      provided, in the event of any inconsistency, the provisions of this Agreement
      shall control. Nothing herein contained shall prevent the Lender from enforcing
      any or all other notes, guaranties, pledge or security agreements in accordance
      with their respective terms.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    9.2 Further
      Assurance.
      From
      time to time, the Borrower will execute and deliver to the Lender such
      additional documents and will provide such additional information as the Lender
      may reasonably require to carry out the terms of this Agreement and be informed
      of the Borrower’s operations, business and condition

     

    9.3 Enforcement
      and Waiver by the Lender.
      The
      Lender shall have the right at all times to enforce the provisions of the Loan
      Documents in strict accordance with the terms thereof, notwithstanding any
      conduct or custom on the part of the Lender in refraining from so doing at
      any
      time or times. The failure of the Lender at any time or times to enforce their
      rights under such provisions, strictly in accordance with the same, shall not
      be
      construed as having created a custom in any way or manner contrary to specific
      provisions of the Loan Documents or as having in any way or manner modified
      or
      waived the same. All rights and remedies of the Lender is cumulative and
      concurrent and the exercise of one right or remedy shall not be deemed a waiver
      or release of any other right or remedy.

     

    9.4 Expenses
      of the Lender.
      The
      Borrower will, on demand, reimburse the Lender for all out-of-pocket expenses,
      including the reasonable fees and expenses of legal counsel for the Lender,
      incurred by the Lender in connection with the preparation, administration,
      amendment, modification, or enforcement of the Loan Documents and the collection
      or attempted collection of the Note.

     

    9.5 Notices.
      Any
      notices or consents required or permitted by this Agreement shall be in writing
      and shall be deemed delivered when delivered in person, or when sent by
      certified mail, postage prepaid, return receipt requested, by overnight courier
      service, or by facsimile to the address and/or telecopy number as follows,
      unless such address or number is changed by written notice
      hereunder.

     

    

    
      	
            	(a)
              If to the Borrower:	
              RxElite,
                Inc.

            

    

    1404
      North Main Street, Suite 200

    Meridian,
      Idaho 83642

    Attn:
      Jonathan Houssian

    Telecopy:
      (208) 288-1191

    

    
      	
            	with
              a copy (which shall not constitute notice) to:	
              Haynes
                and Boone, LLP

            

    

    153
      East
      53rd
      Street,
      Suite 4900

    New
      York,
      New York 10022

    Attn:
      Harvey J. Kesner, Esq.

    Telecopy:
      (212) 918-8989

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    
      

      
        	
              	(b) If
                to the Lender:	
                NPIL
                  Pharma Inc.

              

        	 	 	
                379
                  Thornall Street, 1st
                  Floor

                Alfieri
                  Building

                Edison,
                  New Jersey 08837

                Attn:
                  R. Ananthanarayanan, President

                Telecopy:
                  732-388-4013

                Telephone:
                  732-549-9451

              

      

    

     

    
      	
            	with
              a copy (which shall not constitute notice) to:	
              Ashurst
                LLP

            

      	 	 	
              Broadwalk
                House

              5
                Appold Street

              London
                EC2A 2HA UK

              Attention:
                Andrew Edge

              Telecopy:
                +44 (0)20 7638 1112

            

     

    
      	
            	with
              a copy (which shall not constitute notice) to:	
              Waller
                Lansden Dortch & Davis LLP

            

      	 	 	
              511
                Union Street, Suite 2700

              Nashville,
                Tennessee 37219

              Attention:
                Robert L. Harris

              Jessica
                Green Gichner 

              Telecopy:
                (615) 244-6804

            

    

     

    9.6 Waiver
      and Release.
      To the
      maximum extent permitted by applicable Laws, the Borrower:

     

    (a) 
      Waives:
      (1) protest of all commercial paper at any time held by the Lender on which
      the
      Borrower is in any way liable; and (2) notice and opportunity to be heard,
      after
      acceleration in the manner provided in Section
      8.2,
      before
      exercise by the Lender of the remedies of self-help, set-off, or of other
      summary procedures permitted by any applicable Laws or by any agreement with
      the
      Borrower, and, except where required hereby or by any applicable Laws, notice
      of
      any other action taken by the Lender; and

     

    (b) Releases
      the Lender, and its officers, directors, attorneys, employees, and agents from
      all claims for loss or damage caused by any act or omission on the part of
      any
      of them except for gross negligence, recklessness or willful
      misconduct.

     

    9.7 Indemnification.
      Borrower hereby indemnifies and holds the Lender, and its officers, directors,
      employees and agents free and harmless from and against any and all actions,
      causes of action, suits, losses, liabilities and damages, and expenses in
      connection therewith, including, without limitation, reasonable counsel fees
      and
      disbursements, incurred by the Lender as a result of, or arising out of, or
      relating to the execution, delivery, performance or enforcement of the Loan
      Documents or any instrument contemplated therein, except for the Lender’s gross
      negligence or willful misconduct. If and to the extent that the foregoing
      undertaking may be unenforceable for any reason, Borrower hereby agrees to
      make
      the maximum contribution to the payment and satisfaction of such liabilities
      and
      costs permitted under applicable Laws.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    9.8 Applicable
      Laws.
      The
      Laws of the State of Delaware, other than its conflicts of laws rules, shall
      govern the construction and interpretation of this Agreement and the validity
      and enforceability of this Agreement, and of its provisions and the transactions
      pursuant to this Agreement.

     

    9.9 Binding
      Effect, Assignment and Entire Agreement.
      This
      Agreement shall inure to the benefit of, and shall be binding upon, the
      respective successors and permitted assigns of the parties hereto. The Borrower
      has no right to assign any of its rights or obligations hereunder without the
      prior written consent of the Lender. This Agreement and the documents executed
      and delivered pursuant hereto constitute the entire agreement between the
      parties, and supersede all prior agreements and understandings among the parties
      hereto. This Agreement may be amended only by a writing signed on behalf of
      each
      party.

     

    9.10 Severability.
      If any
      provision of this Agreement shall be held invalid under any applicable Laws,
      such invalidity shall not affect any other provision of this Agreement that
      can
      be given effect without the invalid provision, and, to this end, the provisions
      hereof are severable.

     

    9.11 Counterparts.
      This
      Agreement may be executed by the parties independently in any number of
      counterparts, all of which together shall constitute but one and the same
      instrument which is valid and effective as if all parties had executed the
      same
      counterpart.

     

    9.12 Venue.
      It is
      agreed that venue for any action arising in connection with this Agreement
      or
      the Obligations secured hereby shall lie exclusively with courts sitting in
      the
      State of Delaware, unless the Lender otherwise agrees in writing.

     

    9.13 Right
      of Setoff.
      Borrower acknowledges that Lender shall retain its common law right of setoff
      with respect to any of the Obligations.

     

    (Remainder
      of Page Intentionally Left Blank)

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
      the
      day and year first above written.

    

    
      	 	
              BORROWER:

            
	 	 
	 	
              RXELITE,
                INC.

            
	 	 
	 	
              BY:___________________________________

            
	 	 
	 	
              TITLE:_________________________________

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	 	
              LENDER:

            
	 	
              NPIL
                PHARMA INC.

            
	 	 
	 	
              BY:__________________________________

            
	 	 
	 	
              TITLE:________________________________

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