Document:

EX-4.24

Exhibit 4.24

LIMITED WAIVER AND CONSENT TO CONVERTIBLE SECURED NOTES

          This LIMITED WAIVER AND CONSENT (this “Waiver and Consent”) is dated as of April 30,
2009 and entered into by and among NationsHealth Inc., a Delaware corporation (the
“Company”), NationsHealth Holdings, L.L.C., a Florida limited liability company and a
wholly-owned subsidiary of the Company (“NH LLC”), United States Pharmaceutical Group,
L.L.C., a Delaware limited liability company and an indirect wholly-owned subsidiary of the Company
(“USPG,” the Company and NH LLC are collectively, the “Existing Issuers”), Diabetes
Care & Education, Inc., a South Carolina corporation (“Diabetes”), and National
Pharmaceuticals and Medical Products (USA) L.L.C., a Florida limited liability company
(“National” and “Diabetes” are together, the “Additional Issuers,” and the
Existing Issuers and the Additional Issuers are together, the “Issuers”) and MHR Capital
Partners Master Account LP (as assignee of MHR Capital Partners (500) LP (f/k/a MHR Capital
Partners LP)), OTQ LLC and MHR Capital Partners (100) LP (collectively, the “Holders”) and
MHR Capital Partners (500) LP, as collateral agent (the “Collateral Agent”), and is made
with reference to those certain Promissory Notes in an aggregate principal amount of $15,000,000
issued by the Issuers and also designated as 7 3/4% Convertible Secured Notes (the “Notes”)
pursuant to that certain Investment Unit Purchase Agreement, dated as of February 28, 2005 between
the Existing Issuers and the Holders. Capitalized terms used herein without definition shall have
the same meanings herein as set forth in the First Amended Notes (defined herein).

RECITALS

          WHEREAS, the Company desires to enter into that certain Agreement and Plan of Merger, in the
form attached hereto as Exhibit A, dated as of the date hereof (the “Merger
Agreement”) by and among the Company, ComVest NationsHealth Holdings, LLC, a Delaware limited
liability company (“Parent”), and NationsHealth Acquisitions Corp., a Delaware corporation
and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will
merge with and into the Company (the “Merger”) and the separate corporate existence of
Merger Sub shall thereupon cease, and the Company shall be the surviving corporation in the Merger;

          WHEREAS, in connection with the execution of the Merger Agreement, the Company and Parent
desire to enter into a Series A Preferred Stock Purchase Agreement, dated as of the date hereof, in
the form attached hereto as Exhibit B (the “Series A Preferred Stock Purchase
Agreement”), pursuant to which Parent agrees to purchase 41,666,667 shares of Series A
Preferred Stock of the Company (the “Series A Preferred Stock”) at the Effective Time (as
defined in the Merger Agreement) of the Merger and will have the right to purchase up to 16,666,667
additional shares of Series A Preferred Stock of the Company (the “Investment Option Preferred
Stock”) exercisable until the first anniversary of the closing date of the Merger;

          WHEREAS, concurrently with the execution of the Merger Agreement, Parent and certain holders
of the Common Stock have agreed to enter into a Voting Agreement with

 

 

respect to the Merger Agreement in the form attached hereto as Exhibit C and the
transactions contemplated thereby (the “Merger Voting Agreement”);

          WHEREAS, in connection with the execution of the Merger Agreement, the Company and Parent also
desire to enter into a Bridge Loan Agreement, dated as of the date hereof, in the form attached
hereto as Exhibit D (the “Bridge Loan Agreement”), pursuant to which the Issuers
will issue to Parent a 10% Secured Convertible Subordinated Promissory Note in the aggregate
principal amount of $3,000,000 attached hereto as Exhibit E (the “Bridge Note,” and
the loan made by Parent under the Bridge Loan Agreement, the “Bridge Loan”), the payment of
which shall be secured by a security interest in substantially all of the assets of the Issuers
that is senior to the security interest securing the Notes and constitute Senior Indebtedness under
the Notes and the First Amended Notes, and all of the amounts outstanding thereunder upon the
Effective Time shall be converted into Series A Preferred Stock;

          WHEREAS, in connection with the execution of the Bridge Loan Agreement, the Company has issued
to Parent warrants to issue up to 1,000,000 shares of the Common Stock at an exercise price of
$0.01 per share, dated as of the date hereof, in the form attached hereto as Exhibit F (the
“Bridge Loan Warrants”) exercisable within 15 days of the termination of the Merger
Agreement pursuant to certain provisions of the Merger Agreement;

          WHEREAS, in connection with the execution of the Bridge Loan Agreement, the Company and Parent
have requested that the Holders enter into a Subordination Agreement, dated as of the date hereof,
in the form attached hereto as Exhibit G (the “Bridge Loan Intercreditor
Agreement,” and collectively with the Bridge Loan Agreement, the Bridge Note, and the Bridge
Loan Warrant, the “Bridge Loan Documents”) pursuant to which the Holders would subordinate
the obligations of the Notes to the obligations of the Bridge Notes as provided for therein;

          WHEREAS, in connection with the Bridge Loan Agreement, Parent has requested that the Holders
consent to waive the redemption upon Change of Control under Section 5(b) of the Notes as it
relates to the conversion by Parent pursuant to Section 2(c) and 2(d) and Section 6(b) of the
Bridge Note of all of the obligations under the Bridge Loan into shares of Series A-1 Preferred
Stock of the Company, par value $.01 per share (the “Series A-1 Preferred Stock”), with the
rights, preferences and privileges set forth in the Certificate of Designation attached hereto as
Exhibit H (the “Certificate of Designation”) in the event (i) the Merger Agreement
is terminated and the Issuers do not pay all of the outstanding principal and accrued and unpaid
interest that become due under the Bridge Loan on or before the Maturity Date or applicable due
date as provided in the Bridge Note, (ii) the Bridge Loan Purchase Option (defined below) has not
been exercised and (iii) neither Parent nor any of its Affiliates have acquired any Senior
Indebtedness under the Credit Agreement (the “Optional Conversion”);

          WHEREAS, Parent and the Company have agreed that, as consideration for the consent of the
Holders to the Optional Conversion as and as a condition to such consent, (i) the Company has
agreed to amend and restate the Notes in the form attached hereto as Exhibit I (the
“First Amended Notes”), effective as of the date hereof, including to inter, alia, add the
Additional Issuers and issue to the Holders warrants to purchase 10,183,282 shares of Common Stock
(subject to adjustment as set forth therein) in the form attached hereto as Exhibit J (the

 

 

“Waiver Warrants”) which shall be immediately exercisable upon such Optional
Conversion, (ii) in the event that the Merger Agreement is terminated and the Issuers do not pay
all of the outstanding principal and accrued and unpaid interest that become due under the Bridge
Loan on or before the Maturity Date or applicable due date, Parent agrees to grant MHR the right to
purchase all of the Bridge Loan for a purchase price of 100% of the outstanding principal accrued
and unpaid interest during the last fifteen (15) calendar days of the Thirty Day Post-Termination
Period (as defined in the Merger Agreement) or the last fifteen (15) calendar days of the Thirty
Day Post-Maturity Termination Period (as defined in the Merger Agreement), if on the first day of
such fifteen (15) day period any principal or accrued interest on the Bridge Loan remains unpaid
(the “Bridge Loan Purchase Option”) and (iii) in connection with the agreement described in
clause (iii) hereof, Parent has entered into a letter agreement in the form attached hereto as
Exhibit K (the “Waiver Termination Side Letter”) and ComVest Investment Partners
III, L.P. (“ComVest”) has entered into a letter agreement in the form attached hereto as
Exhibit L (the “ComVest Letter,” and collectively with the Waiver Termination Side
Letter, Certificate of Designation, the First Amended Notes and the Waiver Warrants, the
“Optional Conversion Documents”) with the Holders setting forth certain limitations on the
terms and conditions under which Parent or ComVest, as the case may be, may purchase any Senior
Indebtedness under the Credit Agreement;

          WHEREAS, in connection with the Merger, the Company has requested that the Holders contribute
their equity in the Company in a tax free transaction in exchange for non-voting common stock of
Merger Sub, which non-voting common stock will be converted in the Merger into Common Stock (the
“Rollover Shares”) as of the Effective Time, pursuant to an Exchange and Rollover
Agreement, in the form attached hereto as Exhibit M (the “Rollover Agreement”);

          WHEREAS, the Company has additionally requested that in connection with the Merger, the
Holders agree to enter into certain agreements effective as of the Effective Time with respect to
the Rollover Shares and their rights as stockholders, including the Preferred Stock Investor Rights
Agreement in the form attached hereto as Exhibit N, the Preferred Stock Voting Agreement in
the form attached hereto as Exhibit O and the Preferred Stock Right of First Refusal and
Co-Sale Agreement in the form attached hereto as Exhibit P (collectively, with the Rollover
Agreement, the “Rollover Documents”);

          WHEREAS, pursuant to the Preferred Stock Voting Agreement, as of the Effective Time, an
individual designated by MHR shall be elected to the Board of Directors of the Company (the
“MHR Representative”) and the Company shall enter into an Indemnification Agreement with
the MHR Representative in the form attached hereto as Exhibit Q (the “Indemnification
Agreement”);

          WHEREAS, in connection with the transactions contemplated by this Waiver and Consent, at the
Effective Time, (i) the Company shall (x) amend and restate the First Amended Notes in the form
attached hereto as Exhibit R (the “Second Amended Notes”), and (y) issue to the
Holders warrants to purchase shares of Common Stock, exercisable into shares of Common Stock equal
to 10% of the Common Stock on a fully diluted basis immediately following the Effective Time and
after giving effect to the issuance of the Investment Option Preferred Stock in the form attached
hereto as Exhibit S (the “MHR Warrants”), (ii) Parent shall

 

 

enter into a letter agreement with the Holders in the form attached hereto as Exhibit
T (the “Merger Side Letter”), and (ii) the Issuer, Parent and CapitalSource Finance,
LLC shall enter into a letter agreement with the Holders in the form attached hereto as Exhibit
U (the “Tri-Party Side Letter”) setting forth certain limitations on the terms and
conditions under which Parent may purchase any obligations under the Credit Agreement;

          WHEREAS, in connection with the execution of the Merger Agreement, the Series A Preferred
Stock Purchase Agreement, the Merger Voting Agreement, the Bridge Loan Documents, the Rollover
Documents, the Indemnification Agreement, the Tri-Party Side Letter (collectively, with the other
ancillary documents described herein, the “Merger Transaction Documents”) and the
consummation of the transactions contemplated thereby (the “Merger Transactions”), and the
execution of the Optional Conversion Documents and the consummation of the Optional Conversion, the
Company has requested the consent of the Holders of the Notes and the waiver or amendments of
certain provisions thereunder;

          WHEREAS, in connection with foregoing, the Holders desire to grant certain consents and waive
certain provisions of the Notes, to enter into the First Amended Notes, and, at the Effective Time,
to exchange such First Amended Notes for the Second Amended Notes and the MHR Warrants, but only
subject to the terms and conditions contained herein;

          NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants
herein contained, the parties hereto agree as follows:

Section 1. WAIVER AND CONSENTS

     (a) Execution of Merger Agreement. Subject to the terms and conditions set
forth herein, including the conditions to effectiveness in Section 5(a) and in reliance on
the representations, warranties and covenants of the Issuers herein contained, the Holders
hereby consent to the Company entering into the Merger Agreement, and waive any Event of
Default that would arise under the Notes solely as a result of the execution of the Merger
Transaction Documents (other than the consummation of the Merger Agreement which is
addressed in Section 1(d) below and such events that are addressed in Sections 1(b), 1(c),
1(e) and 1(f) below), and hereby agree to waive the redemption upon Change of Control in
Section 5(b) of the Notes, solely as it relates to the execution of Merger Agreement and the
Merger Voting Agreement (but not to any Change of Control that may result from the
consummation of the Merger which is addressed in Section 1(d) below).

     (b) Bridge Loan Intercreditor Agreement. Subject to the terms and conditions
set forth herein, including the conditions to effectiveness in Section 5(a) and in reliance
on the representations, warranties and covenants of the Issuers herein contained, the
Holders hereby consent and agree to enter into the Bridge Loan Intercreditor Agreement.

     (c) Optional Conversion. Subject to the terms and conditions set forth herein,
including the conditions to effectiveness in Section 5(c) and in reliance on the
representations, warranties and covenants of the Issuers herein contained, the Holders

 

 

hereby agree to waive the redemption upon Change of Control in Section 5(b) of the
Notes and the First Amended Notes, solely as it relates to the Optional Conversion.

     (d) Consummation of Merger. Subject to the terms and conditions set forth
herein, including the conditions to effectiveness in Section 5(b) and in reliance on the
representations, warranties and covenants of the Issuers herein contained, upon the
Effective Time, the Holders hereby consent to the consummation of the Merger and the other
transactions contemplated by the Merger Agreement, and hereby agree to waive the redemption
upon Change of Control in Section 5(b) of the Notes, solely as it relates to the Merger.

     (e) ADHYO Partial Redemption Right. Subject to the terms and conditions set
forth herein, including the conditions to effectiveness in Section 5(b) and in reliance on
the representations, warranties and covenants of the Issuers herein contained, at the
Effective Time, the Holders hereby waive Issuers’ compliance with and forbear from
exercising or enforcing the Issuers’ noncompliance with the provisions of Section 5(c) of
the First Amended Notes relating to the partial redemption of the First Amended Notes on
February 28, 2010.

     (f) Cross-Default to Waived Events of Default under Credit Agreement. Subject
to the terms and conditions set forth herein, including the conditions to effectiveness in
Section 5(a) and in reliance on the representations, warranties and covenants of the Issuers
herein contained, the Holders hereby waive any Event of Default under the Notes resulting
from each of the events of default waived by CapitalSource Finance LLC pursuant to Section 2
of the Consent, Waiver, Joinder and Eighth Amendment to Third Amended and Restated Revolving
Credit, Term Loan and Security Agreement, dated April 30, 2009, among the Issuers and Senior
Lender, individually and as Agent for the other Lenders under the Credit Agreement, in the
form attached hereto as Exhibit V (the “CapitalSource Consents”), only to
the extent set forth therein.

Section 2. LIMITATION OF WAIVER AND CONSENTS

          Without limiting the generality of the provisions of Section 12 of the Notes, the First
Amended Notes or the Second Amended Notes, the waivers and consents set forth above shall be
limited precisely as written and relate solely to the noncompliance by the Issuers with the
provisions of the Notes, the First Amended Notes or the Second Amended Notes in the manner and to
the extent described above, and nothing in this Waiver and Consent shall be deemed to:

     (a) constitute a waiver of compliance by the Issuers with respect to (i) Section 12 of
the Notes, the First Amended Notes or the Second Amended Notes in any other instance or (ii)
any other term, provision or condition of the Notes, the First Amended Notes or the Second
Amended Notes or any other instrument or agreement referred to therein; or

     (b) prejudice any right or remedy that Collateral Agent or any Holders may now have
(except to the extent such right or remedy was based upon existing defaults that

 

 

will not exist after giving effect to this Waiver and Consent) or may have in the
future under or in connection with the Notes, the First Amended Notes or the Second Amended
Notes or any other instrument or agreement referred to therein.

          Except as expressly set forth herein, the terms, provisions and conditions of the Notes and
the Transaction Documents (as defined in the Notes) shall remain in full force and effect and in
all other respects are hereby ratified and confirmed. The Holders hereby reserve all of their
rights under the Notes and the Transaction Documents and the First Amended Notes and the Notes
Documents (as defined in the First Amended Notes), and on and after the Effective Time, the Second
Amended Notes and the Notes Documents (as defined in the Second Amended Notes) except as
specifically set forth in (and subject to the terms and conditions of) this Waiver and Consent.

          Except with respect to, and only to the extent of, the consents and waivers set forth in
Sections 1(a) and 1(b), and 1(f) nothing contained herein effects a waiver or qualification or
limitation of the Holders’ rights under the Notes or the First Amended Notes or other documents and
agreements unless and until the Merger is consummated and the other conditions set forth in Section
5(b) hereof are satisfied on or prior to the Effective Time. If the Effective Time does not occur
in accordance with the terms of the Merger Agreement, including in the event the Merger Agreement
is terminated for any reason or in the event the Merger is not consummated on or prior to the
Walk-Away Date (as such term is defined in the Merger Agreement) as may be extended by the parties
in accordance with the terms of the Merger Agreement, or if the other conditions set forth in
Section 5(b) hereof shall not have been satisfied on or prior to the Effective Time, the consents
and waivers in Section 1, other than those contained in Section 1(a), 1(b) and 1(f), and Section
1(c) (subject to the satisfaction of the conditions in Section 5(c), shall terminate and cease to
have any further force and effect. The Holders fully reserve any and all of their rights, remedies
and defenses under the Notes and the First Amended Notes and at law or in equity in connection with
any termination of the waivers and consents hereunder.

Section 3. COVENANTS

	 	(a)	 	The Issuers covenant and agree that:
	 
	 	(i)	 	The Merger Agreement and the Series A Preferred Stock Purchase
Agreement shall not be amended, modified or supplemented, and any other party’s
compliance thereto shall not be waived, without the prior written consent of
the Holders, except in the case of the Merger Agreement, for amendments which
would be required for Parent to provide a superior proposal, waivers by Parent
of conditions precedent pursuant to Article VI of the Merger Agreement and for
any such amendments, modifications, supplements or waivers that do not
adversely affect MHR, including without limitation, amendments and supplements
to the Company Disclosure Schedule or the Parent Disclosure Schedule.
	 
	 	(ii)	 	Other than for the filing as of the date hereof of the
Certificate of Designation, and for the filing immediately prior to the
Effective Time of

 

 

	 	 	 	the Company’s Amended and Restated Certificate of Incorporation in the form
attached hereto as Exhibit W (the “Amended and Restated
Certificate of Incorporation”) and the adoption immediately prior to the
Effective Time of the Company’s Amended and Restated Bylaws in the form
attached hereto as Exhibit X (the “Amended and Restated
Bylaws”), in each case pursuant to the terms of the Merger Agreement,
the certificate of incorporation or certificate of formation and Bylaws or
limited liability company agreement or similar organizational documents of
the Issuers shall not be amended, modified or supplemented, and any other
party’s compliance thereto shall not be waived, without the prior written
consent of the Holders, except for any such amendments, modifications and
supplements that do not adversely affect MHR.

	 	(iii)	 	The Bridge Loan Documents shall not be amended, modified or
supplemented, and any other party’s compliance thereto shall not be waived,
without the prior written consent of the Holders, except for any such
amendments, modifications, supplements or waivers that do not adversely affect
MHR.
	 
	 	(iv)	 	The consent of CapitalSource Finance LLC under the
Intercreditor Agreement and the Credit Agreement to this Waiver and Consent,
the transactions contemplated hereunder, including the issuance of the First
Amended Notes, the Second Amended Notes, the Waiver Warrants, the MHR Warrants,
the Merger Transactions and the Optional Conversion pursuant to the Consent,
Waiver, Joinder and Eighth Amendment to Third Amended and Restated Revolving
Credit, Term Loan and Security Agreement, in the form provided to the Holders
on or prior to the date hereof (the “CapitalSource Consents”) shall
remain in full force and effect.
	 
	 	(v)	 	Concurrently herewith, the Issuers shall deliver the First
Amended Notes and the Waiver Warrants to the Holders.
	 
	 	(vi)	 	On the Merger Closing Effective Date (as defined below), the
Issuers shall deliver the Second Amended Notes and the MHR Warrants to the
Holders.
	 
	 	(vii)	 	The Company shall prepare and file within three days of the
date hereof, a current report on Form 8-K disclosing the Merger and the other
transactions contemplated hereby, including the Merger Transactions and the
Optional Conversion, and filing as exhibits thereto, all agreements that would
be required to be filed or reported in a Schedule 13D by any parties that are
required to report on Schedule 13D the transactions contemplated hereby.
	 
	 	(viii)	 	The Issuers hereby agree to afford reasonable opportunity in advance of
filing any SEC reports or documents relating to this Waiver and Consent or the
Merger Transaction Documents to O’Melveny & Myers, LLP, on

 

 

	 	 	 	behalf of the Holders, to review and such reports or documents and any other
material disclosure or press releases, and to comment and consent (not to be
unreasonably withheld) to any such reports or documents or any other
material disclosure or press releases that contain disclosure related to
MHR, to take all reasonable steps necessary and desirable to obtain approval
for the transactions contemplated under this Waiver and Consent as
expeditiously as possible under applicable law and to use reasonable best
efforts to obtain any and all requisite regulatory and/or third party
approvals therefor.

     (b) The Holders covenant and agree that provided (i) no Default or Event of Default
with respect to the First Amended Notes, the Second Amended Notes and the other Rollover
Financing Documents (as defined in the Merger Agreement) as to which the Company and the
Holders are a party shall or will exist as of and immediately after the Effective Time, and
(ii) the Issuers shall have delivered to the Holders such satisfactory evidence thereof
(including certifications) as is reasonably requested by the Holders, on the Merger Closing
Effective Date, the Holders shall, subject to and in reliance on the foregoing provide to
Parent, Merger Sub and the Company a certificate that no default and/or event of default
exists as of and immediately after the Effective Time with respect to the First Amended
Notes, the Second Amended Notes and the other Rollover Financing Documents as to which the
Company and the Holders are a party.

Section 4. REPRESENTATIONS AND WARRANTIES

          In order to induce the Holders to enter into this Waiver and Consent, Issuers hereby represent
and warrant that as of the date hereof, as of the Optional Conversion Effective Date and as of the
Merger Closing Effective Date:

     (a) Power and Authority. The Issuers party thereto have all requisite
corporate or limited liability company power and authority to enter into this Waiver and
Consent and to enter into and issue the First Amended Notes and the Waiver Warrants, and
upon the Effective Time, enter into the Rollover Documents and enter into and issue the
Second Amended Notes and the MHR Warrants and to carry out the transactions contemplated
thereby, and perform their respective obligations thereunder.

     (b) Authorization of Agreements. The execution and delivery of this Waiver and
Consent, the Rollover Documents, the First Amended Notes, the Waiver Warrants, the Second
Amended Notes and the MHR Warrants and the performance by the Issuers party thereto of this
Waiver and Consent, the Rollover Documents, the First Amended Notes, the Waiver Warrants,
the Second Amended Notes and the MHR Warrants and the issuance, delivery and payment of the
First Amended Notes, the Waiver Warrants, the Second Amended Notes and the MHR Warrants have
been duly authorized by all necessary corporate or limited liability company action on the
part of the Issuers party thereto.

     (c) No Conflict. The execution and delivery by the Issuers party thereto of
this Waiver and Consent, the First Amended Notes and the Waiver Warrants, and, upon

 

 

the Effective Time, the Rollover Documents, the Second Amended Notes and the MHR
Warrants, and the performance by the Issuers party thereto of this Waiver and Consent, the
Rollover Documents, the First Amended Notes, the Waiver Warrants, the Second Amended Notes
and the MHR Warrants and the issuance, delivery and payment of the First Amended Notes, the
Waiver Warrants, the Second Amended Notes and the MHR Warrants do not and will not (i)
violate any provision of any law or any governmental rule or regulation applicable to the
Company or any of its Subsidiaries, (ii) the certificate or articles of incorporation or
formation or bylaws or limited liability agreement or operating agreement of the Company or
any of its Subsidiaries or any order, judgment or decree of any court or other agency of
government binding on the Company or any of its Subsidiaries, (iii) conflict with, result in
a breach of or constitute (with due notice or lapse of time or both) a default under or give
rise to a right of termination, cancellation, modification, amendment, creation of a payment
obligation or acceleration (including pursuant to any put right) of any material obligation
or the loss of a material benefit under any contract to which the Company or any of its
Subsidiaries is a party, (iv) result in or require the creation or imposition of any Lien
upon any of the properties or assets of the Company or any of its Subsidiaries (other than
Liens created in favor of the Collateral Agent on behalf of the Holders), or (v) require any
approval of stockholders or any approval or consent of any Person under any contractual
obligation of the Company or any of its Subsidiaries, except for such approvals or consents
which will have been obtained on or before the Waiver and Consent Effective Date or the
Merger Closing Effective Date, as the case may be, or in the case of subclauses (i), (iii),
(iv) and (v), as would not have or would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.

     (d) Governmental Consents. The execution and delivery by the Issuers party
thereto of this Waiver and Consent, the Rollover Documents, the First Amended Notes, the
Waiver Warrants, the Second Amended Notes and the MHR Warrants, and the performance by the
Issuers party thereto of this Waiver and Consent, the Rollover Documents, the First Amended
Notes, the Waiver Warrants, the Second Amended Notes and the MHR Warrants and the issuance,
delivery and payment of the First Amended Notes, the Waiver Warrants, the Second Amended
Notes and the MHR Warrants do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body, except as would not have or would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect.

     (e)  Binding Obligation. This Waiver and Consent, the Rollover Agreement the
First Amended Notes and the Waiver Warrants have been duly executed and delivered by the
Issuers party thereto and this Waiver and Consent, the Rollover Agreement, the First Amended
Notes and the Waiver Warrants are, and the other Rollover Documents, the Second Amended
Notes and the MHR Warrants, when executed and delivered, will be the legally valid and
binding obligations of the Issuers party thereto, enforceable against the Issuers party
thereto in accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’
rights generally or by equitable principles relating to enforceability.

 

 

     (f) Absence of Default. Except for the events set forth in Section 1 hereof
waived or consented to thereunder, no event has occurred and is continuing or will result
from the consummation of the transactions contemplated by this Waiver and Consent that would
constitute an Event of Default or a potential Event of Default under the Notes and the First
Amended Notes or as of the Merger Closing Effective Date, the Second Amended Notes.

     (g) Solvency. Immediately after the consummation of the Merger Transactions,
each of the Issuers (i) will not be insolvent, (ii) will not be left with unreasonably small
capital, and (iii) will not have debts beyond its ability to pay such debts as they mature.

     (h) Waiver Warrants and MHR Warrants. The issuance of the Waiver Warrants are,
and, as of the Effective Time, the MHR Warrants will be, duly authorized and will be free
from all taxes, liens and charges in respect of the issue thereof. The Waiver Warrants will
be exercisable for shares of Common Stock equal to, and the Company has duly authorized and
reserved for issuance shares of Common Stock equal to, 10% of the Common Stock on a fully
diluted basis immediately following the Optional Conversion. The MHR Warrants will be
exercisable for shares of Common Stock equal to, and as of the Effective Time the Company
shall have duly authorized and reserved for issuance shares of Common Stock equal to, 10% of
the Common Stock on a fully diluted basis immediately following the Effective Time and after
giving effect to the issuance of the Investment Option Preferred Stock. Upon exercise of
the Waiver Warrants and the MHR Warrants in accordance with their respective terms, the
shares of Common Stock issued in respect of the Waiver Warrants and the Warrant Shares will
be validly issued, fully paid and nonassesable free from all preemptive or similar rights,
taxes, Liens and charges in respect of the issue thereof, with the holder being entitled to
all rights accorded to a holder of shares of Common Stock.

     (i) No Subsidiaries. Other than any Subsidiaries that have no or de minimis
assets and liabilities and generate no or de minimis revenues, the Company has no
Subsidiaries other than those that are Existing Issuers or are Additional Issuers.

     (j) No Other Agreements. Other than the First Amended Notes and the Notes
Documents (as such term is defined in the First Amended Notes), the Second Amended Notes and
the Notes Documents (as such term is defined in the Second Amended Notes) (collectively, the
“Collective Notes Documents”), the Merger Transaction Documents, the Bridge Loan
Documents, and the Optional Conversion Documents and agreements specified in Schedule
4 to this Waiver and Consent, the Issuers and their Affiliates have not entered into any
other agreement, arrangement or understanding with any Person related to the transactions
contemplated by the Collective Notes Documents, the Merger Transaction Documents, the Bridge
Loan Documents and the Optional Conversion Documents; provided that any waivers, amendments,
new agreements and existing agreements inadvertently omitted from Schedule 4 hereto
entered into by or among the Issuers, Parent and their respective Affiliates after the date
hereof for the purpose of consummating the Merger Transactions (other the than the Bridge
Loan Documents) are permitted hereunder, so long as they do not adversely affect MHR,
including, without

 

 

limitation any of their rights under any of the Collective Notes Documents, the Merger
Transaction Documents, the Bridge Loan Documents or the Optional Conversion Documents and
MHR promptly receives a copy thereof. The Issuers agree to provide MHR with copies of any
new agreements and any existing agreements not listed in Schedule 4 promptly upon
becoming aware of the same.

          “Material Adverse Effect” shall mean with respect to the Company or any of its Subsidiaries,
any event, circumstance, development, condition, change, or effect which, after taking into effect
any insurance recoveries, is, either individually or in the aggregate with any other event,
circumstance, development, condition, change, or effect, (i) materially adverse to the business,
operation, condition (financial or otherwise), or results of operations of the Company and its
Subsidiaries, taken as a whole, (ii) has, had or would reasonably be expected to have any material
adverse effect upon or change in the validity or enforceability of the Collective Notes Documents,
the Merger Transaction Documents or the Optional Conversion Documents or the ability of any of the
Issuers to perform their obligations thereunder or (iii) has, had or would reasonably be expected
to have any material adverse effect on the rights of MHR under the Collective Notes Documents, the
Merger Transaction Documents or the Optional Conversion Documents.

Section 5. CONDITIONS TO EFFECTIVENESS

     (a) Sections 1(a), 1(b) and 1(f) of this Waiver and Consent shall become effective only
upon the satisfaction of all of the following conditions precedent (the date of satisfaction
of such conditions being referred to herein as the “Waiver and Consent Effective
Date”):

	 	(i)	 	On or before the Waiver and Consent Effective Date, each of the
Issuers, or Parent, as applicable, shall deliver to the Holders (with
sufficient originally executed copies, where appropriate, for each Holder and
its counsel) the following, each, unless otherwise noted, dated the Waiver and
Consent Effective Date:

(1) Certified copies of its certificate of incorporation or
certificate of formation, together with a good standing certificate
from the Secretary of State of the state of its incorporation or
formation, each dated a recent date prior to the Waiver and Consent
Effective Date;

(2) Copies of its Bylaws or operating or limited liability company
agreement, certified as of the Waiver and Consent Effective Date by
its corporate secretary or an assistant secretary;

(3) Resolutions of its Board of Directors approving and authorizing
the execution, delivery, and performance of the Merger Transaction
Documents, to which it is a party, and finding that the Merger
Transactions are fair to and in the best interests of the
stockholders of the Company (other than Parent and the

 

 

stockholders party to the Rollover Agreement), authorizing the
execution, delivery, and performance of the Bridge Loan Documents and
the Optional Conversion Documents to which it is a party, and
authorizing the execution, delivery and performance of this Waiver
and Consent and the execution, delivery, issuance and performance of
the First Amended Notes and the Waiver Warrants, and, as of the
Effective Date, the Second Amended Notes and the MHR Warrants,
certified by its corporate secretary or an assistant secretary as
being in full force and effect without modification or amendment (the
“Board Recommendation”);

(4) A certificate, dated as of the Closing Date, duly executed by the
President and the Secretary of each of the Issuers certifying that
the conditions set forth in Sections 5(a)(ii) and 5(a)(iii), have
been fully satisfied.

(5) A copy of this Waiver and Consent, duly executed by the Issuers;

(6) An executed copy of the Merger Agreement;

(7) An executed copy of the Merger Voting Agreement;

(8) An executed copy of the Bridge Loan Agreement, the Bridge Notes
and the Bridge Loan Warrants;

(9) An executed copy of the Bridge Loan Intercreditor Agreement;

(10) A copy of the Rollover Agreement, duly executed by the Company,
and the stockholders party thereto (other than MHR);

(11) An executed copy of the Series A Preferred Stock Purchase
Agreement;

(12) A copy of the Preferred Stock Investor Rights Agreement, duly
executed by the Company, Parent and the stockholders party thereto
(other than MHR);

(13) A copy of the Preferred Stock Right of First Refusal and Co-Sale
Agreement duly executed by the Company, Parent and the stockholders
party thereto (other than MHR);

(14) A copy of the Preferred Stock Voting Agreement duly executed by
the Company, Parent and the stockholders party thereto (other than
MHR);

(15) An executed copy of the CapitalSource Consents;

 

 

(16) An executed copy of the Amended and Restated Senior
Subordination Agreement, by and among the Holders and CapitalSource
Finance LLC, in the form attached hereto as Exhibit Y;

(17) An executed copy of the Senior Subordination Agreement by and
between Parent and CapitalSource Finance LLC;

(18) The original First Amended Notes, executed by the Issuers;

(19) The Waiver Warrants, executed by the Company;

(20) A copy of the Waiver Termination Side Letter, duly executed by
Parent, and the Issuers;

(21) A copy of the Merger Side Letter, duly executed by Parent, and
the Issuers;

(22) A copy of the ComVest Side Letter, duly executed by ComVest and
the Issuers;

(23) A copy of the Tri-Party Side Letter, duly executed by
CapitalSource Finance, LLC, Parent and the Issuers;

(24) Each document (including, without limitation, any UCC financing
statement) required by the First Amended Notes or under law or
requested by Collateral Agent to be filed or recorded in order to
create, in favor the Collateral Agent for the benefit of the Holders,
perfected lien and security interest in the Collateral of the
Additional Issuers (subject only to the Liens securing Senior
Indebtedness and Permitted Liens) and evidence of such filing,
registration or recordation and the payment by the Additional Issuers
of any necessary fee, tax or expense relating thereto;

(25) The Certificate of Designation, filed with the Secretary of
State of the State of Delaware;

	 	(ii)	 	Each of the representations and warranties contained herein
shall be true and correct in all material respects (except for any
representations and warranties that are qualified by materiality or by Material
Adverse Effect which shall be true and correct in all respects) on and as of
the Waiver and Consent Effective Date with the same force and effect as though
the same had been made on and as of the Waiver and Consent Effective Date other
than such representations and warranties that specifically relate to an earlier
date (which need only be true and correct as of such date).
	 
	 	(iii)	 	The Issuers shall have performed and complied, in all material
respects, with the covenants and provisions of this Waiver and Consent required
to

 

 

	 	 	 	be performed or complied with on or prior to the Waiver and Consent
Effective Date.

	 	(iv)	 	The Special Committee of the Board of Directors shall have
received a fairness opinion of an independent financial advisor finding that
the Merger Transactions are fair to the holders of Common Stock other than
Parent and the stockholders party to the Rollover Agreement (the “Fairness
Opinion”), which Fairness Opinion shall not have been modified or withdrawn
as of the Waiver and Consent Effective Date.
	 
	 	(v)	 	Concurrently with the execution and delivery of this Agreement,
the Company shall have received at least $3 million in cash proceeds of the
Bridge Loan.

     (b) Sections 1(d) and 1(e) of this Waiver and Consent shall become effective only upon
the satisfaction of all of the following conditions precedent (the date of satisfaction of
such conditions being referred to herein as the “Merger Closing Effective Date”):

	 	(i)	 	The Collective Note Documents and the other agreements set
forth in Section 5(a) above to which MHR is a party shall be in full force and
effect.
	 
	 	(ii)	 	On or before the Merger Closing Effective Date, the Issuers or
Parent, as applicable, shall deliver to the Holders (with sufficient originally
executed copies, where appropriate, for each Holder and its counsel) the
following, each, unless otherwise noted, dated the Merger Closing Effective
Date:

(1) A officer’s certificate of the Company certifying that all
conditions precedent to the consummation of the Merger Agreement have
been waived or fulfilled;

(2) An officer’s certificate, dated as of the Merger Closing
Effective Date, duly executed by the President and the Secretary of
each of the Issuers certifying that the conditions set forth in
Sections 5(b)(i), (iii), (iv) and (v) have been fully satisfied.

(3) The original Second Amended Notes, executed by the Issuers;

(4) The MHR Warrants, executed by the Company;

(5) A copy of the Amended and Restated Certificate of Incorporation
certified by the Secretary of State of the State of Delaware;

(6) A copy of the Amended and Restated Bylaws, duly adopted by the
Company;

 

 

(7) A copy of the Indemnification Agreement by and between the
Company and the MHR Representative, duly executed by the Company;

(8) MHR’s obligations under the Stockholders Agreement, dated as of
February 28, 2005, by and among the Company, RGGPLS Holding, Inc.,
GRH Holdings, L.L.C., and the MHR shall be extinguished;

(9) An executed copy of the Fourth Amended and Restated Credit
Agreement by and among the Issuers and CapitalSource Finance LLC;

(10) An executed copy of the Management Agreement, by and between the
Company and ComVest Advisors, LLC in the form attached hereto as
Exhibit Z; and

(11) An executed copy of the Management Fee Subordination Agreement
by and between the Holders and ComVest Advisors, LLC, in the form
attached hereto as Exhibit AA.

	 	(iii)	 	Each of the representations and warranties contained herein
shall be true and correct in all material respects (except for any
representations and warranties that are qualified by materiality or by Material
Adverse Effect which shall be true and correct in all respects) on and as of
Merger Closing Effective Date with the same force and effect as though the same
had been made on and as of the Merger Closing Effective Date other than such
representations and warranties that specifically relate to an earlier date
(which need only be true and correct as of such date).
	 
	 	(iv)	 	The Issuers shall have performed and complied, in all material
respects, with the covenants and provisions of this Waiver and Consent required
to be performed or complied with by it between the date hereof and the Merger
Closing Effective Date.
	 
	 	(v)	 	The Merger and the other Merger Transactions shall have been
consummated materially in accordance with the Merger Agreement, without waiver
or amendment of any material term, provision or condition set forth therein in
a manner that is adverse to the Holders (except to the extent consented to by
the Holders in their sole discretion or as otherwise permitted in Section
3(a)(i)) and in compliance with all applicable laws; and, the Board
Recommendation and the Fairness Opinion shall not have been modified, withdrawn
or qualified in any respects.
	 
	 	(vi)	 	The Company shall have received consideration from Parent in
connection with the conversion of all the Bridge Loans into shares of Preferred
Stock and the investment of the Remaining Investment Amount (as such term is
defined in the Merger Agreement) in accordance with the Series A

 

 

	 	 	 	Preferred Stock Purchase Agreement in an aggregate amount equal to
$8,000,000.

	 	(vii)	 	Contemporaneously with the Effective Time, the MHR
Representative shall have been duly nominated and elected to the Board of
Directors of the Company.
	 
	 	(viii)	 	No temporary restraining order, preliminary or permanent injunction or other
judgment or order issued by any Governmental Authority or other law, rule,
legal restraint or prohibition shall be in effect preventing or rendering
illegal the consummation of any of the transactions contemplated hereunder or
under the Merger Transactions.
	 
	 	(ix)	 	The Holders shall have received payment of the fees and
disbursements described in Section 7 below.

     (c) Section 1(c) of this Waiver and Consent shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of satisfaction of such
conditions being referred to herein as the “Optional Conversion Effective Date”):

	 	(i)	 	On or before the Optional Conversion Effective Date, the
Issuers, or Parent, as applicable, shall deliver to the Holders (with
sufficient originally executed copies, where appropriate, for each Holder and
its counsel) the following, each, unless otherwise noted, dated the Optional
Conversion Effective Date:

(1) An officer’s certificate, dated as of the Optional Conversion
Effective Date, duly executed by the President and the Secretary of
each of the Issuers certifying that the conditions set forth in
Sections 5(c)(ii) and (iii) have been fully satisfied.

(2) An officer’s certificate of Parent, dated as of the Optional
Conversion Effective Date, duly executed by an authorized office of
Parent certifying that the conditions set forth in Sections 5(c)(v)
and (vi) have been fully satisfied.

	 	(ii)	 	Each of the representations and warranties contained herein
shall be true and correct in all material respects (except for any
representations and warranties that are qualified by materiality or by Material
Adverse Effect which shall be true and correct in all respects) on and as of
Optional Conversion Effective Date with the same force and effect as though the
same had been made on and as of the Optional Conversion Effective Date other
than such representations and warranties that specifically relate to an earlier
date (which need only be true and correct as of such date).
	 
	 	(iii)	 	The Issuers shall have performed and complied, in all material
respects, with the covenants and provisions of this Waiver and Consent required
to

 

 

	 	 	 	be performed or complied with by it between the date hereof and the Optional
Conversion Effective Date.

	 	(iv)	 	Each of the representations and warranties of Parent and its
Affiliates contained in the Waiver Termination Side Letter shall be true and
correct in all material respects on and as of Optional Conversion Effective
Date with the same force and effect as though the same had been made on and as
of the Optional Conversion Effective Date other than such representations and
warranties that specifically relate to an earlier date (which need only be true
and correct as of such date).
	 
	 	(v)	 	Parent and its Affiliates shall have performed and complied, in
all material respects, with the covenants and provisions of the Waiver
Termination Side Letter required to be performed or complied with by it between
the date hereof and the Optional Conversion Effective Date.
	 
	 	(vi)	 	The Optional Conversion and the other transactions contemplated
hereunder as of the Optional Conversion Effective Date shall have been
consummated materially in accordance with the terms of the Merger Agreement and
Bridge Loan Documents, without waiver or amendment of any material term,
provision or condition set forth therein in a manner that is adverse to the
Holders (except to the extent consented to by the Holders in their sole
discretion) and in material compliance with all applicable laws.
	 
	 	(vii)	 	No temporary restraining order, preliminary or permanent
injunction or other judgment or order issued by any Governmental Authority or
other law, rule, legal restraint or prohibition shall be in effect preventing
or rendering illegal the consummation of any of the transactions contemplated
hereunder as of the Optional Conversion Effective Date or under the Optional
Conversion.
	 
	 	(viii)	 	The Holders shall have received payment of the fees and disbursements
described in Section 7 below.

Section 6. GOVERNING LAW

          THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

Section 7. COSTS AND EXPENSES

          The Issuers shall pay no later than May 7, 2009, $360,000, in respect of legal fees and
disbursements of counsel to the Holders in connection with the preparation, negotiation,

 

 

execution and delivery of this Waiver and Consent , the Acknowledgment, dated April 15, 2009
by and among the Issuers and the Holders, and the Collective Notes Documents incurred through the
Waiver and Consent Effective Date. On the date that either the Optional Conversion or the Merger
is consummated, the Issuers shall pay all other legal fees and disbursements of counsel to the
Holders in respect of the preparation, negotiation, execution and delivery of this Waiver and
Consent and the Collective Notes Documents, the Merger Transactions and the Optional Conversion
(collectively, “Transaction Expenses”), up to $190,000. The Holders shall provide to the
Issuers, on or prior to each such payment date, an invoice from its counsel relating to such fees
and disbursements (but with no requirement for supporting documentation). The Holders represent
and warrant to the Issuers that the amounts set forth in such invoices will relate only to
Transaction Expenses.

Section 8. INDEMNITY

     (a) The Issuers shall indemnify the Holders, within ten (10) days after written demand
therefor, for the full amount of liability incurred in respect of Taxes (by the Holders or
their direct or indirect equity owners, the “Holder Group”) or adverse Tax
consequences suffered by the any member of the Holder Group in connection with or relating
to the transactions contemplated by this Waiver and Consent, whether or not such Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority. A
certificate of the Holders as to the amount of such payment or liability under this Section
8(a) shall be delivered to the Company and shall be conclusive absent demonstrable error.

     (b) “Tax” or “Taxes” means (i) any and all federal, state, local or
foreign taxes, charges, fees, imposts, levies or other assessments, including all net
income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and estimated taxes,
customs duties, fees, assessments and charges of any kind whatsoever; (ii) all interest,
penalties, fines, additions to tax or additional amounts imposed by the IRS and any other
Governmental Authority responsible for the administration of any Tax in connection with any
item described in clause (i); and (iii) any liability in respect of any items described in
clauses (i) and/or (ii) payable by reason of contract, assumption, transferee liability,
operation of law, Treasury Regulation section 1.1502-6(a) (or any predecessor or successor
thereof or any analogous or similar provision under law) or otherwise.

     (c) The Company and each Subsidiary, on a joint and several basis (each, an
“Indemnifying Party”), shall indemnify, defend and hold harmless each of the Holders
and each of their respective officers, directors, members, managers, partners, stockholders,
employees, lenders, advisors, agents and other representatives and any Affiliate of the
foregoing, and each of their respective successors and permitted assigns (each, an
“Indemnified Party”) from and against, and shall promptly reimburse each Indemnified
Party for, all demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including interest, court costs and reasonable attorneys’
fees and expenses (including reasonable expenses of investigation and reasonable attorneys’
and accountants’ fees and expenses in connection with any

 

 

action, suit or proceeding, including those incurred upon any appeal) arising or
resulting from or in connection with any judicial, administrative or arbitral actions,
suits, mediations, investigations, inquiries, proceedings or claims or demands instituted by
any third party with respect to the execution, delivery, enforcement and performance of this
Waiver and Consent, the Merger Transaction Documents or the Optional Conversion Documents,
or in any other way arising out of or relating to this Waiver and Consent, the Merger
Transactions or the Optional Conversion (collectively, “Indemnified Liabilities”).
The rights of the Indemnified Parties under this Section 8 shall be in addition to (i) any
cause of action or similar right of any Indemnified Party against the Company or other
Persons, or (ii) any liabilities the Company or any of the Subsidiaries may be subject to
pursuant to any applicable law.

     (d) Each party entitled to indemnification under Section 8(c) (the “Indemnified
Party”) will (i) give prompt written notice to the party obligated to indemnify such
Indemnified Party (the “Indemnifying Party”) of any claim with respect to which it
seeks indemnification pursuant to Section 8(c) and (ii) permit such Indemnifying Party to
assume the defense of such claim with counsel selected by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party; provided, however, that any Indemnified
Party entitled to indemnification hereunder shall have the right to employ separate counsel
and to participate in the defense of such claim, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (x) the Indemnifying Party has
agreed in writing to pay such fees and expenses, (y) the Indemnifying Party shall have
failed to assume the defense of such claim within 20 days of delivery of the written notice
of the Indemnified Party with respect to such claim or failed to employ counsel selected by
such Indemnifying Party and reasonably satisfactory to such Indemnified Party or (z) in the
reasonable judgment of such Indemnified Party, based upon advice of its counsel, a conflict
of interest may exist between such Indemnified Party and the Indemnifying Party with respect
to such claims (in which case, if the Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense of such claim on
behalf of such Indemnified Party); provided, further, that an Indemnifying Party who is not
entitled to, or elects not to, assume the defense of a claim on behalf of all Indemnified
Parties shall not be obligated to pay the fees and expenses of more than one counsel (in
addition to local counsel) for all Indemnified Parties. If the Indemnifying Party assumes
the defense of the claim, it shall not be subject to any liability for any settlement or
compromise made by the Indemnified Party without its consent (but such consent shall not be
unreasonably withheld). In connection with any settlement negotiated by an Indemnifying
Party, no Indemnifying Party shall, and no Indemnified Party shall be required by an
Indemnifying Party to, (i) enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party
of a release from all liability in respect to such claim or litigation (ii) enter into any
settlement that attributes by its terms liability to the Indemnified Party, or (iii) consent
to the entry of any judgment that does not include as a term thereof a full dismissal of the
litigation or proceeding with prejudice. In addition, without the consent of the Indemnified
Party (which consent will not be unreasonably withheld), no Indemnifying Party will be
permitted to consent to entry of any judgment or enter into any settlement

 

 

which provides for any action on the part of the Indemnified Party other than the
payment of money damages which are to be paid in full by the Indemnifying Party. If an
Indemnifying Party fails or elects not to assume the defense of a claim pursuant to clause
(y) above, or is not entitled to assume or continue the defense of such claim pursuant to
clause (z) above, the Indemnified Party shall have the right without prejudice to its right
of indemnification hereunder to, in its discretion exercised in good faith and upon advice
of counsel, to contest, defend and litigate such claim and may settle such claim, either
before or after the initiation of litigation, at such time and upon such terms as the
Indemnified Party deems fair and reasonable, provided that at least ten (10) days prior to
any settlement, written notice of its intention to settle is given to the Indemnifying
Party.

Section 9. MISCELLANEOUS

     (a) Headings. Section and subsection headings in this Waiver and Consent are
included herein for convenience of reference only and shall not constitute a part of this
Waiver and Consent for any other purpose or be given any substantive effect.

     (b) Counterparts; Effectiveness. This Waiver and Consent may be executed in
any number of counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may be detached
from multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document. This Waiver and Consent
(other than the provisions of Section 1 hereof, the effectiveness of which is governed by
Section 5 hereof) shall become effective upon the execution of a counterpart hereof by the
Issuers and the Holders.

     (c) Severability. In case any provision in this Waiver and Consent shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

     (d) Binding Effect. This Waiver and Consent shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and assigns.

     (e) No Waivers. Any provision of this Waiver and Consent may be amended or
waived, if, but only if, such amendment or waiver is signed, in the case of an amendment, by
each party to this Waiver and Consent, or in the case of a waiver, by each party against
whom the waiver is to be effective.

     (f) Survival of Representations and Warranties. All representations and
warranties made in this Waiver and Consent or in any other document furnished in connection
with this Waiver and Consent shall survive the execution and delivery of this Waiver and
Consent, and no investigation by any Holder or any closing shall affect the representations
and warranties or the right of the Holders to rely on them.

     (g) Jurisdiction. The Issuers irrevocably consent to the exclusive
jurisdiction of the United States federal courts and the state courts located in the County
of New York, State of New York in any suit or proceeding based on or arising under this Note

 

 

and irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts. The Issuers irrevocably waive the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Issuers further agree that service
of process upon the Issuers mailed by first class mail shall be deemed in every respect
effective service of process upon the Issuers in any such suit or proceeding. The Issuers
agree that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner. Nothing herein shall affect the right of the Holder to institute suit
and conduct an action in any other appropriate manner, jurisdiction or court or to serve
process in any other manner permitted by law.

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed and
delivered by their respective officers thereunto duly authorized as of the date first written
above.

	 	 	 	 	 
	 	Issuers:

NATIONSHEALTH, INC.

 	 
	 	By:  	/s/ Glenn Parker 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 
	 
	 	NATIONSHEALTH HOLDINGS, L.L.C.

 	 
	 	By:  	/s/ Glenn Parker 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 
	 
	 	UNITED STATES PHARMACEUTICAL GROUP, L.L.C.

 	 
	 	By:  	/s/ Glenn Parker 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 
	 
	 	DIABETES CARE & EDUCATION, INC.

 	 
	 	By:  	/s/
Glenn Parker 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS
(USA), LLC

 	 
	 	By:  	/s/
Glenn Parker 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	MHR CAPITAL PARTNERS (500) LP, individually

and as Collateral Agent

By: MHR Advisors LLC, its General Partner

 	 
	 	By:  	/s/
Hal Goldstein 	 
	 	 	Name:  	Hal Goldstein 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	HOLDERS:

OTQ, LLC

 	 
	 	By:  	/s/
Hal Goldstein 	 
	 	 	Name:  	Hal Goldstein 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	MHR CAPITAL PARTNERS MASTER ACCOUNT LP

By: MHR Advisors LLC, its General Partner

 	 
	 	By:  	/s/
Hal Goldstein 	 
	 	 	Name:  	Hal Goldstein 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	MHR CAPITAL PARTNERS (100) LP

By: MHR Advisors LLC, its General Partner

 	 
	 	By:  	/s/ Hal Goldstein 	 
	 	 	Name:  	Hal Goldstein 	 
	 	 	Title:  	Authorized SignatoryEX-4.25

Exhibit 4.25

SENIOR SUBORDINATION AGREEMENT

     This SENIOR SUBORDINATION AGREEMENT, dated as of April 30, 2009 (this “Agreement”), by and
among COMVEST NATIONSHEALTH HOLDINGS, LLC, a Delaware limited liability company, and MSL FAMILY
LLC, a Delaware limited liability company (individually and collectively, the “Junior Lender”) and
CAPITALSOURCE FINANCE LLC, a Delaware limited liability company, with its chief executive office
located at 4445 Willard Avenue, Chevy Chase, Maryland 20815, as agent for itself and the other
lenders under the Senior Loan Agreement referred to below (in such capacity, the “Agent”).

W I T N E S S E T H :

     WHEREAS, CapitalSource Finance LLC (together with its successors and assigns, the “Senior
Lender”) and UNITED STATES PHARMACEUTICAL GROUP, L.L.C. d/b/a NATIONSHEALTH (“USPG”), a Delaware
limited liability company, NATIONSHEALTH HOLDINGS, L.L.C., (“NHH”) a Florida limited liability
company, NATIONSHEALTH, INC. (“NationsHealth”), a Delaware corporation, DIABETES CARE & EDUCATION,
INC. (“DCE”), a South Carolina corporation, and NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS
(USA), LLC, a Florida limited liability company (“National”, together with USPG, NHH,
NationsHealth, and DCE, collectively, the “Borrower”) are parties to a certain Third Amended and
Restated Revolving Credit, Term Loan and Security Agreement dated as of April 11, 2007 (as amended,
restated, supplemented, replaced or otherwise modified from time to time, the “Original Senior Loan
Agreement”) under which the Senior Lender has made or may make loans and other financial
accommodations to Borrower;

     WHEREAS, pursuant to the Original Senior Loan Agreement, Borrower has granted in favor of the
Senior Lender a first priority lien on and security interest in (collectively, the “Senior Lien”)
substantially all of the assets and property of Borrower as security for their obligations to the
Senior Lender under the Original Senior Loan Agreement;

     WHEREAS, the Senior Lender designated Agent as its agent for taking certain actions on its
behalf pursuant to Section 12.12 of the Original Senior Loan Agreement;

     WHEREAS, NationsHealth intends to merge with NationsHealth Acquisition Corp. (“NAC”), a
Delaware corporation and a wholly owned subsidiary of the Junior Lender, subject to the terms of
that certain Agreement and Plan of Merger dated April 30, 2009 (the “Merger Agreement”), pursuant
to which NAC shall be merged with and into NationsHealth, the separate corporate existence of NAC
shall thereupon cease, and NationsHealth shall be the surviving corporation (such transaction, the
“Merger”);

 

 

     WHEREAS, in connection with the execution and delivery of the Merger Agreement, the Junior
Lender has agreed to provide a bridge loan to Borrower in the principal amount of $3,000,000 (the
“Bridge Loan”) in accordance with the terms of that certain Bridge Loan Agreement dated April 30,
2009 by and between the Junior Lender and Borrower (as amended, supplemented or otherwise modified
from time to time, the “Junior Agreement”), which Bridge Loan is evidenced by that certain 10%
Secured Convertible Subordinated Promissory Note in the principal amount of $3,000,000 dated April
30, 2009 (the “Junior Note”); and

     WHEREAS, upon the consummation of the Merger, the Bridge Loan shall be converted into shares
of Series A Preferred Stock of NationsHealth;

     WHEREAS, Borrower has granted in favor of the Junior Lender a lien on and security interest
(collectively, the “Junior Lien”) in substantially all of Borrower’s assets and property as
security for its obligations to the Junior Lender under the Junior Agreement;

     WHEREAS, the Agent on behalf of the Senior Lender has, among other things, consented to the
execution and delivery by Borrower of the Merger Agreement, the Junior Agreement and the Junior
Note pursuant to that certain Consent, Waiver, Joinder and Eighth Amendment to Third Amended and
Restated Revolving Credit, Term Loan and Security Agreement dated April 30, 2009 (the “Eighth
Amendment”) and, concurrently with the execution and delivery of the Eighth Amendment, agreed to
further amend and restate the Original Senior Loan Agreement pursuant to a certain Fourth Amended
and Restated Revolving Credit, Term Loan and Security Agreement dated April 30, 2009 (the “Senior
Loan Agreement”); and

     WHEREAS, it is a condition precedent to the effectiveness of the Eighth Amendment and the
Senior Loan Agreement that, among other things, the Junior Lender shall have executed and delivered
this Agreement subordinating its rights with respect to the Junior Obligations (as defined below)
to the rights of the Senior Lender with respect to the Senior Obligations (as defined below) and
that Borrower shall have acknowledged this Agreement.

     NOW, THEREFORE, in consideration of the promises contained herein and to induce the Agent on
behalf of the Senior Lender to enter into the Eighth Amendment and the Senior Loan Agreement, the
Junior Lender hereby agrees as follows:

     SECTION 1. Definitions. Capitalized terms used but not defined herein shall have
the meanings given to them in the Senior Loan Agreement, and the rules of usage set forth therein
shall apply hereto.

2

 

     SECTION 2. Subordination.

          (a) All Junior Obligations, and all claims, demands, rights and remedies of the Junior Lender
with respect thereto, are and shall continue at all times to be subject, subordinate and junior in
right of payment and priority to the Senior Obligations including, without limitation, all interest
on the Senior Obligations at the rate stated in the Senior Loan Agreement from the date of the
filing by or against Borrower of a petition under any bankruptcy, insolvency or similar law whether
or not such interest is allowable in any such
proceeding to the date of the indefeasible payment in full of the Senior Obligations
(“Postpetition Interest”). The term “Junior Obligations,” as used in this Agreement, shall mean
and include the principal amount of and the premium, if any, and interest on all indebtedness and
other monetary obligations of Borrower to the Junior Lender under the Merger Agreement, the Junior
Agreement and the Junior Note, together with all fees, costs and expenses relating thereto, whether
direct or contingent, now or hereafter existing, due or to become due to, or held or to be held by
the Junior Lender, whether created directly or acquired by assignment or otherwise, including,
without limitation, all principal of and premium, if any, and interest on the Junior Note
(including extensions, modifications, refinancings, renewals and refundings thereof) and any other
note or notes or any other agreement between Borrower and the Junior Lender, including but not
limited to fees, costs and/or expenses owed or owing to the Junior Lender under or by reason of the
Merger Agreement, including but not limited to (i) the Termination Fee (as defined in the Merger
Agreement), (ii) the Transaction Fees (as defined in the Merger Agreement) and (iii) any other
Parent Damages (as defined in the Merger Agreement)(the fees and damages set forth in the foregoing
clauses (i), (ii) and (iii), collectively, the “Merger Agreement Fees and Damages”). The term
“Senior Obligations,” as used in this Agreement, shall mean and include the principal amount of and
the premium, if any, and interest (including Postpetition Interest) and all other amounts on all of
the Obligations including, without limitation, Collateral Management Fees, Unused Line Fees, the
Restatement Fee, Yield Maintenance and amounts due under the Equity Participation Fee Agreement,
and all other fees, costs and expenses relating thereto, whether direct or contingent, now or
hereafter existing, due or to become due to, or held or to be held by, the Senior Lender, whether
created directly or acquired by assignment or otherwise (including extensions, modifications,
refinancings, renewals and refundings thereof).

          (b) Except as provided in Section 2(c), the Junior Lender shall not receive, demand or accept,
either directly or indirectly, any payment (of any kind or character) on the Junior Obligations,
whether as principal, premium, interest or otherwise, unless and until all the Senior Obligations
including, without limitation, all Postpetition Interest, have been indefeasibly paid in full in
cash and the obligation (the “Commitment”) of the Senior Lender, if any, to make loans and advances
under the Senior Loan Agreement has been terminated.

3

 

          (c) Notwithstanding any provision of this Agreement to the contrary, (i) the Junior Lender may
convert the Bridge Loan into shares of Series A Preferred Stock of NationsHealth in accordance with
the terms and conditions of Section 6(a) of the Junior Note as in effect on the date of this
Agreement and receive, accept and retain such shares of Series A Preferred Stock, (ii) the Junior
Lender may exercise its option under either Section 2(c) and Section 2(d) of the Junior Note as in
effect on the date of this Agreement to convert the Bridge Loan into shares of Series A Preferred
Stock of NationsHealth and receive, accept and retain such shares of Series A Preferred Stock (the
“Voluntary Conversion Option”), (iii) the Junior Lender may receive, accept and retain any accrued
interest on the Junior Note that is required to be paid by Borrower upon any conversion permitted
under clauses (i) and (ii) of this subsection; (iv) the Junior Lender may receive, accept and
retain the Bridge Loan Warrant (as defined in the Junior Loan Agreement) in accordance with the
terms and conditions of Section 1(m) of the Junior Loan Agreement; (v) the Junior Lender may
exercise the Preferred Stock Investment Option (as defined in the Merger Agreement), (vi) upon the
closing of the Bridge Loan the Junior Lender may receive, accept and retain the fees, costs and
expenses required to be paid to
the Junior Lender from the proceeds of the Bridge Loan in accordance with Section 3(c) of the
Junior Loan Agreement; (vii) upon the termination of the Merger Agreement pursuant to Section
7.1(d)(iii) in connection with a Superior Proposal (as such term is defined in the Merger
Agreement), the Junior Lender may receive, accept and retain the Termination Fees (as such term is
defined in the Merger Agreement) and other amounts required to be paid under Section 7.3(a) of the
Merger Agreement, the outstanding principal balance of the Junior Note and the balance of any
unpaid and accrued interest thereon, as long as (i) all amounts permitted to be paid under this
clause (vii) are paid from the proceeds provided by or received from the person making the Superior
Proposal and (ii) the person making the Superior Proposal has agreed that any proceeds are
subordinate to the payment of the Senior Obligations as provided herein and (viii) upon the closing
of the Merger, the Junior Lender may receive, accept and retain the balance of any unpaid and
accrued interest on the Bridge Loan, any unpaid Transaction Fees and any other fees, costs and
expenses required to be paid or reimbursed by Borrower in connection with the Merger Agreement from
the Investment Amount (as such term is defined in the Merger Agreement).

In addition, the Junior Lender may receive, accept and retain regularly scheduled monthly interest
payments under the Junior Note at a rate per annum equal to 10% unless (i) a Default or an Event of
Default has occurred and is continuing under the Senior Loan Agreement (a “Senior Default”) with
respect to which the Junior Lender has received from the Senior Lender a notice (a “Senior Default
Notice”) prohibiting the Junior Lender from receiving, collecting or accepting any of the foregoing
payments and from commencing any Enforcement Action (as defined below) and (ii) either (x) the
Junior Lender has not received a written notice from the Senior Lender informing the Junior Lender
that such Senior Default has been waived or cured, or (y) less than one hundred eighty (180) days
have passed since the date of the Junior Lender’s receipt of such Senior Default Notice.

Nothing in this subsection (c) shall prohibit the accrual (but not the payment to the Junior
Lender) of interest on the Junior Obligations at the default rate in accordance with the terms of
the Junior Agreement or the Junior Note following the occurrence of an event of default under the
Junior Agreement or the Junior Note.

          (d) If the Junior Lender shall receive any payment or prepayment (including from any account
debtor under any accounts receivable of Borrower or following an Insolvency Event) on the Junior
Obligations that it is not entitled to receive under this Agreement, the Junior Lender will hold
any amount so received in trust for the Senior Lender and shall, as soon as possible, turn over
such payment to the Agent on behalf of the Senior Lender in the form received (together with any
necessary endorsements) to be applied to the Senior Obligations.

4

 

          (e) Unless and until the Senior Obligations shall have been indefeasibly paid in full in cash
and the Commitment has been terminated, the Junior Lender will not accelerate the maturity of the
Junior Obligations or commence any action or proceeding against Borrower to recover all or any part
of the Junior Obligations, or join with any other creditor in doing so, unless (i) in the case of
the acceleration of the Junior Obligations, (A) only if the Agent on behalf of the Senior Lender
has accelerated the Senior Obligations and consented in writing to the acceleration of the Junior
Obligations or (B) an event of default has occurred
and is continuing under Section 7(a) of the Junior Loan Agreement and, as applicable, the
Thirty Day Post-Maturity Period (as defined in Section 2(c) of the Junior Note) or the Thirty Day
Post-Termination Period (as defined in Section 2(d) of the Junior Note) has expired without the
payment or purchase in full of the Junior Obligations as provided in Section 2(c) and Section 2(d)
of the Junior Note (a “Junior Default”), written notice of which the Junior Lender has delivered
to the Senior Lender (the “Junior Default Notice”), and thirty (30) days (or, if a Senior Default
with respect to which the Junior Lender has received from the Senior Lender a Senior Default
Notice, one hundred eighty (180) days from the date of delivery by the Senior Lender of a Senior
Default Notice if delivered during such thirty-day period) have expired since the date of the
Senior Lender’s receipt of the Junior Default Notice and such Junior Default has not been cured or
waived during such time periods, (ii) in the case of any action or proceeding brought against
Borrower under any bankruptcy, insolvency or similar law or any other proceeding the result of
which could give rise to an Insolvency Event (as defined below), the Senior Lender shall have
joined therein or (iii) in the case of any other action or proceeding that does not involve an
Enforcement Action (which shall be governed exclusively by Section 3(s) hereof), a Junior Default
has occurred and is continuing with respect to which the Junior Lender has delivered a Junior
Default Notice to the Senior Lender, and thirty (30) days (or one hundred eighty (180) days from
the date of delivery by the Senior Lender of a Senior Default Notice if delivered during such
thirty-day period) have expired since the date of the Senior Lender’s receipt of such Junior
Default Notice and such Junior Default has not been cured or waived during such time periods. For
purposes of this Agreement, the term “Insolvency Event” shall mean, with respect to any Borrower,
the occurrence of any of the following: (i) such Borrower shall be adjudicated insolvent or
bankrupt or institutes proceedings to be adjudicated insolvent or bankrupt, or shall generally fail
to pay or admit in writing its inability to pay its debts as they become due, (ii) such Borrower
shall seek dissolution or reorganization or the appointment of a receiver, trustee, custodian, or
liquidator for it or a substantial portion of its property, assets or business or to effect a plan
or other arrangement with its creditors, (iii) such Borrower shall make a general assignment for
the benefit of its creditors, or consent to or acquiesce in the appointment of a receiver, trustee,
custodian, or liquidator for a substantial portion of its property, assets or business, (iv) such
Borrower shall file a voluntary petition under any bankruptcy, insolvency, or similar law, (v) such
Borrower shall take any corporate or similar act in furtherance of any of the foregoing, or (vi)
such Borrower, or a substantial portion of its property, assets or business, shall become the
subject of an involuntary proceeding or petition for (A) its dissolution or reorganization or (B)
the appointment of a receiver, trustee, custodian or liquidator, and (I) such proceeding shall not
be dismissed or stayed within sixty (60) days, (II) such receiver, trustee, custodian or liquidator
shall be appointed or (III) such Person fails to contest in a timely or appropriate manner any such
proceeding or petition.

5

 

          (f) Upon the occurrence of any Insolvency Event of Borrower or in the event of a sale of all
or substantially all of the assets, or any other marshaling of the assets and liabilities, or any
recapitalization, refinancing or reorganization, of Borrower, the Senior Obligations shall first be
indefeasibly paid in full in cash and the Commitment terminated before the Junior Lender shall be
entitled to receive any money, distributions or other assets in any such proceeding. In any such
event, the Junior Lender shall demand, sue for, collect or receive every such payment or
distribution of cash, property, stock or obligations, give acquittance therefor, file claims and
proofs of claim in any statutory or nonstatutory proceeding, exercise the rights of the Junior
Lender arising under or relating to the Junior Agreement or the Junior Note and vote
the claim of the Junior Lender under the Junior Agreement or the Junior Note in its sole
discretion in connection with any such event, including, without limitation, the right to
participate in any composition of creditors and to vote at creditors’ meetings for the election of
trustees, acceptances of plans of reorganization and any other matter upon which the Junior Lender
would be otherwise entitled to vote; provided, that if the Junior Lender votes its claim, the
Junior Lender shall not, without the prior written consent of the Agent on behalf of the Senior
Lender, vote to accept a plan of liquidation, reorganization, arrangement, composition or extension
that does not provide for the payment, refinancing, restatement or recognition in full of all of
the Senior Obligations. In the event that the Junior Lender shall fail to take any such action
following the written request of the Agent on behalf of the Senior Lender or fail to vote its claim
in any proceedings prior to 5 days before the expiration of the time to vote, the Agent on behalf
of the Senior Lender may (but shall not be obligated) demand, sue for, collect or receive every
such payment or distribution of cash, property, stock or obligations, give acquittance therefor,
file claims and proofs of claim in any statutory or nonstatutory proceeding, exercise the rights of
the Junior Lender arising under or relating to the Junior Agreement or the Junior Note and vote the
claim of the Junior Lender under the Junior Agreement or the Junior Note in its sole discretion in
connection with any such event, including, without limitation, the right to participate in any
composition of creditors and to vote at creditors’ meetings for the election of trustees,
acceptances of plans of reorganization and any other matter upon which the Junior Lender would be
otherwise entitled to vote. In such an event, the Junior Lender hereby irrevocably authorizes the
Agent on behalf of the Senior Lender and grants to the Agent on behalf of the Senior Lender an
exclusive power of attorney (which power of attorney is coupled with an interest and is
irrevocable), but without imposing any obligation upon the Agent on behalf of the Senior Lender, to
demand, sue for, collect or receive every such payment or distribution of cash, property, stock or
obligations, to give acquittance therefor, to file claims and proofs of claim in any statutory or
nonstatutory proceeding, to exercise the rights of the Junior Lender arising under or relating to
the Junior Agreement or the Junior Note and to vote the claim of the Junior Lender under the Junior
Agreement or the Junior Note in its sole discretion in connection with any such event, including,
without limitation, the right to participate in any composition of creditors and to vote at
creditors’ meetings for the election of trustees, acceptances of plans of reorganization and any
other matter upon which the Junior Lender would be otherwise entitled to vote. In furtherance of
the foregoing, at the request of the Agent on behalf of the Senior Lender, the Junior Lender shall
execute and deliver to the Agent on behalf of the Senior Lender a separate power of attorney and
such further powers and instruments as the Agent on behalf of the Senior Lender may request to
enable the Agent on behalf of the Senior Lender to enforce its rights under this subsection. Any
payment or distribution of any kind which otherwise would be payable or deliverable upon or with
respect to the Junior Obligations in any such proceeding, other than as set forth in Section 2(c),
shall be paid or delivered directly to the Agent on behalf of the Senior Lender for application to
the Senior Obligations until the Senior Obligations shall have been indefeasibly paid in full.

          (h) The Senior Lender may, at any time and from time to time, without the consent of or notice
to the Junior Lender, without incurring responsibility or liability to the Junior Lender and
without impairing or releasing any right or remedy of the Agent on behalf of the Senior Lender
hereunder:

6

 

          (i) amend, modify, restate, alter or waive any of the terms of the Senior Loan
Agreement or any of the other documents, agreements or instruments evidencing or
securing the Senior Obligations (collectively, the “Senior Loan Documents”) in any
manner not prohibited under this Section 2(h),

          (ii) change the manner, place or terms of payment of, change or extend the time
of payment of, or renew, increase or alter the Senior Obligations, or waive defaults
under or amend the Senior Loan Agreement or any other Loan Document in any manner or
enter into or amend in any manner or waive defaults under any other agreement
relating to the Senior Obligations;

          (iii) sell, exchange, release or otherwise deal with any property by whomsoever
at any time pledged to secure, or howsoever securing, the Senior Obligations;

          (iv) release any Person liable in any manner for the payment or collection of
any of the Senior Obligations;

          (v) exercise or refrain from exercising any rights against Borrower or any
other Person; or

          (vi) apply any sums by whomsoever paid or however realized to the Senior
Obligations.

          (i) The Junior Lender waives notice of acceptance of this Agreement.

          (j) The Junior Lender will cause each note or other instrument that evidences any Junior
Obligations (including, without limitation, the Junior Agreement and the Junior Note) to bear upon
its face a statement or legend to the effect that such note or other instrument is subordinated to
the Senior Obligations in the manner and to the extent set forth in this Agreement. The Junior
Lender shall mark its books and records, including any financial statements, to show that the
Junior Obligations are so subordinated to the Senior Obligations.

          (k) The Borrower and the Junior Lender agree that they will not amend, modify or supplement
the Junior Agreement or the Junior Note without the prior written consent of the Senior Lender
pursuant to the Senior Loan Agreement or any of the other documents, agreements or instruments
(collectively, the “Senior Loan Documents”). Notwithstanding the foregoing, if the Senior Loan
Documents are amended or otherwise modified to provide for additional covenants or events of
default or to make more restrictive any existing covenants or events of default applicable to the
Borrower, then the Junior Agreement, the Junior Note, and/or any other documents related thereto
shall be amended to provide for such additional covenants or events of default or such more
restrictive covenants or events of default, as the case may be.

          (l) Subject to the indefeasible payment in full of the Senior Obligations in cash and the
termination of the Commitment, the Junior Lender shall be subrogated to the Senior Lender’s rights
to receive payments or distributions in cash or property applicable to the Senior Obligations, and
no payment or distribution made to the Senior Lender
by virtue of this Agreement that otherwise would have been made to the Junior Lender shall be
deemed to be a payment by Borrower on account of the Junior Obligations.

7

 

          (m) The Junior Lender will not sell, assign, transfer or otherwise dispose of all or any part
of, or any interest in, the Junior Obligations to any Person without having first obtained (i) such
Person’s agreement in writing to be bound as the Junior Lender’s successor by the terms of this
Agreement or, in the case of an interest in the Junior Obligations, an acknowledgment by such
interest holder of the terms hereof, or (ii) the Agent on behalf of the Senior Lender’s prior
written consent.

          (n) The Junior Lender agrees that it will not exercise any right of setoff it may have against
the Junior Obligations in respect of any obligation owed by the Junior Lender to Borrower.

          (o) If Borrower shall become subject to a case under the Bankruptcy Code, and if the Agent on
behalf of the Senior Lender desires to permit the use of cash collateral or to provide (or to
permit another Person to provide) financing to Borrower under either Section 363 or Section 364 of
the Bankruptcy Code on such terms and conditions and in such amounts as the Agent on behalf of the
Senior Lender may decide, the Junior Lender agrees as follows: (i) adequate notice to the Junior
Lender shall be deemed to have been given to the Junior Lender if the Junior Lender receives notice
at least five (5) Business Days prior to the hearing held by the applicable bankruptcy court to
consider entry of an order approving such use or financing, provided that nothing in this
subsection shall be deemed to entitle the Junior Lender to any notice not required by the
Bankruptcy Code and that no such notice need be given with respect to an interim order approving
such use or financing so long as the conditions in clause (ii) hereof to avoid an objection by the
Junior Lender have been met, and (ii) no objection will be raised by the Junior Lender to any such
use or financing on the grounds of a failure to provide “adequate protection” of the Junior Lien or
any other ground if the Junior Lender is granted, with the approval of the applicable bankruptcy
court, a lien on and security interest in the post-petition Collateral to secure any claim that it
may have on account of the post-petition diminution in value of the Collateral, which lien shall
be subordinate to the Lien of the Senior Lender, any Liens to which the Lien of the Senior Lender
is subordinate and any “carve-out” reasonably agreed to by the Agent on behalf of the Senior
Lender. For purposes of this subsection, “Lien” shall mean any liens granted to the Senior Lender
pursuant to the Senior Loan Documents together with any post-petition liens and/or super-priority
claims for Post-Petition Financing and adequate protection of the Senior Lender’s pre-petition
liens. For purposes of this subsection, notice of a proposed financing or use of cash collateral
shall be deemed given when made in the manner prescribed by this Agreement, or as the applicable
bankruptcy court may approve, or, actual notice is given to the Junior Lender or its counsel,
whichever is soonest. In addition, the Junior Lender, its capacity as the holder of a secured
claim, agrees that it will not object to or oppose, and will consent to, a sale or other
disposition of any of the Collateral free and clear of security interests, liens or other claims of
the Junior Lender under Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy
Code if (x) the Agent on behalf of the Senior Lender has consented to such sale or disposition and
(y) the sale or other disposition has been subject to notice, efforts to attract competitive bids
and a competitive bidding procedure reasonably satisfactory under the circumstances to the Junior
Creditor. The parties acknowledge and agree that (i) the claims and interests of the Senior Lender
under the Senior Loan Agreement
are substantially different from the claims and interests of the Junior Lender under the
Junior Agreement and the Junior Note and (ii) such claims and interests should be treated as
separate classes for purposes of Section 1122 of the Bankruptcy Code. It is acknowledged and
agreed that this Agreement shall constitute a “subordination agreement” within the meaning of
Section 510(a) of the Bankruptcy Code.

8

 

          (p) All liens, pledges, and security interests of any nature upon or in any Collateral held by
the Junior Lender, including, without limitation, the Junior Lien, or any other Person for the
benefit or of or otherwise in favor of the Junior Lender shall be and are hereby made inferior and
junior to the liens, pledges and security interests of any nature upon or in any Collateral held by
or in favor of the Senior Lender, including, without limitation, the Senior Lien, regardless of the
failure to perfect or the order or manner of perfection of any such liens, pledges and security
interests. The priorities set forth in this Agreement are applicable irrespective of any priority
available to the Senior Lender or the Junior Lender under contract or applicable law or any
representation or warranty of Borrower to the contrary in any agreement, instrument, or other
document to which the Junior Lender is a party.

          (q) Notwithstanding the lack of perfection of any of the liens or security interests of the
Senior Lender with respect to any or all of the Collateral or any priority in time of perfection of
any of the liens or security interests of the Junior Lender over the liens or security interests of
the Senior Lender with respect to any or all of the Collateral, the liens and security interests of
the Senior Lender with respect to the Collateral shall be superior and prior in right of payment
and enforcement to the liens and security interests of the Junior Lender.

          (r) The Senior Lender may take any judicial or nonjudicial action, including any action to
enforce its liens on or security interests in any or all of the Collateral, including, without
limitation, to foreclose, execute, levy upon, or collect or dispose of any or all of the Collateral
(each, an “Enforcement Action”) as it shall determine in its sole and exclusive judgment.

          (s) The Junior Lender agrees that, until all the Senior Obligations have been indefeasibly
paid in full in cash and the Commitment has been terminated, the Junior Lender shall not commence
or continue to prosecute or otherwise proceed with an Enforcement Action, contact any account
debtor of Borrower, or otherwise take any action that will impede, interfere with, restrict or
restrain the exercise by the Senior Lender of its right and remedies under the Senior Loan
Agreement or which is contrary, prejudicial or inconsistent with the Senior Lender’s first priority
secured position in the Collateral unless (i) a Junior Default has occurred and is continuing, the
Junior Lender has delivered a Junior Default Notice to the Senior Lender and either (A) thirty (30)
days have expired since the date of the Junior Lender’s delivery of such Junior Default Notice and
the Junior Lender has not received a Senior Default Notice from the Senior Lender or (B) the Junior
Lender has received a Senior Default Notice from the Senior Lender and one hundred eighty (180)
days have expired since the date of such receipt and at the end of the relevant time period
described in (A) and (B), the Senior Lender has not commenced or is not continuing to prosecute or
otherwise proceed with an Enforcement Action, it being understood that (1) the Junior Lender shall
not commence any Enforcement Action if no Junior Default has occurred and is continuing (or if
there exists no basis for such Junior Default as set forth in Section 2(e) hereof), (2) the Junior
Lender shall discontinue any Enforcement
Action commenced by it at any time thereafter if the Senior Lender shall have commenced an
Enforcement Action with respect to any Collateral, and (3) in no event shall the Junior Lender have
the right to instruct any bank holding proceeds of any Collateral in a lockbox or blocked account
as to the disposition of such proceeds. The Senior Lender (to the exclusion of the Junior Lender
and the Junior Collateral Agent) shall have (whether or not any default or event of default under
the Senior Loan Agreement, the Junior Agreement, the Junior Notes, or any agreement relating
thereto shall have occurred and be continuing, and both before and after the occurrence of any
Insolvency Event of Borrower) the sole and exclusive right to administer, enforce and consent to
all matters in respect of the Collateral, including the right (A) to release, or direct or consent
to the release of, with or without consideration, the Collateral from the lien of the Senior Loan
Agreement or the Junior Notes, and (B) to direct or consent to the sale, transfer, lease, or other
disposition of the Collateral, the foreclosure or forbearance from foreclosure in respect of the
Collateral (including, without limitation, seeking or not seeking relief from any stay against
foreclosure in respect of the Collateral upon the occurrence of any Insolvency Event), and the
acceptance of the Collateral in full or partial satisfaction of the Senior Obligations.

9

 

          (t) Upon the sale or other disposition of any Collateral by or on behalf of the Agent on
behalf of the Senior Lender or the release or agreement of the Agent on behalf of the Senior Lender
to release the Senior Lien in any Collateral (whether in connection with any Enforcement Action by
the Agent on behalf of the Senior Lender or otherwise), the Junior Lender shall be deemed to have
consented (and does hereby consent) to such sale and to have released (and does hereby release) any
Junior Lien in the Collateral being sold, disposed of or released from the Senior Lien and shall,
at the request of the Agent on behalf of the Senior Lender, take all action and, if required,
execute and deliver all documents requested by the Agent on behalf of the Senior Lender in
connection therewith. Each of the Junior Lender and the Junior Collateral Agent hereby appoints
and constitutes the Agent on behalf of the Senior Lender as its attorney-in-fact and authorizes the
Agent on behalf of the Senior Lender to make any payment on or take any act necessary or desirable
to protect or preserve any of the Collateral. This power of attorney is coupled with an interest
and is irrevocable.

          (u) The Junior Lender agrees not to seek to avoid, contest or bring (or join in) any action or
proceeding to contest the validity of any rights of the Senior Lender with respect to the
Collateral or the validity or reasonableness of any actions taken or omitted to be taken by the
Agent on behalf of the Senior Lender hereunder or in connection herewith, under the Senior Loan
Agreement or under any other Loan Document, or in respect of any of the Collateral including,
without limitation, (i) the timing, method, or manner of collecting, disposing of or liquidating
any of the Collateral, (ii) the terms, including the price and percentage of consideration received
in cash, of any such disposition or liquidation, or (iii) the failure to dispose of or liquidate
any of the Collateral. Without limitation of the foregoing, the Junior Lender hereby waives, to
the fullest extent permitted by law, (A) any right under Section 9-615(a) of the Code with respect
to the application of disposition proceeds to the Senior Obligations, (B) any right to notice and
objection under Section 9-620 of the Code, promptness, diligence, notice of acceptance, and any
other notice with respect to any of the obligations under the Junior Agreement or the Junior Notes,
and (C) any requirement that the Agent on behalf of the Senior Lender exhaust any right or take any
action against Borrower, any other Person, the Collateral, or any other collateral. In addition,
the Junior Lender agrees that the Agent on behalf of the Senior Lender shall have no obligation to
marshal any Collateral or to seek recourse
against or satisfaction of any of the Senior Obligations from one source before seeking
recourse against or satisfaction from another source. The Junior Lender further agrees that the
net cash proceeds resulting from the Senior Lender’s exercise of any right to liquidate all or
substantially all of the Collateral, including any and all collections (after deducting all of the
Senior Lender’s expenses related thereto), may be applied by the Senior Lender to such of the
Senior Obligations and in such order as the Agent on behalf of the Senior Lender may elect in its
sole and absolute discretion, whether due or to become due. The Junior Lender further agrees that
all of the Senior Lender’s remedies under the Loan Documents shall be cumulative, may be exercised
simultaneously against any Collateral and either Loan Party or in such order and with respect to
such Collateral or such Loan Party as the Agent on behalf of the Senior Lender may deem desirable,
and are not intended to be exhaustive.

10

 

          (v) Notwithstanding any provision of this Agreement to the contrary, this Agreement shall not
limit the right of the Junior Lender to receive any Reorganized Securities. For purposes hereof,
“Reorganized Securities” shall mean securities of Borrower or any other Person (including those of
Borrower as reorganized) issued to the Junior Lender in respect of all or a part of the Junior
Obligations and provided for by a plan of reorganization in a proceeding under the Bankruptcy Code
or in connection with an Insolvency Event of Borrower, provided, that (i) such securities are (a)
equity securities or (b) debt securities subordinated to the Senior Obligations (and any debt
securities received by the holders of the Senior Obligations in such proceeding) at least to the
same extent as the Junior Obligations are subordinated to the Senior Obligations pursuant to this
Agreement and (ii) such securities are authorized by a court of competent jurisdiction in a final
order or decree which, in the case of debt securities, gives effect to this proviso and the
subordination of such debt securities to the Senior Obligations (and any debt securities received
by the holders of the Senior Obligations in such proceeding) on the terms set forth in this
Agreement.

          (w) Notwithstanding any provision of this Agreement to the contrary, if the Junior Lender
shall have exercised the Voluntary Conversion Option, then the Junior Lender shall not receive,
demand or accept, either directly or indirectly, any payment (of any kind or character) in respect
of the Merger Agreement Fees and Damages, deliver a Junior Default Notice, commence or continue to
prosecute or otherwise proceed with an Enforcement Action with respect to the collection or
enforcement of the Merger Agreement Fees and Damages, contact any account debtor of Borrower, or
otherwise take any action with respect to the collection of the Merger Agreement Fees and Damages
that will impede, interfere with, restrict or restrain the exercise by the Senior Lender of its
right and remedies under the Senior Loan Agreement or which is contrary, prejudicial or
inconsistent with the Senior Lender’s first priority secured position in the Collateral (all of the
foregoing being collectively referred to as “Merger Agreement Fee Collection Actions”) until the
indefeasible payment in full of the Senior Obligations in cash and the termination of the
Commitment. Further, notwithstanding any provision of this Agreement to the contrary, if the
Bridge Loan shall have been paid or purchased as set forth in Section 2(c) and (d) of the Junior
Note, then the Junior Lender shall not take or action any Merger Agreement Fee Collection Actions
until the earlier of (i) the indefeasible payment in full of the Senior Obligations in cash and the
termination of the Commitment, (ii) the acceleration of the Senior Obligations and (iii) the
expiration of three hundred sixty (360) days following the date of the termination of the Merger
Agreement which triggered Borrower’s obligation to pay such Merger Agreement Fees and Damages, it
being
understood that (1) the Junior Lender shall discontinue any Merger Fee Collection Actions
commenced by it at any time thereafter if the Senior Lender shall have commenced an Enforcement
Action with respect to any Collateral, and (2) in no event shall the Junior Lender have the right
to instruct any bank holding proceeds of any Collateral in a lockbox or blocked account as to the
disposition of such proceeds.

11

 

          (x) The Junior Lender acknowledges and agrees that (i) MHR Capital Partners Master Account LP
(as assignee of MHR Capital Partners (500) LP (f/k/a MHR Capital Partners LP)), MHR Capital
Partners (100) LP and OTQ LLC (collectively, the “MHR Notehholders”) and MHR Capital Partners
(500) LP in its capacity as collateral agent for the MHR Noteholders (in such capacity, the “MHR
Collateral Agent”) have executed and delivered a certain Subordination Agreement of even date
herewith in favor of the Junior Lender (the “Junior Lender MHR Subordination Agreement”) and (ii)
the MHR Noteholders and the MHR Collateral Agent have executed and delivered a certain Amended and
Restated Senior Subordination Agreement in favor of the Senior Lender of even date herewith (the
“Senior Lender MHR Subordination Agreement”). The Junior Lender hereby acknowledges and agrees
that, until the indefeasible payment in full of the Senior Obligations in cash and the termination
of the Commitment, it shall not deliver a “Senior Non-Payment Default Notice” (as such term is
defined in the Junior Lender MHR Subordination Agreement) unless and until the Senior Lender shall
have delivered a “CapitalSource Non-Payment Default Notice” (as such term is defined in the Junior
Lender MHR Subordination Agreement) and the “Senior Non-Payment Default Notice” delivered by the
Junior Lender is based upon the same underlying event, circumstance or condition on which the
“CapitalSource Non-Payment Default Notice” is based. Notwithstanding the foregoing, if the event,
circumstance or condition upon which the “CapitalSource Non-Payment Default Notice” is waived or
cured (including, without limitation, as a result of an amendment or modification to the Senior
Loan Agreement or the “Junior Note” (as defined in the Junior Lender MHR Subordination Agreement)
then the “Senior Non-Payment Default Notice” shall be deemed withdrawn. Any “Senior Non-Payment
Default Notice” which is delivered in violation of, or which is not withdrawn as required by, this
Section 2(x) shall be null and void.

     SECTION 3. Representations and Warranties. The Junior Lender and the Senior Lender
hereby represent and warrant to the other that:

          (a) It has full power and authority to enter into, execute, delivery and carry out the terms
of this Agreement and to incur the obligations provided for herein, all of which have been duly
authorized by all proper and necessary action and are not prohibited by its governing instruments.

          (b) This Agreement, when executed and delivered, will constitute its valid and legally binding
obligation enforceable in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and by equitable principles.

          (c) No provision of any mortgage, indenture, contract, agreement, statute, rule, regulation,
judgment, decree or other binding on it or affecting its property conflicts with,
or requires any consent which has not already been obtained under, or would in any way prevent
the execution, delivery or performance of the terms of this Agreement.

12

 

     SECTION 4. Covenants of Junior Lender.

          (a) The Junior Lender agrees that it will not at any time contest the validity, perfection,
priority or enforceability of the Senior Obligations or the Senior Lien in the Collateral granted
to the Agent on behalf of the Senior Lender and/or the Senior Lender pursuant to the Senior Loan
Documents. The provisions of this Agreement shall apply regardless of any invalidity,
unenforceability or lack of perfection of the Senior Lien.

          (b) The Junior Lender acknowledges that the Agent on behalf of the Senior Lender has the right
to collect payments of all accounts receivable of the Borrower pursuant to the Senior Loan
Documents and that any collection of such accounts receivable by Junior Lender shall be subject to
the terms and conditions of this Agreement and shall be paid to the Agent on behalf of the Senior
Lender until the indefeasible payment in full of the Senior Obligations in cash and the termination
of the Commitment.

          (c) The Junior Lender agrees that fifteen (15) days notice prior to any disposition of any
assets of any Borrower or any Collateral securing any of the Senior Obligations shall be
reasonable.

          (e) Subject to the terms and conditions of this Agreement, the Junior Lender agrees not to
interfere with any disposition of assets of any Borrower or any Collateral securing any of the
Senior Obligations by or at the direction of the Agent on behalf of the Senior Lender.

          (f) The Junior Lender waives any right to require the Agent or the Senior Lender to marshal
any assets of any Borrower or to otherwise proceed in any fashion against any Borrower or any other
person.

          (g) The Junior Lender acknowledges and agrees that, until the Senior Obligations are
indefeasibly paid in full and the Commitment is terminated, the use and application of insurance
proceeds and condemnation proceeds payable in connection with any property or business of any
Borrower shall be governed by terms of the Senior Loan Documents. To the extent that the Agent or
the Senior Lender permits such proceeds to be utilized by the Borrower to repair, rebuild or
replace any lost or damaged property, the Junior Lender agrees that the Agent’s or the Senior
Lender’s determination regarding the use of such proceeds shall be binding upon the Junior Lender.
To the extent that any of such proceeds are not made available to any Borrower to repair, rebuild
or replace any property, and such proceeds are paid to the Agent on behalf of the Senior Lender,
the Senior Lender shall use such proceeds to repay Senior Obligations. In the event that any
insurance or condemnation proceeds related to any property or business of any Borrower is paid to
the Junior Lender, the Junior Lender agrees to immediately deliver such insurance or condemnation
proceeds to the Agent on behalf of the Senior Lender.

          (h) The Junior Lender acknowledges and agrees that no obligations of the Borrower contained in
the Senior Loan Documents are created for the benefit of the Junior Lender and the Junior Lender
shall have no right to enforce any obligation or provision contained in the Senior Loan Documents.

13

 

     SECTION 5. Further Assurances. The Junior Lender shall, at any time and from time to
time, at Borrower’s expense, promptly execute and deliver all further instruments and documents and
take all further action that the Agent on behalf of the Senior Lender may request to protect any
right or interest granted or purported to be granted hereby or to enable the Agent on behalf of the
Senior Lender to exercise and enforce its rights and remedies hereunder.

     SECTION 6. Obligations Unimpaired. Nothing in this Agreement shall impair as between
Borrower, on the one hand, and the Senior Lender or the Junior Lender, on the other hand, the
obligations of Borrower to the Senior Lender or the Junior Lender, as the case may be. In addition,
all rights and interests of the Agent and/or the Senior Lender hereunder, and all agreements and
obligations of the Junior Lender and the Borrower under this Agreement, shall remain in full force
and effect irrespective of:

          (a) the occurrence of any event or circumstance set forth in Section 2(g) above;

          (b) any lack of validity or enforceability of the Senior Loan Agreement or any document,
agreement or instrument evidencing, securing or otherwise relating to the Senior
Obligations; or

          (c) the occurrence of any event or circumstance which might otherwise constitute a
defense available to, or a discharge of, either the Borrower with respect to the Senior
Obligations or the Junior Lender with respect to this Agreement.

     SECTION 7. Termination; Reinstatement. (a) This Agreement shall terminate and cease
to be of any further force or effect ninety (90) days after the indefeasible payment in full in
cash of the Senior Obligations and termination of the Commitment.

          (b) If, at any time, all or part of any payment with respect to the Senior Obligations
theretofore made by Borrower or any other Person is rescinded or must otherwise be returned by the
Senior Lender for any reason whatsoever (including, without limitation, as a result of Borrower or
any other Person becoming the subject of an Insolvency Event), this Agreement shall continue to be
effective or be reinstated, as the case may be, all as though such payment had not been made.

     SECTION 8. Benefit of Agreement. Nothing in this Agreement, express or implied, shall
give or be construed to give to any Person including, without limitation, Borrower (but excluding
the Agent, the Senior Lender and the Junior Lender) any legal or equitable right, remedy or claim
under this Agreement or under any covenant or provision contained herein, all such covenants and
provisions being for the sole and exclusive benefit of the Agent, the Senior Lender and the Junior
Lender.

     SECTION 9. Notices. All notices, requests and other communications to any party
hereunder shall be in writing and shall be deemed given if delivered personally, sent by facsimile
(which is confirmed by an acknowledgement or transmission report generated by the machine from
which the facsimile was sent indicating that the facsimile was sent in its entirety to the
addressee’s facsimile number) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses:

14

 

			
	               	 	If to the Senior Lender, to:

CapitalSource Finance LLC

4445 Willard Avenue, 12th Floor

Chevy Chase, Maryland 20815

Attention: Healthcare and Specialty Business, Portfolio Manager

Facsimile: (301) 841-2340)

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

			
	               	 	Updike, Kelly & Spellacy, P.C.

One State Street

P.O. Box 231277

Hartford, Connecticut 06123-1277

Attention: John F. Wolter

Facsimile: (860) 548-2680

If to the Junior Lender (including MSL Family, LLC), to:

ComVest Investment Partners III, L.P.

One North Clematis

Suite 300

West Palm Beach, Florida 33401

Attention: Cecilio Rodriguez

Facsimile: (561) 671-3225

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

			
	               	 	Foley & Lardner LLP

100 North Tampa Street

Suite 2700

Tampa, FL 33602

Attention: Steven W. Vazquez

Facsimile: (813) 221-4210

If to the Borrower, to:

NationsHealth, Inc.

13630 NW 8th Street

Suite 210

Sunrise, Florida 33325

Attention: Chief Executive Officer

Facsimile: (954) 903-5005

15

 

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

			
	               	 	McDermott Will & Emery LLP

201 South Biscayne Boulevard

22nd Floor

Miami, Florida 33131

Phone: 305.358.3500

Fax: 305.347.6500

Attention: Ira J. Coleman, Esq.

                  Frederic L. Levenson, Esq.

                  Harris Siskind, Esq.

and

McDermott Will & Emery LLP

227 West Monroe Street

Chicago, Illinois 60606

Phone: 312.372.2000

Fax: 312.984.7700

Attention: Helen R. Friedli, Esq.

or such other address or facsimile number as such party may hereafter specify by like notice to the
other parties hereto. All such notices, requests and other communications shall be deemed received
on the date of receipt by the recipient thereof if received prior to 5 P.M. in the place of receipt
and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next succeeding Business Day in
the place of receipt. In the event that an addressee of a notice or communication rejects or
otherwise refuses to accept a notice or other communication delivered or sent in accordance with
this Section 9, or if the notice or other communication cannot be delivered because of a change in
address for which no notice was given, then such notice or other communication is deemed to have
been received upon such rejection, refusal or inability to deliver.

     SECTION 10. Amendments and Waivers. No amendment or waiver of any provision of this
Agreement, or consent to any departure by the Junior Lender or Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Agent on behalf of the
Senior Lender, Borrower and the Junior Lender.

     SECTION 11. Delays; Partial Exercise of Remedies. No delay or omission of the Agent
on behalf of the Senior Lender to exercise any right or remedy hereunder shall impair any such
right or operate as a waiver thereof. No single or partial exercise by the Agent on behalf of the
Senior Lender of any right or remedy shall preclude any other or further exercise thereof, or
preclude any other right or remedy.

     SECTION 12. Counterparts; Telecopied Signatures. This Agreement and any waiver or
amendment related hereto may be executed in counterparts and by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. This Agreement may be executed and
delivered by telecopier or other facsimile transmission all with the same force and effect as if
the same were a fully executed and delivered original manual counterpart.

16

 

     SECTION 13. Severability. If any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

     SECTION 14. Entire Agreement; Successors and Assigns. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof, supersedes any prior
written and verbal agreements among them with respect to the subject matter hereof, and shall bind
and benefit the parties (including, without limitation, the Agent or the Senior Lender) and their
respective successors and permitted assigns. Borrower and the Junior Lender each acknowledge and
agree that the Senior Lender, subject to Section 3 hereof, at any time and from time to time may
sell, assign or grant participating interests in or transfer all or any part of its rights or
obligations under this Agreement, the Senior Obligations, the Collateral and/or the Loan Documents
to one or more other persons, including, without limitation, financial institutions (each such
transferee, assignee or purchaser, a “Transferee”). In such case, the Transferee shall have all of
the rights and benefits with respect to the portion of such Senior Obligations, the Collateral,
this Agreement and/or the Loan Documents, as the case may be, held by it as fully as if such
Transferee were the original holder thereof (including, without limitation, rights of set off and
recoupment), and shall become vested with all of the powers and rights given to Lender hereunder
with respect thereto, and shall be deemed to be the “Senior Lender” for all purposes hereunder, the
predecessor Senior Lender shall thereafter be forever released and fully discharged from any
liability or responsibility hereunder with respect to the rights and interests so assigned, and
either the Agent, the Senior Lender or any Transferee may be designated as the sole agent to manage
the transactions and obligations contemplated herein.

     SECTION 15. Conflict. In the event of any express conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of any of the Senior Loan
Agreement, the other Loan Documents, the Junior Agreement or the Junior Note, the provisions of
this Agreement shall control.

     SECTION 16. Statement of Indebtedness. Upon demand by the Agent on behalf of the
Senior Lender, the Junior Lender will furnish to the Agent on behalf of the Senior Lender a
statement of indebtedness owing from Borrower to the Junior Lender. The Senior Lender may rely
without further investigation upon any such statement.

     SECTION 17. SPECIFIC PERFORMANCE. THE AGENT ON BEHALF OF SENIOR LENDER IS HEREBY
AUTHORIZED TO DEMAND SPECIFIC PERFORMANCE OF THIS AGREEMENT AT ANY TIME WHEN THE JUNIOR LENDER
SHALL HAVE FAILED TO COMPLY WITH ANY OF THE PROVISIONS OF THIS AGREEMENT APPLICABLE TO IT. THE
JUNIOR LENDER HEREBY IRREVOCABLY WAIVES ANY DEFENSE BASED ON THE ADEQUACY OF A REMEDY AT LAW THAT
MIGHT BE ASSERTED AS A BAR TO SUCH REMEDY OF SPECIFIC PERFORMANCE.

     SECTION 18. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, WHETHER
SOUNDING IN CONTRACT, TORT OR EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS AND
DECISIONS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF MARYLAND.

17

 

     SECTION 19. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN OR AMONG ANY OF THE
PARTIES HERETO, WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY
BY STATE AND FEDERAL COURTS LOCATED IN THE STATE OF MARYLAND AND THE COURTS TO WHICH AN APPEAL
THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE SENIOR LENDER SHALL HAVE THE RIGHT, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE JUNIOR LENDER TO ENFORCE THE
PROVISIONS HEREOF IN ANY OTHER COURT OF COMPETENT JURISDICTION OR VENUE. EACH OF THE JUNIOR LENDER
AND BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF ANY SUCH COURT IN WHICH THE
SENIOR LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.

     SECTION 20. JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (I) THIS AGREEMENT OR (II) ANY CONDUCT, ACT OR
OMISSION OF THE JUNIOR LENDER, BORROWER, THE AGENT, SENIOR LENDER OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER AFFILIATE, IN EACH CASE WHETHER SOUNDING
IN CONTRACT, TORT OR EQUITY OR OTHERWISE.

     SECTION 21. SERVICE OF PROCESS. THE JUNIOR LENDER HEREBY IRREVOCABLY DESIGNATES
                                 AS THE DESIGNEE AND AGENT OF THE JUNIOR LENDER TO RECEIVE, FOR AND ON BEHALF OF
THE JUNIOR LENDER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL
BE PROMPTLY FORWARDED BY MAIL TO THE JUNIOR LENDER, BUT THE FAILURE OF THE JUNIOR LENDER TO RECEIVE
SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE AGENT ON BEHALF OF THE SENIOR LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.

[SIGNATURE PAGES NEXT FOLLOW]

18

 

[Signature Page to the Senior Subordination Agreement]

     IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed by its proper and
duly authorized officer as of the date first set forth above.

	 	 	 	 	 
	 	JUNIOR LENDER:

COMVEST NATIONSHEALTH HOLDINGS, LLC

 	 
	 	By:  	/s/ Jose Gordo
 	 
	 	 	Name:  	Jose Gordo 	 
	 	 	Title:  	President 	 
	 
	 	MSL FAMILY, LLC

 	 
	 	By:  	/s/ Mark Lama
 	 
	 	 	Name:  	Mark Lama 	 
	 	 	Title:  	President 	 
	 
	 	AGENT ON BEHALF OF SENIOR LENDER:

CAPITALSOURCE FINANCE LLC, AS AGENT

 	 
	 	By:  	/s/ Natasha R. Luddington
 	 
	 	 	Name:  	Natasha R. Luddington 	 
	 	 	Title:  	Authorized Signatory 	 

19

 

	 	 	 	 	 

[Acknowledgement Page to the Senior Subordination Agreement]

ACKNOWLEDGMENT

     Each of the undersigned hereby acknowledges the provisions of the foregoing Senior
Subordination Agreement and agrees to abide by the terms thereof.

	 	 	 	 	 
	 	BORROWER:

UNITED STATES PHARMACEUTICAL GROUP, L.L.C. d/b/a NATIONSHEALTH

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 
	 
	 	NATIONSHEALTH HOLDINGS, L.L.C.

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 
	 
	 	NATIONSHEALTH, INC.

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 
	 
	 	DIABETES CARE & EDUCATION, INC.

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	GEO 	 
	 
	 	NATIONAL PHARMACEUTICALS AND
MEDICAL PRODUCTS (USA), LLC

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Title:  	CEO 	 
	 

20

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