Document:

ex10-3.htm

    
      

    

    Exhibit 10.3

     

    
      COMMERCIAL
PLEDGE AGREEMENT

       

      
        	
                Principal

                $675,000.00

              	
                Loan
      Date

                04-21-2008

              	
                Maturity

                04-21-2009

              	
                Loan
      No.

                503003088

              	
                Call
      / Coll

              	
                Account

              	
                Office

                LL

              	
                Initials

                 

              
	
                References
      in the boxes above are for Lender’s use only and do not limit the
      applicability of this document to any particular loan or
item.

                Any
      item above containing ***** has been omitted due to text length
      limitations.

              

      

      

      
        	
                Grantor:

              	
                PacificHealth
      Laboratories, Inc.

              	 	
                Lender:

              	
                Grand
      Bank, N.A.

              	 
      
	 
      	
                100
      Matawan Road, Suite 420

              	 	 
      	
                One
      Edinburg Road

              	 
      
	 
      	
                Matawan,
      NJ  07747

              	 	 
      	
                Hamilton,
      NJ  08619

              	 
      

      

       

      DEFINITIONS.
The following capitalized words and terms shall have the following meanings when
used in this Agreement. Unless specifically stated to the contrary, all
references to dollar amounts shall mean amounts in lawful money of the United
States of America. Words and terms used in the singular shall include the
plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Agreement shall have the meanings
attributed to such terms in the Uniform Commercial Code:

       

      Agreement.
The word "Agreement" means this Commercial Pledge Agreement, as this Commercial
Pledge Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Commercial Pledge Agreement from time to
time.

       

      Borrower.
The word "Borrower" means PacificHealth Laboratories, Inc. and includes all
co-signers and co-makers signing the Note and all their successors and
assigns.

       

      Collateral.
The word "Collateral" means all of Grantor's right, title and interest in and to
all the Collateral as described in the Collateral Description section of this
Agreement.

       

      Default.
The word "Default" means the Default set forth in this Agreement in the section
titled "Default".

       

      Event of
Default. The words "Event of Default" mean any of the events of default set
forth in this Agreement in the default section of this Agreement.

       

      Grantor.
The word "Grantor” means PacificHealth Laboratories, Inc..

       

      Guaranty.
The word "Guaranty" means the guaranty from guarantor, endorser, surety, or
accommodation party to Lender, including without limitation a guaranty of all or
part of the Note*

       

      Income
and Proceeds. The words Income and Proceeds" mean all present and future income,
proceeds, earnings, increases, and substitutions from or for the Collateral of
every kind and nature, including without limitation all payments, interest,
profits, distributions, benefits, rights, options, warrants, dividends, stock
dividends, stock splits, stock rights, regulatory dividends, subscriptions,
monies, claims for money due and to become due, proceeds of any insurance on the
Collateral, shares of stock of different par value or no par value issued in
substitution or exchange for shares included in the Collateral, and all other
property Grantor is entitled to receive on account of such Collateral, including
accounts, documents, instruments, chattel paper, and general
intangibles.

       

      Indebtedness.
The word "Indebtedness" means the indebtedness evidenced by the Note or Related
Documents, including all principal and interest together with all other
indebtedness and costs and expenses for which Grantor is responsible under this
Agreement or under any of the Related Documents.

       

      Lender.
The word "Lender" means Grand Bank, N.A., its successors and
assigns.

       

      Note. The
word "Note" means the Note executed by PacificHealth Laboratories, Inc. in the
principal amount of $675,000.00 dated April 21, 2008, together with all renewals
of, extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.

       

      Obligor.
The word "Obligor' means without limitation any and all persons obligated to pay
money or to perform some other act under the Collateral.

       

      Property.
The word 'Property' means all of Grantor's right, title and interest in and to
all the Property as described in the "Collateral Description" section of this
Agreement.

       

      Related
Documents. The words "Related Documents" mean all promissory notes, credit
agreements, loan agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and
all other instruments, agreements and documents, whether now or hereafter
existing, executed in connection with the Indebtedness.

       

      THIS
COMMERCIAL PLEDGE AGREEMENT dated April 21, 2008, is made and executed between
PacificHealth Laboratories, Inc, ("Grantor") and Grand Bank, N.A.
("Lender").

       

      GRANT OF
SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a
security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by
law.

       

      COLLATERAL
DESCRIPTION. The word 'Collateral" as used in this Agreement means all of
Grantor's property (however owned if more than one), in the possession of Lender
(or in the possession of a third party subject to the control of Lender),
whether existing now or later and whether tangible or intangible in character,
including without limitation each, and, all of the following:

       

      Pledged
Collateral Account Agreement with Oppenheimer Account #A81-0740868 which will be
funded by a minimum $1,350,000 of assets maintained by Oppenheimer

       

      In
addition, the word "Collateral" includes all of Grantor's property (however
owned), in the possession of Lender (or in the possession of a third party
subject to the control of Lender), whether now or hereafter existing and whether
tangible or intangible in character, including without limitation each of the
following:

       

      (A) All
property to which Lender acquires title or documents of title.

       

      (B) All
property assigned to Lender.

       

      (C) All
promissory notes, bills of exchange, stock certificates, bonds, savings
passbooks, time certificates of deposit, insurance policies, and all other
instruments and evidences of an obligation.

       

      (D) All
records relating to, any of the property described in this Collateral section,
whether in the form of a writing, microfilm, microfiche, or electronic
media.

       

      (E) All
Income and Proceeds from the Collateral as defined herein.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      COMMERCIAL
PLEDGE AGREEMENT

      
        	
                Loan
      No: 50300088

              	
                (Continued)

              	
                Page
      2

              

      

       

      RIGHT OF
SETOFF. To the extent permitted by applicable law, Lender reserves a right of
setoff in all Grantor's accounts with Lender (whether checking; savings, or some
other account). This includes all accounts Grantor holds jointly with someone
else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law. Grantor authorizes Lender,
to the extent permitted by applicable law, to charge or setoff all sums owing on
the Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

       

      REPRESENTATIONS
AND WARRANTIES WITH RESPECT TO THE COLLATERAL. Grantor represents and warrants
to Lender that:

       

      Ownership.
Grantor is the lawful owner of the Collateral free and clear of all security
interests, liens, encumbrances and claims of others except as disclosed to and
accepted by Lender in writing prior to execution of this Agreement.

       

      Right to
Pledge. Grantor has the full right, power and authority to enter into this
Agreement and to pledge the Collateral.

       

      Authority;
Binding Effect. Grantor has the full right, power and authority to enter into
this Agreement and to grant a security interest in the Collateral to Lender.
This Agreement is binding upon Grantor as well as Grantor's successors and
assigns, and is legally enforceable in accordance with its terms. The foregoing
representations and warranties, and all other representations and warranties
contained in this Agreement are and shall be continuing in nature and shall
remain in full force and effect until such time as this Agreement is terminated
or cancelled as provided herein.

       

      No
Further Assignment. Grantor has not, and shall not, sell, assign, transfer,
encumber or otherwise dispose of any of Grantor's rights in the Collateral
except as provided in this Agreement.

       

      No
Defaults. There are no defaults existing under the Collateral, and there are no
offsets or counterclaims to the same. Grantor will strictly and promptly perform
each of the terms, conditions, covenants and agreements, if any, contained in
the Collateral which are to be performed by Grantor.

       

      No
Violation. The execution and delivery of this Agreement will not violate any law
or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.

       

      Financing
Statements. Grantor authorizes Lender to file a UCC financing statement, or
alternatively, a copy of this Agreement to perfect Lender's security interest.
At Lender's request, Grantor additionally agrees to sign all other documents
that are necessary to perfect, protect, and continue Lender's security interest
in the Property. Grantor will pay all filing fees, title transfer fees, and
other fees and costs involved unless prohibited by law or unless Lender is
required by law to pay such fees and costs. if Grantor changes Grantor's name or
address, or the name or address of any person granting a security interest under
this Agreement changes, Grantor will promptly notify the Lender of such
change.

       

      LENDER'S
RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. Lender may hold the
Collateral until all Indebtedness has been paid and satisfied. Thereafter Lender
may deliver the Collateral to Grantor or to any other owner of the Collateral.
Lender shall have the following rights in addition to all other rights Lender
may have by law:

       

      Maintenance
and Protection of Collateral. Lender may, but shall not be obligated to, take
such steps as it deems necessary or desirable to protect, maintain, insure,
store, or care for the Collateral, including paying of any liens or claims
against the Collateral. This may include such things as hiring other people,
such as attorneys, appraisers or other experts. Lender may charge Grantor for
any cost incurred in so doing. When applicable law provides more than one method
of perfection of Lender's security interest, Lender may choose the method(s) to
be used. If the Collateral consists of stock, bonds or other investment property
for which no certificate has been issued, Grantor agrees, at Lender's request,
either to request issuance of an appropriate certificate or to give instructions
on Lender's forms to the issuer, transfer agent, mutual fund company, or broker,
as the case may be, to record on its books or records Lender's security interest
in the Collateral, Grantor also agrees to execute any additional documents,
including but not limited to, a control agreement, necessary to perfect Lender's
security interest as Lender may desire.

       

      Income
and Proceeds from the Collateral. Lender may receive all Income and Proceeds and
add it to the Collateral. Grantor agrees to deliver to Lender immediately upon
receipt, in the exact form received and without commingling with other property,
all Income and Proceeds from the Collateral which may be received by, paid, or
delivered to Grantor or for Grantor's account, whether as an addition to, in
discharge of, in substitution of, or in exchange for any of the
Collateral.

       

      Application
of Cash. At Lender's option, Lender may apply any cash, whether included in the
Collateral or received as Income and Proceeds or through liquidation, sale, or
retirement, of the Collateral, to the satisfaction of the Indebtedness or such
portion thereof as Lender shall choose, whether or not matured.

       

      Transactions
with Others. Lender may (1) extend time for payment or other performance, (2)
grant a renewal or change in terms or conditions, or (3) compromise, compound or
release any obligation, with any one or more Obligors, endorsers, or Guarantors
of the Indebtedness as Lender deems advisable, without obtaining the prior
written consent of Grantor, and no such act or failure to act shall affect
Lender's rights against Grantor or the Collateral.

       

      All
Collateral Secures Indebtedness. All Collateral shall be security for the
Indebtedness, whether the Collateral is located at one or more offices or
branches of Lender. This will be the case whether or not the office or branch
where Grantor obtained Grantor's loan knows about the Collateral or relies upon
the Collateral as security.

       

      Collection
of Collateral. Lender at Lender's option may, but need not, collect the Income
and Proceeds directly from the Obligors. Grantor authorizes and directs the
Obligors, if Lender decides to collect the income and Proceeds, to pay and
deliver to Lender all Income and Proceeds from the Collateral and to accept
Lender's receipt for the payments.

       

      Power of
Attorney. Grantor irrevocably appoints Lender as Grantor's attorney-in-fact,
with full power of substitution, (a) to demand, collect, receive, receipt for,
sue and recover all Income and Proceeds and other sums of money and other
property which may now or hereafter become due, owing or payable from the
Obligors in accordance with the terms of the Collateral; (b) to execute, sign
and endorse any and all instruments, receipts, checks, drafts and warrants
issued in payment for the Collateral; (c) to settle or compromise any and all
claims arising under the Collateral, and in the place and stead of Grantor,
execute and deliver Grantor's release and acquittance for Grantor; (d) to file
any claim or claims onto take any action or institute or take part in any
proceedings, either in Lender's own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable; and (e) to execute in Grantor's name and to deliver to the Obligors
on Grantor's behalf, at the time and in the manner specified by the Collateral,
any necessary instruments or documents.

       

      Perfection
of Security Interest. Upon Lender's request, Grantor will deliver to Lender any
and all of the documents evidencing or constituting the Collateral. When
applicable law provides more than one method of perfection of Lender's security
interest, Lender may choose the method(s) to be used. Upon Lender's request,
Grantor will sign and deliver any writings necessary to perfect Lender's
security interest. If any of the

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      COMMERCIAL
PLEDGE AGREEMENT

      
        	
                Loan
      No: 503003088

              	
                (Continued)

              	
                Page
      3

              

      

       

      Collateral
consists of securities for which no certificate has been issued, Grantor agrees,
at Lender's option, either to request issuance of an appropriate certificate or
to execute appropriate instructions on Lender's forms instructing the issuer,
transfer agent, mutual fund company, or broker, as the case may be, to record on
its books or records, by book-entry or otherwise, Lender's security interest in
the Collateral. Grantor hereby appoints Lender as Grantor's irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect, amend, or to continue the security interest granted in this Agreement
or to demand termination of filings of other secured parties. This is
a continuing Security Agreement
and will continue in effect even though all or any part of the Indebtedness is
paid in full and even though for a period of time Grantor
may not be Indebted to Lender.

       

      LENDER'S
EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a part
of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B)
be added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may are
entitled upon Default

       

      LIMITATIONS
ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable care in
the physical preservation and custody of the Collateral in Lender's possession,
but shall have no other obligation to protect the Collateral or its value. In
particular, but without limitation, Lender shall have no responsibility for (A)
any depreciation in value of the Collateral or for the collection or protection
of any Income and Proceeds from the Collateral, (B) preservation of rights
against parties to the Collateral or against third persons, (C) ascertaining any
maturities, calls, conversions, exchanges, offers, tenders, or similar matters
relating to
any of the Collateral, or (D) informing Grantor about any of the above,
whether or not Lender has or is deemed to have knowledge of such matters. Except
as provided above, Lender shall have no liability for depreciation or
deterioration of the Collateral.

       

      
        DEFAULT.
Each of the following shall constitute an Event of Default under this
Agreement:

         

        Payment
Default. Grantor fails to make any payment when due under the
Indebtedness.

         

      

      Other
Defaults. Grantor fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and
Grantor.

       

      Default
in Favor of Third Parties. Should Grantor or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Grantor's property or Grantor's or any Grantor's
ability to repay the Indebtedness or perform their respective obligations under
this Agreement or any of the Related Documents.

       

      False
Statements. Any warranty, representation or statement made or furnished
to Lender by Grantor or on Grantor's behalf under this Agreement or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time
thereafter.

       

      Defective
Collateralization. This Agreement or any of the Related Documents ceases
to be in full force and effect (including failure of any Related Documents to
create a valid and perfected security interest or lien) at any time and for any
reason.

       

      Insolvency.
The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.

       

      Creditor
or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any collateral securing the indebtedness. This includes a garnishment of any of
Grantor's accounts, including deposit accounts, with Lender. However, this Event
of Default shall not apply if there is a
good faith dispute by Grantor as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding and if Grantor
gives Lender written notice of the creditor or forfeiture proceeding and
deposits with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion, as being
an adequate reserve or bond for the dispute.

       

      Insufficient
Market Value of Securities. Stock: The Loan to value shall not exceed
70%; and as a result of the deterioration of the market value of the Collateral,
Grantor does not, by the close of business on the next business day after
Grantor has received notice from Lender of the deterioration, either (1) reduce
the amount of the Indebtedness in this loan as required by Lender or (2) pledge
or grant an additional security interest to increase the value of the Collateral
as required by Lender.

       

      Events
Affecting Guarantor. Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or guarantor, endorser, surety, or accommodation party dies or
becomes incompetent or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness.

       

      Adverse
Change. A material adverse change occurs n Grantor's financial condition,
or Lender believes the prospect of payment or performance of the Indebtedness is
impaired.

       

      Insecurity.
Lender in good faith believes itself insecure.

       

      Cure
Provisions. If any default, other than a default in payment or failure to
satisfy Lender's requirement in the Insufficient Market Value of Securities
section is curable and if Grantor has not been given a notice of a breach of the
same provision of this Agreement within the preceding twelve (12) months, it may
be cured if Grantor, after receiving written notice from Lender demanding cure
of such default: (1) cures the default within thirty (30) days; or (2) if the
cure requires more than thirty (30) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.

       

      RIGHTS AND REMEDIES ON DEFAULT.
If an Event of Default occurs under this Agreement, at any time
thereafter, Lender may exercise any one or more of the following rights and
remedies:

       

      Accelerate Indebtedness.
Declare all Indebtedness, including any prepayment penalty which Grantor
would be required to pay, immediately due and payable, without notice of any
kind to Grantor.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      COMMERCIAL
PLEDGE AGREEMENT

      
        	
                Loan
      No: 503003088

              	
                (Continued)

              	
                Page
      4

              

      

       

      Collect the Collateral.
Collect any of the Collateral and, at Lender's option and to the extent
permitted by applicable law, retain possession of the Collateral while suing on
the Indebtedness.

       

      Sell the Collateral. Sell the
Collateral, at Lender's discretion, as a unit or in parcels, at one or more
public or private sales. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Lender shall give or mail to Grantor, and other persons as required by
law, notice at least ten (10) days in advance of the time and place of any
public sale, or of the time after which any private sale may be made. However,
no notice need be provided to any person who, after an Event of Default occurs,
enters into and authenticates an agreement waiving that person's right to
notification of sale. Grantor agrees that any requirement of reasonable notice
as to Grantor is satisfied if Lender mails notice by ordinary mail addressed to
Grantor at the last address Grantor has given Lender in writing. If a public
sale is held, there shall be sufficient compliance with all requirements of
notice to the public by a single publication in any newspaper of general
circulation in the county where the Collateral is located, setting forth the
time and place of sale and a brief description of the property to be sold.
Lender may be a purchaser at any public sale.

       

      Sell Securities. Sell any
securities included in the Collateral in a manner consistent with applicable
federal and state securities laws. If, because of restrictions under such laws,
Lender is unable, or believes Lender is unable, to sell the securities in an
open market transaction, Grantor agrees that Lender will have no obligation to
delay sale until the securities can be registered, Then Lender may make a
private sale to one or more persons or to a restricted group of persons, even
though such sale may result in a price that is less favorable than might be
obtained in an open market transaction. Such a sale will be considered
commercially reasonable. If any securities held as Collateral are "restricted
securities" as defined in the Rules of the Securities and Exchange Commission
(such as Regulation D or Rule 144) or the rules of state securities departments
under state "Blue Sky" laws, or if Grantor or any other owner of the Collateral
is an affiliate of the issuer of the securities, Grantor agrees that neither
Grantor, nor any member of Grantor's family, nor any other person signing this
Agreement will sell or dispose of any securities of such issuer without
obtaining Lender's prior written consent.

       

      Rights and Remedies with Respect to
Investment Property, Financial Assets and Related Collateral. In addition
to other rights and remedies granted under this Agreement and under applicable
law, Lender may exercise any or all of the following rights and remedies: (1)
register with any issuer or broker or other securities intermediary any of the
Collateral consisting of investment property or financial assets (collectively
herein, "investment property") in Lender's sole name or in the name of Lender's
broker, agent or nominee; (2) cause any issuer, broker or other securities
intermediary to deliver to Lender any of the Collateral consisting of
securities, or investment property capable of being delivered; (3) enter into a
control agreement or power of attorney with any issuer or securities
intermediary with respect to any Collateral consisting of investment properly,
on such terms as Lender may deem appropriate, in its sole discretion, including
without limitation, an agreement granting to Lender any of the rights provided
hereunder without further notice to or consent by Grantor; (4) execute any such
control agreement on Grantor's behalf and in Grantor's name, and hereby
irrevocably appoints Lender as agent and attorney-in-fact, coupled with an
interest, for the purpose of executing such control agreement on Grantor's
behalf; (5) exercise any and all rights of Lender under any such control
agreement or power of attorney: (6) exercise any voting, conversion,
registration, purchase, option, or other rights with respect to any Collateral;
(7) collect, with or without legal action, and issue receipts concerning any
notes, checks, drafts, remittances or distributions that are paid or payable
with respect to any Collateral consisting of investment property. Any control
agreement entered with respect to any investment property shall contain the
following provisions, at Lender's discretion. Lender shall be authorized to
instruct the issuer, broker or other securities intermediary to take or to
refrain from taking such actions with respect to the investment property as
Lender may instruct, without further notice to or consent by Grantor. Such
actions may include without limitation the issuance of entitlement orders,
account instructions, general trading or buy or sell orders, transfer and
redemption orders, and stop loss orders. Lender shall be further entitled to
instruct the issuer, broker or securities intermediary to sell or to liquidate
any investment Property, or to pay the cash surrender or account termination
value with respect to any and all investment property, and to deliver all such
payments and liquidation proceeds to Lender. Any such control agreement shall
contain such authorizations as are necessary to place Lender in "control" of
such investment collateral, as contemplated under the provisions of the Uniform
Commercial Code, and shall fully authorize Lender to issue "entitlement orders"
concerning the transfer, redemption, liquidation or disposition of investment
collateral, in conformance with the provisions of the Uniform Commercial
Code.

       

      Foreclosure. Maintain a
judicial suit for foreclosure and sale of the Collateral.

       

      Transfer Title. Effect
transfer of title upon sale of all or part of the Collateral. For this purpose,
Grantor irrevocably appoints Lender as Grantor's attorney-in-fact to execute
endorsements, assignments and instruments in the name of Grantor and each of
them (if more than one) as shall be necessary or reasonable.

       

      Other Rights and Remedies.
Have and exercise any or all of the rights and remedies of a secured creditor
under the provisions of the Uniform Commercial Code, at law, in equity, or
otherwise.

       

      Application of Proceeds. Apply
any cash which is part of the Collateral, or which is received from the
collection or sale of the Collateral, to reimbursement of any expenses,
including any costs for registration of securities, commissions incurred in
connection with a sale, attorneys' fees and court costs, whether or not there is
a lawsuit and including any fees on appeal, incurred by Lender in connection
with the collection and sale of such Collateral and to the payment of the
Indebtedness of Grantor to Lender, with any excess funds to be paid to Grantor
as the interests of Grantor may appear. Grantor agrees, to the extent permitted
by law, to pay any deficiency after application of the proceeds of the
Collateral to the Indebtedness.

       

      Election of Remedies. Except
as may be prohibited by applicable law, all of Lender's rights and remedies,
whether evidenced by this Agreement, the Related Documents, or by any other
writing, shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to perform,
shall not affect Lender's right to declare a default and exercise its
remedies.

       

      MISCELLANEOUS PROVISIONS. The
following miscellaneous provisions are a part of this Agreement:

       

      Amendments. This Agreement,
together with any Related Documents, constitutes the entire understanding and
agreement of the parties as to the matters set forth in this Agreement. No
alteration of or amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or bound by the
alteration or amendment.

       

      Attorneys' Fees; Expenses. Grantor agrees to pay upon
demand all of Lender's costs and expenses, including Lender's attorneys' fees
and Lender's legal expenses, incurred in connection with the enforcement of this
Agreement. Lender may hire or pay someone else to help enforce this Agreement,
and Grantor shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender's attorneys' fees and legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Grantor also shall pay all court costs and such additional fees as may be
directed by the court.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      COMMERCIAL
PLEDGE AGREEMENT

      
        	
                Loan
      No 503003088

              	
                (Continued)

              	
                Page
      5

              

      

       

      Caption Headings. Caption
headings in this Agreement are o convenience purposes only and are not to be
used to interpret or define the provisions of this Agreement.

       

      Governing
Law. This Agreement will be governed by federal law applicable to Lender
and to the extent not preempted by federal law, the laws of the State of New
Jersey without regard to its conflicts of law provisions. This Agreement has
been accepted by Lender in the State of New Jersey.

       

      Choice of Venue. If there is a
lawsuit Grantor agrees upon Lenders request to submit to the jurisdiction of the
courts of Mercer County, State of New Jersey.

       

      No
Waiver by Lender. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lenders right otherwise to demand strict compliance with that provision or any
other provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Grantor, shall constitute a waiver of any of Lender's
rights or of any of Grantor's obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing consent
to subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of
Lender.

       

      Non-Liability
of Lender. The relationship between Grantor and Lender created by this
Agreement is strictly a debtor and creditor relationship and not fiduciary in
nature, nor is the relationship to be construed as creating any partnership or
joint venture between Lender and Grantor.

       

      Notices.
Any notice required to be given under this Agreement shall be given in writing,
and shall be effective when actually delivered, when actually received by
telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may chance its address for notices under this Agreement by giving
formal written notice to the other patties, specifying that the purpose of the
notice is to change the party's address. For notice purposes, Grantor agrees to
keep Lender informed at all times of Grantor's current address. Unless otherwise
provided or required by law, if there is more than one Grantor, any notice given
by Lender to any Grantor is deemed to be notice given to all
Grantors.

       

      Severability.
If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending provision
shall be considered modified so that it becomes legal, valid and enforceable. If
the offending provision cannot be so modified, it shall be considered deleted
from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not
affect the legality, validity or enforceability of any other provision of this
Agreement.

       

      Successors
and Assigns. Subject to any limitations stated in this Agreement on
transfer of Grantor's interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns, If ownership of the
Collateral becomes vested in a person other than Grantor, Lender, without notice
to Grantor, may deal with Grantors successors with reference to this Agreement
and the Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Agreement or liability under the
Indebtedness.

       

      Time
is of the Essence. Time is of the essence in the performance of this
Agreement.

       

      Waive Jury. All parties to
this Agreement hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by any party against any other
party.

       

      GRANTOR
HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT
AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 21, 2008.

       

      GRANTOR:

       

      
        	 
      	
                PACIFICHEALTH
      LABORATORIES, INC.

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/ Robert Portman

              	 
      	
                By:

              	/s/
      Stephen P. Kuchen	 
      
	 
      	 
      	
                Robert
      Portman, CEO of PacificHealth

              	 
      	
                Stephen
      P. Kuchen, CFO of PacificHealth

              
	 
      	 
      	
                Laboratories,
      Inc.

              	 
      	 
      	
                Laboratories,
      Inc.

              	 
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                LENDER:

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                Grand
      Bank, N.A.

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                Authorized
      Signer

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                /s/Angela Kiel

              	 
      	 
      	 
      	 
      

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Acknowledgment

      

      State of
New Jersey

      

      County of
Monmouth

      

      Be it
remembered that on this 21st day of
April 2008, before me, the undersigned authority, personally appeared Robert
Portman, who, I am

      satisfied
is the person named in the foregoing instrument, and I having first made known
to them the contents thereof, they acknowledged that

      they
signed, sealed and delivered the same as their voluntary act and
deed.  All of which is hereby certified.

      

      /s/ Patrice Genco
Nichas

      

      Patrice
Genco Nichas, Esq.,

      an
attorney duly admitted

      to
practice law in New Jersey

      

      Acknowledgment

      

      State of
New Jersey

      

      County of
Monmouth

      

      Be it
remembered that on this 21st day of
April 2008, before me, the undersigned authority, personally appeared Stephen P.
Kuchen, who, I am

      satisfied
is the person named in the foregoing instrument, and I having first made known
to them the contents thereof, they acknowledged that

      they
signed, sealed and delivered the same as their voluntary act and
deed.  All of which is hereby certified.

      

      /s/ Patrice Genco
Nichas

      

      Patrice
Genco Nichas, Esq.,

      an
attorney duly admitted

      to
practice law in New Jerseyex10-4.htm

    
      

    

    Exhibit 10.4

     

    
      SUBORDINATION
AGREEMENT

       

      
        	
                Principal

                $675,000.00

              	
                Loan
      Date

                04-21-2008

              	
                Maturity

                04-21-2009

              	
                Loan
      No.

                503003088

              	
                Call
      / Coll

              	
                Account

              	
                Office

                LL

              	
                Initials

                 

              
	
                References
      in the boxes above are for Lender’s use only and do not limit the
      applicability of this document to any particular loan or
item.

                Any
      item above containing ***** has been omitted due to text length
      limitations.

              

      

      

      
        	
                Borrower:

              	
                PacificHealth
      Laboratories, Inc.

              	 
      	
                Lender:

              	
                Grand
      Bank, N.A.

              	 
      
	 
      	
                100
      Matawan Road, Suite 420

              	 
      	 
      	
                One
      Edinburg Road

              	 
      
	 
      	
                Matawan,
      NJ  07747

              	 
      	 
      	
                Hamilton,
      NJ  08619

              	 
      

      

      

      
        	
                Creditor:

              	
                Robert
      Portman

              	 
      
	 
      	
                Stephen
      P. Kuchen

              	 
      
	 
      	
                100
      Matawan Road, Suite 420

              	 
      
	 
      	
                Matawan,
      NJ  07747

              	 
      

      

      
        
          

        

         

      

      THIS
SUBORDINATION AGREEMENT dated April 21, 2008, is made and executed among
PacificHealth Laboratories, Inc.; 100 Matawan Road, Suite 420; Matawan, NJ 07747
("Borrower); Robert Portman and Stephen P. Kuchen, 100 Matawan Road, Suite 420,
Matawan, NJ 07747 ("Creditor"); and Grand Bank, NA.; One Edinburg Road;
Hamilton, NJ 08619 ("Lender").

       

      DEFINITIONS.
The following capitalized words and terms shall
have the following meanings when used in this Agreement. Unless
specifically stated to the contrary, all references to dollar amounts shall mean
amounts in lawful money of the United States of America. Words and terms used in
the singular shall include the plural, and the plural shall include the
singular, as the context may require. Words and terms not otherwise defined in
this Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code:

       

      Agreement.
The word 'Agreement' means this Subordination Agreement, as this
Subordination Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Subordination Agreement from
time to time

       

      Borrower.
The word "Borrower' means PacificHealth Laboratories, Inc. and includes
all co-signers and co-makers signing the Note and all their successors and
assigns,

       

      Creditor.
The word "Creditor" means Robert Portman and Stephen P.
Kuchen.

       

      Indebtedness.
The word "Indebtedness" means the indebtedness evidenced by the Note or
Related Documents, including all principal and interest together with all other
indebtedness and costs and expenses for which Borrower is responsible under this
Agreement or under any of the Related Documents.

       

      Lender.
The word 'Lender means Grand Bank, N.A., its successors and
assigns.

       

      Note.
The word "Note" means the Note executed by PacificHealth Laboratories,
Inc. in the principal amount of $675,000.00 dated April 21, 2008, together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit
agreement.

       

      Related
Documents. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.

       

      Security
Interest. The words "Security Interest" mean, without limitation, any and
all types of collateral security, present and future, whether in the form of a
lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever whether created by law, contract,
or otherwise.

       

      Subordinated
Indebtedness. The words "Subordinated Indebtedness" mean the indebtedness
described in the section of this Agreement titled "Subordinated
Indebtedness".

       

      Superior
Indebtedness. The words "Superior Indebtedness" mean the indebtedness
described in the section of this Agreement titled “Superior
Indebtedness".

       

      REQUESTED
FINANCIAL ACCOMMODATIONS. Creditor and Borrower each want Lender to
provide financial accommodations to Borrower in the form of (A) new credit or
loan advances, (B) an extension of time to pay or other compromises regarding
all or part of Borrower's present indebtedness to Lender, or (C) other benefits
to Borrower. Borrower and Creditor each represent and acknowledge to Lender that
Creditor will benefit as a result of these financial accommodations from Lender
to Borrower, and Creditor acknowledges receipt of valuable consideration for
entering into this Agreement. Based
on the representations and acknowledgments contained in this Agreement, Borrower
and Creditor agree with
Lender as follows:

       

      SUBORDINATED
INDEBTEDNESS. The words "Subordinated Indebtedness" as used in this
Agreement mean all present and future indebtedness, obligations, liabilities,
claims, rights, and demands of any kind which may be now or hereafter owing from
Borrower
to Creditor. The term "Subordinated Indebtedness" is used in its broadest
sense and includes without limitation all principal, all interest, all costs,
attorneys' fees, all sums paid for the purpose of protecting the rights of a
holder of security, all contingent obligations of Borrower (such as a guaranty),
and all other obligations, secured or unsecured, of any nature
whatsoever.

       

      SUPERIOR
INDEBTEDNESS. The words "Superior Indebtedness" as used in this Agreement
mean and include all present and future indebtedness, obligations, liabilities,
claims, rights, and demands of any kind which may be now or hereafter owing from
Borrower
to Lender. The term "Superior Indebtedness" is used in its broadest sense
and includes without limitation all principal, all interest, all costs,
attorneys' fees, all sums paid for the purpose of protecting Lender's rights in
security (such as paying for insurance on collateral if the owner fails to do
so), all contingent obligations of Borrower (such as a guaranty), all
obligations arising by reason of Borrower's accounts with Lender (such as an
overdraft on a checking account), and all other obligations of Borrower to
Lender, secured or unsecured, of any nature whatsoever.

       

      SUBORDINATION.
All Subordinated Indebtedness of Borrower to Creditor is and shall be
subordinated in all respects to all Superior Indebtedness of Borrower to Lender.
If Creditor holds one or more Security Interests, whether now existing or
hereafter acquired, in any of Borrower's real property or personal property,
Creditor also subordinates all Creditor's Security Interests to all Security
Interests held by Lender, whether now existing or hereafter
acquired.

       

      PAYMENTS
TO CREDITOR. Borrower will not make and Creditor will not accept, at any
time while any Superior Indebtedness is owing to Lender, (A) any payment upon
any Subordinated Indebtedness, (B) any advance, transfer, or assignment of
assets to Creditor in any form whatsoever that would reduce at
any time or in any way the amount of Subordinated Indebtedness, or (C)
any transfer of any assets as security for the Subordinated Indebtedness, except
upon Lender's prior written consent.

       

      In the
event of any distribution, division, or application, whether partial or
complete, voluntary or involuntary, by operation of law or otherwise,
of all or

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                SUBORDINATION
      AGREEMENT

              	 
	
                Loan
      No. 503003088

              	
                (Continued)

              	
                Page
      2

              

      

       

      any part
of Borrower's assets, or the proceeds of Borrower's assets, in whatever form, to
creditors of Borrower or upon any indebtedness of Borrower; whether by reason of
the liquidation, dissolution or other winding-up of Borrower, or by reason of
any execution sale, receivership, insolvency, or bankruptcy proceeding,
assignment for the benefit of creditors, proceedings for reorganization, or
readjustment of Borrower or Borrower's properties, then and in such event, (A)
the Superior Indebtedness shall be paid in full before any payment is made upon
the Subordinated Indebtedness, and (B) all payments and distributions, of any
kind or character and whether in cash, property, or securities, which shall be
payable or deliverable upon or in respect of the Subordinated Indebtedness shall
be paid or delivered directly to Lender for application in payment of the
amounts then due on the Superior Indebtedness until the Superior indebtedness
shall have been paid in full.

       

      In order
that Lender may establish its right to prove claims and recover for its own
account dividends based on the Subordinated Indebtedness, Creditor does hereby
assign all its right, title, and interest in such claims to Lender. Creditor
further agrees to supply such information and evidence, provide access to and
copies of such of Creditor's records as may pertain to the Subordinated
Indebtedness, and execute such instruments as may be required by Lender to
enable Lender to enforce at such claims and collect all dividends, payments, or
other disbursements which may be made on account of the Subordinated
Indebtedness, For such purposes, Creditor hereby irrevocably authorizes Lender
in its discretion to make and present for or on behalf of Creditor such proofs
of claims on account of the Subordinated Indebtedness as Lender may deem
expedient and proper and to vote such claims in any such proceeding and to
receive and collect any and at dividends, payments, or other disbursements made
thereon in whatever form the same may be paid or issued and to apply the same on
account of the Superior Indebtedness.

       

      Should
any payment, distribution, security, or proceeds thereof be received by Creditor
at any time on the Subordinated Indebtedness contrary to the terms of this
Agreement, Creditor immediately wit deliver the same to Lender in precisely the
form received (except for the endorsement or assignment of Creditor if
necessary), for application on or to secure the Superior Indebtedness, whether
it is due or not due, and until so delivered the same shall be held in trust by
Creditor as property of Lender. In the event Creditor fails to make any such
endorsement or assignment Lender, or any of its officers on behalf of Lender, is
hereby irrevocably authorized by Creditor to make the same.

       

      CREDITORS
NOTES. Creditor agrees to deliver to Lender, at Lender's request, all notes of
Borrower to Creditor, or other evidence of the Subordinated Indebtedness, now
held or hereafter acquired by Creditor, while this Agreement remains in effect.
At Lender's request Borrower also will execute and deliver to Creditor a
promissory note evidencing any book account or claim now or hereafter owed by
Borrower to Creditor, which note also shall be delivered by Creditor to Lender.
Creditor agrees not to set, assign, pledge or otherwise transfer any of such
notes except subject to all the terms and conditions of this
Agreement.

       

      CREDITOR'S
REPRESENTATIONS AND WARRANTIES. Creditor represents and warrants to Lender that:
(A) no representations or agreements of any kind have been made to Creditor
which would limit or qualify in any way the terms of this Agreement (B) this
Agreement is executed at Borrower's request and not at the request of Lender;
(C) Lender has made no representation to Creditor as to the creditworthiness of
Borrower; and (0) Creditor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
condition. Creditor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Creditor's risks
under this Agreement, and Creditor further agrees that Lender shall have no
obligation to disclose to Creditor information or material acquired by Lender in
the,
course of its relationship with Borrower.

       

      CREDITOR'S
WAIVERS.
Creditor waives any right to require Lender (A) to make, extend, renew,
or modify any loan to Borrower or to grant any other financial accommodations to
Borrower whatsoever; (B) to make any presentment protest demand, or notice of
any kind, including notice of any nonpayment of the Superior indebtedness or of
any nonpayment related to any Security Interests, or notice of any action or
nonaction on the part of Borrower, Lender, any surety, endorser, or other
guarantor in connection with the Superior Indebtedness, or in connection with
the creation of new or additional Superior Indebtedness; (C) to resort for
payment or to proceed directly or at once against any person, including
Borrower; (D) to proceed directly against or exhaust any Security Interests held
by Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Cod& (F) to pursue any other
remedy within Lenders power; or (G) to commit any act or omission of any kind,
at any time, with respect to any matter whatsoever.

       

      LENDERS
RIGHTS.
Lender may take or omit any and all actions with respect to the Superior
Indebtedness or any Security Interests for the Superior Indebtedness without
affecting whatsoever any of Lender's rights under this Agreement In particular,
without limitation, Lender may without notice of any kind to Creditor, (A) make
one or more additional secured or unsecured loans to Borrower (B) repeatedly
alter, compromise renew, extend, accelerate, or otherwise change the time for
payment or other terms of the Superior Indebtedness or any part thereof,
including increases and decreases of the rate of interest on the Superior
Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) take and hold Security Interests for the payment of the Superior
Indebtedness and exchange, enforce, waive, and release any such Security
Interests, with or without the substitution of new collateral; (D) release
substitute, agree not to sue, or deal with any one or more of Borrowers
sureties, endorsers, or guarantors on any terms or manner Lender choose& (E)
determine how, when and what application of payments and credits, shall be made
on the Superior Indebtedness; (F) apply such security and direct the order or
manner of sate thereof, as Lender in its discretion may determine and (G) assign
this Agreement in whole or in part.

       

      DEFAULT
BY BORROWER. If Borrower becomes insolvent or bankrupt, this Agreement shall
remain in full force and effect Any default by Borrower under the terms of the
Subordinated Indebtedness also shall constitute an event of default under the
terms of the Superior Indebtedness in favor of Lender.

       

      DURATION
AND TERMINATION. This Agreement will take effect when received by Lender,
without the necessity of any acceptance by Lender, in writing, or otherwise, and
will remain in full force and effect until Creditor shall notify Lender in
writing at the address shown above to the contrary. Any such notice shall not
affect the Superior Indebtedness owed Lender by Borrower at the time of such
notice, nor shall such notice affect Superior Indebtedness thereafter granted in
compliance with a commitment made by Lender to Borrower prior to receipt of such
notice, nor shall such notice affect any renewals of or substitutions for any of
the foregoing. Such notice shall affect only indebtedness of Borrower to Lender
arising after receipt of such notice and not arising from financial assistance
granted by Lender to Borrower in compliance with Lenders obligations under a
commitment. Any notes lodged with Lender pursuant to the section titled
"Creditors Notes" above need not be returned until this Agreement has no further
force or effect.

       

      MISCELLANEOUS PROVISIONS.
The following miscellaneous provisions are a part of this
Agreement:

       

      Amendments.
This Agreement together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this
Agreement No alteration of or amendment to this Agreement shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.

       

      Attorneys'
Fees; Expenses. Creditor agrees to pay upon demand all of Lender's costs and
expenses, including Lenders attorneys' fees and Lenders legal expenses, incurred
in connection with the enforcement of this Agreement. Lender may hire or pay
someone else to help enforce this Agreement and Creditor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lenders attorneys' fees
and legal expenses whether or not there is a lawsuit including attorneys' fees
and legal expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Creditor also shall pay all court costs and
such additional fees as may be directed by the court.

       

      Authority.
The Person who signs this Agreement as or on behalf of Creditor represents and
warrants that he or she has authority to execute this

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
         

        
          	 	
                  SUBORDINATION
      AGREEMENT

                	 
	
                  Loan
      No. 503003088

                	
                  (Continued)

                	
                  Page
      3

                

        

         

      

      Agreement
and to subordinate the Subordinated indebtedness and the Creditor's security
interests in Creditor's property, if any.

       

      Caption
Headings. Caption headings in this Agreement are for convenience purposes only
and are not to be used to interpret or define the provisions of this
Agreement.

       

      Governing
Law. This Agreement will be governed by
federal law applicable to Lender and, to the extent not preempted by
federal law, the laws of the State of New Jersey without regard to its conflicts
of law provisions. This Agreement has been accepted by Lender in the State of
New Jersey.

       

      Choice of
Venue, If there is a lawsuit, Creditor agrees upon Lender's request to submit to
the jurisdiction of the courts of Mercer County, State of New
Jersey.

       

      Interpretation.
In all cases where there is more than one Creditor, then all words used in this
Agreement in the singular shall be deemed to have been used in the plural where
the context and construction so require; and where there is more than one
Creditor named in this Agreement or when this Agreement is executed by more than
one , the words "Creditor" shall mean all and any one or more of them. Reference
to the phrase "Creditor" includes the heirs, successors, assigns, and
transferees of each of them.

       

      No Joint
Venture or Partnership. The relationship of Borrower and Creditor and Lender
created by this Agreement is strictly that of debtor-creditor, and nothing
contained in this Agreement or in any of the Related Documents shall be deemed
or construed to create a partnership or joint venture between Borrower and
Creditor and Lender.

       

      Successors
and Assigns. This
Agreement shall be understood to be for the benefit of Lender and for such other
person or persons as may from time to time become or be the holder or owner of
any of the Indebtedness or any interest therein, and this Agreement shall be
transferable to the same extent and with the same force and effect
as any such Indebtedness may be transferable.

       

      No Waiver
by Lender.
Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Creditor, shall constitute a waiver of any of Lender's rights or of any of Creditor's
obligations as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sale discretion of Lender.

       

      BORROWER
AND CREDITOR EACH ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS
SUBORDINATION AGREEMENT, AND BORROWER AND CREDITOR EACH AGREE TO ITS TERMS. THIS
AGREEMENT IS DATED APRIL 21, 2008.

       

      BORROWER:

       

       

      PACIFICHEALTH
LABORATORIES, INC.

       

      

      
        	
                By:

              	
                /s/ Robert Portman

              	 
      	
                By:

              	
                /s/ Stephen P. Kuchen

              	 
      
	 
      	
                Robert
      Portman, CEO of PacificHealth

              	 
      	
                Stephen
      P. Kuchen, CFO of PacificHealth

              
	 
      	
                Laboratories,
      Inc.

              	 
      	 
      	
                Laboratories,
      Inc.

              	 
      
	 	 	 	 	 	 
	
                CREDITOR:

              	 
      	 
      	 
      	 
      
	 	 	 	 	 
	 	 	 	 	 
	
                /s/ Robert Portman

              	 
      	 
      	 
      	 
      
	
                Robert
      Portman, Individually

              	 
      	 
      	 
      	 
      
	 	 	 	 	 
	 	 	 	 	 
	
                /s/ Stephen P. Kuchen

              	 
      	 
      	 
      	 
      
	
                Stephen
      P. Kuchen, Individually

              	 	 	 	 

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Acknowledgment

      

      State of
New Jersey

      

      County of
Monmouth

      

      Be it
remembered that on this 21st day of
April 2008, before me, the undersigned authority, personally appeared Robert
Portman, who, I am satisfied is the person named in the foregoing instrument,
and I having first made known to them the contents thereof, they acknowledged
that they signed, sealed and delivered the same as their voluntary act and
deed.  All of which is hereby certified.

      

      /s/ Patrice Genco
Nichas

      

      Patrice
Genco Nichas, Esq.,

      an
attorney duly admitted

      to
practice law in New Jersey

      

      Acknowledgment

      

      State of
New Jersey

      

      County of
Monmouth

      

      Be it
remembered that on this 21st day of
April 2008, before me, the undersigned authority, personally appeared Stephen P.
Kuchen, who, I am satisfied is the person named in the foregoing instrument, and
I having first made known to them the contents thereof, they acknowledged that
they signed, sealed and delivered the same as their voluntary act and
deed.  All of which is hereby certified.

      

      /s/ Patrice Genco
Nichas

      

      Patrice
Genco Nichas, Esq.,

      an
attorney duly admitted

      to
practice law in New Jersey

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