Document:

ex10-1.htm

    
      

    

    Exhibit 10.1

     

    
      BUSINESS
LOAN AGREEMENT

       

      
        	
                Principal

                $675,000.00

              	
                Loan
      Date

                04-21-2008

              	
                Maturity

                04-21-2009

              	
                Loan
      No

                503003088

              	
                Call/Coll

              	
                Account

              	
                Officer

                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

              	 
      

      

       

      THIS
BUSINESS LOAN AGREEMENT dated April 21, 2008, is made and executed between
PacificHealth Laboratories, Inc. ("Borrower") and Grand Bank, N.A. ("Lender") on
the following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans or other
financial accommodations, Including those which may be described on any exhibit
or schedule attached to this Agreement ("Loan"). Borrower understands and agrees
that: (A) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements as set forth in this
Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all
times shall be subject to Lender's sole judgment and discretion; and (C) all
such Loans shall be and remain subject to the terms and conditions of this
Agreement.

       

      TERM.
This Agreement shall be effective as of April 21, 2008, and shall continue in
full force and effect until such time as all of Borrower's Loans in favor of
Lender have been paid in full, including principal, interest, costs, expenses,
attorneys' fees, and other fees and charges, or until such time as the parties
may agree in writing to terminate this Agreement.

       

      CONDITIONS
PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Advance and
each subsequent Advance under this Agreement shall be subject to the fulfillment
to Lender's satisfaction of all of the conditions set forth in this Agreement
and in the Related Documents.

       

      Loan
Documents. Borrower shall provide to Lender the following documents for the
Loan: (1) the Note; (2) Security Agreements granting to Lender security
interests in the Collateral; (3) financing statements and all other documents
perfecting Lender's Security Interests; (4) evidence of insurance as required
below; (5) subordination; (6) together with all such Related Documents as Lender
may require for the Loan; all in form and substance satisfactory to Lender and
Lender's counsel.

       

      Borrower's
Authorization. Borrower shall have provided in form and substance satisfactory
to Lender properly certified resolutions, duly authorizing the execution and
delivery of this Agreement, the Note and the Related Documents. in addition,
Borrower shall have provided such other resolutions, authorizations, documents
and instruments as Lender or its counsel, may require.

       

      Payment
of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and
other expenses which are then due and payable as specified in this Agreement or
any Related Document.

       

      Representations
and Warranties. The representations and warranties set forth in this Agreement,
in the Related Documents, and in any document or certificate delivered to Lender
under this Agreement are true and correct.

       

      No Event
of Default. There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement or under any Related
Document,

       

      REPRESENTATIONS
AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of
this Agreement, as of the date of each disbursement of loan proceeds, as of the
date of any renewal, extension or modification of any Loan, and at
all times any Indebtedness exists:

       

      Organization.
Borrower is a corporation for profit which is, and at all times shall be, duly
organized, validly existing, and in good standing under and by virtue of the
laws of the State of Delaware. Borrower is duly authorized to transact business
in all other states in which Borrower is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
Borrower is doing business. Specifically, Borrower is, and at all times shall
be, duly qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or financial
condition. Borrower has the full power and authority to own its properties and
to transact the business in which it is presently engaged or presently proposes
to engage. Borrower maintains an office at 100 Matawan Road, Suite 420, Matawan,
NJ 07747. Unless Borrower has designated otherwise in writing, the principal
office is the office at which Borrower keeps its books and records including its
records concerning the Collateral. Borrower will notify Lender prior to any
change in the location of Borrower's state of organization or any change in
Borrower's name. Borrower shall do all things necessary to preserve and to keep
in full force and effect its existence, rights and privileges, and shall comply
with all regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to Borrower and
Borrower's business activities.

       

      Assumed
Business Names. & Borrower has filed or recorded all documents or filings
required by law relating to all assumed business names used by Borrower.
Excluding the name of Borrower, the following is a complete list of all assumed
business names under which Borrower does business: None.

       

      Authorization.
Borrower's execution, delivery, and performance of this Agreement and all the
Related Documents have been duly authorized by all necessary action by Borrower
and do not conflict with, result in a violation of, or constitute a default
under (1) any provision of (a) Borrower's articles of incorporation or
organization, or bylaws, or (b) any agreement or other instrument binding upon
Borrower or (2) any law, governmental regulation, court decree, or order
applicable to Borrower or to Borrower's properties.

       

      Financial
Information. Each of Borrower's financial statements supplied to Lender truly
and completely disclosed Borrower's financial condition as of the date of the
statement, and there has been no material adverse change in Borrower's financial
condition subsequent to the date of the most recent financial statement supplied
to Lender. Borrower has no material contingent obligations except as disclosed
in such financial statements.

       

      Legal
Effect. This Agreement constitutes, and any instrument or agreement Borrower is
required to give under this Agreement when delivered will constitute legal,
valid, and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.

       

      Properties.
Except as contemplated by this Agreement or as previously disclosed in
Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not used or
filed a financing statement under any other name for at least the last five (5)
years.

       

      Hazardous
Substances. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (1) During the period of Borrower's
ownership of the
Collateral, there has been no use, generation,
manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under,
about or from any of the Collateral. (2) Borrower has no knowledge of, or reason
to believe that there has been (a) any breach or violation of any Environmental
Laws; (b) any use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance on. under. about or
from the Collateral by any prior owners or

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                BUSINESS
      LOAN AGREEMENT

              
	
                Loan
      No: 503003088

              	
                (Continued)

              	
                Page
      2

              

      

       

      occupants
of any of the Collateral; or (c) any actual or threatened litigation or claims
of any kind by any person relating to such matters. (3) Neither Borrower nor any
tenant, contractor, agent or other authorized user of any of the Collateral
shall use, generate, manufacture, store, treat, dispose of or release any
Hazardous Substance on, under, about or from any of the Collateral; and any such
activity shall be conducted in compliance with all applicable federal, state,
and local laws, regulations, and ordinances, including without limitation all
Environmental Laws. Borrower authorizes Lender and its agents to enter upon the
Collateral to make such inspections and tests as Lender may deem
appropriate to determine compliance of the Collateral with this section of the
Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be construed to
create any responsibility or liability on the part of Lender to Borrower or to
any other person. The representations and warranties contained herein are based
on Borrower's due
diligence in investigating the Collateral for hazardous waste and
Hazardous Substances. Borrower hereby (1) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (2)
agrees to indemnify, defend, and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which Lender may
directly or indirectly sustain or suffer resulting from a breach of this section
of the Agreement or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release of a hazardous waste or
substance on the Collateral. The provisions of this section of the Agreement,
including the obligation to indemnify and defend, shall survive the payment of
the Indebtedness and the termination, expiration or satisfaction of this
Agreement and shall not be affected by Lender's acquisition of any interest in
any of the Collateral, whether by foreclosure or otherwise.

       

      Litigation
and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in
writing.

       

      Taxes.
To the best of Borrower's knowledge, all of Borrower's tax returns and
reports that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been
provided.

       

      Lien
Priority.
Unless otherwise previously disclosed to Lender in writing, Borrower has not
entered into or granted any Security Agreements, or permitted the filing or
attachment of any Security Interests on or affecting any of the Collateral
directly or indirectly securing repayment of Borrower's Loan and Note, that
would be prior or that may in any way be superior to Lender's Security Interests
and rights in and to such Collateral.

       

      Binding
Effect. This Agreement, the Note, all Security Agreements (if any), and
all Related Documents are binding upon the signers thereof, as well as upon
their successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.

       

      AFFIRMATIVE
COVENANTS. Borrower covenants and agrees with Lender that, so long as
this Agreement remains in effect, Borrower will:

       

      Notices
of Claims and Litigation. Promptly inform Lender in writing of (1) all
material adverse changes in Borrower's financial condition, and (2) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial condition
of any Guarantor.

       

      Financial
Records. Maintain its books and records in accordance with GAAP, applied
on a consistent basis, and permit Lender to examine and audit Borrower's books
and records at all reasonable times.

       

      Financial
Statements. Furnish Lender with the following:

       

      Annual
Statements. As soon as available, but in no event later than ninety (90)
days after the end of each fiscal year, Borrower's balance sheet and income
statement for the year ended, prepared by Borrower.

       

      Tax
Returns. As soon as available, but in no event later than 15 days after
the applicable filing date for the tax reporting period ended, Federal and other
governmental tax returns, prepared by Borrower.

       

      All
financial reports required to be provided under this Agreement shall be prepared
in accordance with GAAP, applied on a consistent basis, and certified by
Borrower as being true and correct.

       

      Additional
Information. Furnish such additional information and statements, as
Lender may request from time to time.

       

      Insurance.
Maintain fire and other risk insurance, public liability insurance, and
such other insurance as Lender may require with respect to Borrower's properties
and operations, in form, amounts, coverages and with insurance companies
acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form satisfactory
to Lender, including stipulations that coverages will not be cancelled or
diminished without at least thirty (30) days prior written notice to Lender,
Each insurance policy also
shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Borrower or
any other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest for the Loans, Borrower will
provide Lender with such lender's loss payable or other endorsements as Lender
may require.

       

      Insurance
Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy
showing such information as Lender may reasonably request, including without
limitation the following: (1) the name of the insurer; (2) the risks insured;
(3) the amount of the policy; (4) the properties insured; (5) the then current
property values on the basis of which insurance has been obtained, and the
manner of determining those values; and (6) the expiration date of the policy.
In addition, upon request of Lender (however not more often than annually),
Borrower will have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral. The
cost of such appraisal shall be paid by Borrower.

       

      Subordination.
Prior to disbursement of any Loan proceeds, deliver to Lender
subordination agreements on Lender's forms, executed by Borrower's creditors
named below, subordinating all of Borrower's indebtedness to such creditors, or
such lesser amounts as may be agreed to by Lender in writing, and any security
interests in collateral securing that indebtedness to the Loans and security
interests of Lender.

       

      Name of
Creditor

       

      Robert
Portman and Stephen P. Kuchen

       

      Other
Agreements. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements,

       

      Loan
Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.

       

      Taxes,
Charges and Liens. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits.

       

      Performance. Perform and
comply in a timely manner with all terms, conditions and agreement set forth in
this Agreement and

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        	
                BUSINESS
      LOAN AGREEMENT

              
	
                Loan
      No: 503003088

              	
                (Continued)

              	
                Page
      3

              

      

       

      the Loan
Documents, and in all other instruments and agreements between Borrower and
Lender. Borrower shall notify Lender immediately in writing of any default in
connection with any agreement.

       

      Operations.
Maintain executive and management personnel with substantially the same
qualifications and experience as the present executive and management personnel;
provide written notice to Lender of any change in executive and management
personnel; conduct as business affairs in a reasonable and prudent
manner.

       

      Environmental
Studies. Promptly conduct and complete, at Borrowers expense, at such
investigations, studies, samplings and testings as may be requested by Lender or
any governmental authority relative to any substance, or any waste or by-product
of any substance defined as toxic or a hazardous substance under applicable
federal, state or local law, rule, regulation, order or directive, at or
affecting any property or any facility owned, leased or used by
Borrower.

       

      Compliance
with Governmental Requirements. Comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower's properties, businesses and operations
and to the use or occupancy of the Collateral, including without limitation, the
Americans With Disabilities Act Borrower may contest in good faith any such law,
ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as in Lender's sole opinion, Lender s
interests in the Collateral are not jeopardized. Lender may require Borrower to
post adequate security or a surety bond, reasonably satisfactory to Lender, to
protect Lender's interest Inspection.
Permit employees or agents of Lender at any reasonable time to inspect any and
all Collateral for the Loan or Loans and Borrower's other properties and to
examine or audit Borrower a books, accounts, and records and to make copies and
memoranda of Borrower s books, accounts, and records. If Borrower now or at any
time hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of Lender,
shall notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense.

       

      Compliance
Certificates. Unless waived in
writing by Lender, provide Lender at least annually, with a certificate executed
by Borrower s chief financial officer, or other officer or person acceptable to
Lender, certifying that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and further
certifying that as of the date of the certificate, no Event of Default exists
under this Agreement.

       

      Environmental
Compliance and Reports. Borrower shall
comply in all respects with any and all Environmental Laws; not cause or permit
to exist as a result of an intentional or unintentional action or omission on
Borrower's part or on the part of any third party, on property owned and/or
occupied by Borrower, any environmental activity where damage may result to the
environment unless such environmental activity is pursuant to and in compliance
with the conditions of a permit issued by the appropriate federal, state or
local governmental authorities shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive letter or other communication from any governmental
agency or instrumentality concerning any intentional or unintentional action or
omission on Borrower's part in connection with any environmental activity
whether or not there is damage to the environment and/or other natural
resources.

       

      Additional
Assurances. Make, execute and deliver to Lender such promissory notes.
mortgages, deeds of trust, security agreements, assignments, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to perfect
all Security Interests.

       

      RECOVERY
OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule,
regulation or guideline, or the interpretation or application of any thereof by
any court or administrative or governmental authority (including any request or
policy not having the force of law) shall impose modify or make applicable any
taxes (except federal, state or local income or franchise taxes imposed on
Lender), reserve requirements capital adequacy requirements or other obligations
which would (A) increase the cost to Lender for extending or maintaining the
credit facilities to which this Agreement relates, (B) reduce the amounts
payable to Lender under this Agreement or the Related Documents, or (C) reduce
the rate of return on Lender's capital as a consequence of Lender's obligations
with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lenders written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.

       

      LENDER'S
EXPENDITURES, If any action or proceeding is commenced that would materially
affect Lender's interest in the Collateral or if Borrower fails to comply with
any provision of this Agreement or any Related Documents, including but not
limited to Borrower's failure to discharge or pay when due any amounts Borrower
is required to discharge or pay under this Agreement or any Related Documents
Lender on Borrower'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 any Collateral and
paying all costs for insuring, maintaining and preserving any 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 Borrower. All such expenses will become a
part of the Indebtedness and at Lenders 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.

       

      NEGATIVE
COVENANTS. Borrower covenants and agrees with Lender that while this Agreement
is in effect Borrower shall not without the prior written consent of
Lender:

       

      Indebtedness and Liens: (1)
Except for trade debt incurred in the normal course of business and indebtedness
to Lender contemplated by this Agreement create, incur or assume indebtedness
for borrowed money, including capital leases, (2) sell, transfer, mortgage,
assign pledge lease, grant a security interest in or encumber any of Borrowers
assets (except as allowed as Permitted Liens), or (3) sell with recourse any of
Borrower's accounts, except to Lender.

       

      Continuity of Operations: (1)
Engage in any business activities substantially different than those in which
Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer,
acquire or consolidate with any other entity, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, or (3) pay
any dividends on Borrower's stook (other than dividends payable in its stock),
provided, however that notwithstanding the foregoing but only so long as no
Event of Default has occurred and is continuing or would result from the payment
of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
Internal Revenue Code of 1956, as amended), Borrower may pay cash dividends on
its stock to its shareholders from time to time in amounts necessary to enable
the shareholders to pay income taxes and make estimated income tax payments to
satisfy their liabilities under federal and state law which arise solely from
their status as Shareholders of a Subchapter S Corporation because of their
ownership of shares of Borrowers stock, or purchase or retire any of Borrower's
outstanding shares or alter or amend Borrower's capital structure.

       

      Loans, Acquisitions and
Guaranties: (1) Loan, invest in or advance money or assets to any other
person, enterprise or entity, (2) purchase, create or acquire any interest in
any other enterprise or entity, or (3) incur any obligation as surety or
guarantor other than in the ordinary course of business

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

        
          
            	
                    BUSINESS
      LOAN AGREEMENT

                  
	
                    Loan
      No: 503003088

                  	
                    (Continued)

                  	
                    Page
      4

                  

          

        

         

      

      Agreements. Borrower will not
enter into any agreement containing any provisions which would be violated or
breached by the performance of Borrower's obligations under this Agreement or in
connection herewith.

       

      CESSATION
OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower,
whether under this Agreement or under any other agreement, Lender shall have no
obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower
or any Guarantor is in default under the terms of this Agreement or any of the
Related Documents or any other agreement that Borrower or any Guarantor has with
Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes
insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged
a bankrupt; (C) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (E) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.

       

      RIGHT OF
SETOFF. To the extent permitted by applicable law, Lender reserves a right of
setoff in all Borrower's accounts with Lender (whether checking, savings, or
some other account). This includes all accounts Borrower holds jointly with
someone else and all accounts Borrower 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. Borrower 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.

       

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

       

      Payment
Default. Borrower fails to make any payment when due under the
Loan.

       

      Other
Defaults. Borrower 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
Borrower.

       

      Default
In Favor of Third Parties. Borrower or any Grantor defaults 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 Borrower's or any Grantor's property or Borrower's or any
Grantor's ability to repay the Loans 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 Borrower or on Borrower'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.

       

      Insolvency.
The dissolution or termination of Borrower's existence as a going business, the
insolvency of Borrower, the appointment of a receiver for any part of Borrower'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 Borrower.

       

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

       

      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 Borrower or by any governmental agency against
any collateral securing the Loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower 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.

       

      Events
Affecting Guarantor. Any of the preceding events occurs with respect to any
Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness. In the event of a death, Lender, at its option,
may, but shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event of
Default.

       

      Change in
Ownership. Any change in ownership of twenty-five percent (25%) or more of the
common stock of Borrower.

       

      Adverse
Change. A material adverse change occurs in Borrower's financial condition, or
Lender believes the prospect of payment or performance of the Loan is
impaired.

       

      Insecurity.
Lender in good faith believes itself insecure.

       

      Right to
Cure. If any default, other than a default on Indebtedness, is curable and if
Borrower or Grantor, as the case may be, has not been given a notice of a
similar default within the preceding twelve (12) months, it may be cured if
Borrower or Grantor, as the case may be, after receiving written notice from
Lender demanding cure of such default: (1) cure the default within thirty (30)
days; or (2) if the cure requires more than thirty (30) days, immediately
initiate steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continue and complete all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.

       

      EFFECT OF
AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise
provided in this Agreement or the Related Documents, all commitments and
obligations of Lender under this Agreement or the Related Documents or any other
agreement immediately will terminate (including any obligation to make further
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies 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 Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.

       

      PROVISION
FOR THE TIMELY RECEIPT OF FINANCIAL INFORMATION. BORROWER AND GUARANTORS AGREE
TO PROVIDE SIGNED FINANCIAL STATEMENTS AND TAX RETURNS ON AN ANNUAL BASIS.
FAILURE TO PROVIDE UPDATED FINANCIAL STATEMENTS AND TAX: RETURNS SHALL BE A
DEFAULT OF THE NOTE, INCLUDING THE FAILURE OF BORROWER AND/OR GUARANTOR TO
PROVIDE THE FINANCIAL INFORMATION AS REQUIRED HEREUNDER OR UNDER THE LOAN
AGREEMENT, THE APPLICABLE INTEREST RATE TO THE LOAN, FOR PERIOD BEGINNING THIRTY
(30) DAYS AFTER WRITTEN NOTICE OF SUCH DEFAULT AND ENDING UPON THE CURING OF
SAID NOTICE OF DEFAULT, SHALL INCREASE ONE HALF OF ONE PERCENT (.50%) FOR THE
FIRST THIRTY (30) DAYS OF SAID DEFAULT AND INCREASE AN ADDITIONAL ONE HALF OF
ONE PERCENT (.50%) DURING EACH THIRTY (30) DAY PERIOD THEREAFTER DURING WHICH
THE NOTICE DEFAULT CONTINUES. SUCH DEFAULT INTEREST RATES SHALL APPLY TO THE
OUTSTANDING PRINCIPAL BALANCE OF THE LOAN. UPON CURING OF THE NOTICED DEFAULT,
THE INTEREST RATE ON THE LOAN SHALL REVERT TO THE INITIALLY AGREED-UPON INTEREST
RATE EFFECTIVE ON THE DATE ON WHICH THE DEFAULT IS CURED.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        
          
            	
                    BUSINESS
      LOAN AGREEMENT

                  
	
                    Loan
      No: 503003088

                  	
                    (Continued)

                  	
                    Page
      5

                  

          

           

        

      

      TAXES AND
INSURANCE. Property taxes and insurance will be paid directly by the Borrower
within ten days of the due date. Despite the foregoing, the Bank reserves the
right to escrow for taxes and insurance at any time during the term of the Loan.
The Borrower will be required to pay the Bank an annual tax service fee of
$50.00. The first year's fee will be collected at closing. Thereafter the
Borrower will be billed a tax service fee every year. The tax service fee is
subject to increases over the term of the Loan.

       

      SUBMISSION
OF MONTHLY OPPENHEIMER STATEMENTS. It is a condition of this loan that Grand
Bank receive monthly statements from the Oppenheimer account pledged as
collateral.

       

      LOAN TO
VALUE REQUIREMENT. Grand Bank will receive monthly statements from Oppenheimer
from the account pledged as collateral, and the borrower will be required to
maintain a maximum loan to value of no greater than 70% at all times during the
term of the loan. If when one of the monthly Oppenheimer statements is received
and it is determined that the loan to value exceeds 70%, the customer must
either pay down the loan so that the loan to value is 70% or less; or they will
have to provide additional collateral, satisfactory to the bank, to maintain a
70% loan to value. If a 70% loan to value is not maintained, it will be
considered an event of default.

       

      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. Borrower agrees to pay upon demand all of Lenders costs
and expenses, including Lender's 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 Borrower 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. Borrower also shall pay all court
costs and such additional fees as may be directed by the court.

       

      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.

       

      Consent
to Loan Participation, Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loan to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy Borrower may have with respect to such matters.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loan and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.

       

      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, Borrower agrees upon Lender's 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 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 Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any of Borrower's or any 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.

       

      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 change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party's address. For notice purposes, Borrower agrees to
keep Lender informed at all times of Borrowers current address. Unless otherwise
provided or required by law, if there is more than one Borrower, any notice
given by Lender to any Borrower is deemed to be notice given to all
Borrowers.

       

      No
Joint Venture or Partnership, The relationship of Borrower 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
Lender.

       

      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.

       

      Subsidiaries
and Affiliates of Borrower. To the extent the context of any provisions
of this Agreement makes it appropriate, including without limitation any
representation, warranty or covenant, the word "Borrower" as used in this
Agreement shall include all of Borrower's subsidiaries and affiliates.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to, make any Loan or other financial
accommodation to any of Borrowers subsidiaries or affiliates.

       

      Successors and Assigns. All covenants
and agreements by or on behalf of Borrower contained in this Agreement or any
Related Documents shall bind Borrower's successors and assigns and shall inure
to the benefit of Lender and its successors and assigns. Borrower shall not,
however, have the right to assign Borrower's rights under this Agreement or any
interest therein, without the prior written consent of Lender.

       

      Survival of Representations and Warranties. Borrower
understands and agrees that in extending Loan Advances. Lender is relying on
all

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        
          	
                  BUSINESS
      LOAN AGREEMENT

                
	
                  Loan
      No: 503003088

                	
                  (Continued)

                	
                  Page
      6

                

        

      

       

      representations,
warranties, and covenants made by Borrower in this Agreement or in any
certificate or other instrument delivered by Borrower to Lender under this
Agreement or the Related Documents. Borrower further agrees that regardless of
any investigation made by Lender, all such representations, warranties and
covenants will survive the extension of Loan Advances and delivery to Lender of
the Related Documents, shall be continuing in nature, shall be deemed made and
redated by Borrower at the time each Loan Advance is made, and shall remain in
full force and effect until such time as Borrower's Indebtedness shall be paid
in full, or until this Agreement shall be terminated in the manner provided
above, whichever is the last to occur.

       

      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,

       

      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. Accounting words and terms not otherwise
defined in this Agreement shall have the meanings assigned to them in accordance
with generally accepted accounting principles as in effect on the date of this
Agreement:

       

      Advance. The word "Advance"
means a disbursement of Loan funds made, or to be made, to Borrower or on
Borrower's behalf on a line of credit or multiple advance, basis under the terms
and conditions of this Agreement.

       

      Agreement. The word
"Agreement" means this Business Loan Agreement, as this Business Loan Agreement
may be amended or modified from time to time, together with all exhibits and
schedules attached to this Business Loan 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 property and assets granted as collateral security for a
Loan, whether real or personal property, whether granted directly or indirectly,
whether granted now or in the future, and whether granted in the form of a
security interest, mortgage, collateral mortgage, deed of trust, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional safe, trust receipt, lien,
charge, 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.

       

      Environmental Laws. The words
"Environmental Laws" mean any and all state, federal and local statutes,
regulations and ordinances relating to the protection of human health or the
environment, including without limitation the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S,C. Section 1801, et seq., the Resource Conservation and Recovely Act, 42
U.S.C. Section 6901, et seq., the New Jersey Industrial Site Recovery Act, NJSA
Section 13:1K-6 ("'ISRA"), the New Jersey Spill Compensation and Control Act,
NJSA 58:10-23.11, et seq., or other applicable state or federal laws, rules, or
regulations adopted pursuant thereto.

       

      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.

       

      GAAP. The word "GAAP" means
generally accepted accounting principles.

       

      Grantor. The word "Grantor"
means each and all of the persons or entities granting a Security Interest in
any Collateral for the Loan, including without limitation all Borrowers granting
such a Security Interest.

       

      Guarantor, The word
"Guarantor" means any guarantor, surety, or accommodation party of any or all of
the Loan.

       

      Guaranty. The word "Guaranty"
means the guaranty from Guarantor to Lender, including without limitation a
guaranty of all or part of the Note.

       

      Hazardous Substances. The
words "Hazardous Substances" mean materials that, because of their quantity,
concentration or physical, chemical or infectious characteristics, may cause or
pose a present or potential hazard to human health or the environment when
improperly used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled. The words 'Hazardous Substances" are used in
their very broadest sense and include without limitation any and all hazardous
or toxic substances, materials or waste as defined by or listed under the
Environmental Laws. The term "Hazardous Substances" also includes, without
limitation, petroleum and petroleum by-products or any fraction thereof and
asbestos.

       

      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.

       

      Loan. The word "Loan" means
any and all loans and financial accommodations from Lender to Borrower whether
now or hereafter existing, and however evidenced, including without limitation
those loans and financial accommodations described herein or described on any
exhibit or schedule attached to this Agreement from time to time.

       

      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,

       

      Permitted Liens. The words
"Permitted Liens" mean (1) liens and security interests securing Indebtedness
owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges
either not yet due or being contested in good faith; (3) liens of materialmen,
mechanics, warehousemen, or carriers, or other like liens arising in the
ordinary course of business and securing obligations which are not yet
delinquent; (4) purchase money liens or purchase money security interests upon
or in any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this Agreement or
permitted to be incurred under the paragraph of this Agreement titled
“Indebtedness and Liens"; (5) liens and security interests which, as of the date
of this Agreement, have been disclosed to and approved by the Lender in writing;
and (6) those liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net value of
Borrower's assets.

       

      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 Loan.

       

      Security Agreement. The words
"Security Agreement" mean and include without limitation any agreements,
promises, covenants, arrangements, understandings or other agreements granting a
Security

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        
          	
                  BUSINESS
      LOAN AGREEMENT

                
	
                  Loan
      No: 503003088

                	
                  (Continued)

                	
                  Page
      7

                

        

      

       

      Interest.

       

      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.

       

      BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND
BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED APRIL 21,
2008.

       

      BORROWER:

       

      

       

      PACIFICHEALTH
LABORATORIES, INC.

      

      
        	
                By:

              	
                /s/ Robert Portman

              	 	
                By:

              	
                 /s/ Stephen P. Kuchen

              	 
      
	 
      	
                Robert
      Portman,

              	 	 
      	
                Stephen
      P. Kuchen,

              	 
      
	 
      	
                CEO
      of PacificHealth

              	 	 
      	
                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 Jerseyex10-2.htm

    
      

    

    Exhibit 10.2

     

    
      PROMISSORY
NOTE

       

       

      
        	
                Principal

                $675,000.00

              	
                Loan
      Date

                04-21-2008

              	
                Maturity

                04-21-2009

              	
                Loan
      No

                503003088

              	
                Call/Coll

              	
                Account

              	
                Officer

                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

              	 
      

      

       

      

      
        	
                Principal
      Amount:

              	
                $675,000.00

              	
                Initial
      Rate:

              	
                5.250%

              	
                Date
      of Note:

              	
                April
      21, 2008

              

      

       

      

      PROMISE TO PAY. PacificHealth
Laboratories, Inc. ("Borrower') promises to pay to Grand Bank, N.A. ("Lender"),
or order, in lawful money of the United States of America, the principal amount
of Six Hundred Seventy-five Thousand & 00/100 Dollars ($675,000.00) or so
much as may be outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date of
each advance until repayment of each advance. Borrower also promises to pay all
applicable fees and expenses.

       

      PAYMENT. Borrower will pay
this loan in one payment of all outstanding principal plus all accrued unpaid
interest on April 21, 2009. In addition, Borrower will pay regular monthly
payments of all accrued unpaid interest due as of each payment date, beginning
May 21, 2008, with all subsequent interest payments to be due on the same day of
each month after that Unless otherwise agreed or required by applicable law,
payments will be applied first to any accrued unpaid interest; then to
principal; and then to any late charges. The annual interest rate for this Note
is computed on a 365/360 basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing.

       

      VARIABLE INTEREST RATE. The
interest rate on this Note is subject to change from time to time based on
changes in an independent index which is the Wall Street Journal Prime (the
Index"). The Index is not necessarily the lowest rate charged by Lender on its
loans. If the Index becomes unavailable during the term of this loan, Lender may
designate a substitute index after notifying Borrower. Lender will tell Borrower
the current Index rate upon Borrower's request, The interest rate change will
not occur more often than each DAY. Borrower understands that Lender may make
loans based on other rates as well The Index currently is 5.250% per annum. The
interest rate to be applied to the unpaid principal balance during this Note
will be at a rate equal to the Index, adjusted if necessary for any minimum and
maximum rate limitations described below, resulting in an initial rate of 5.250%
per annum. NOTICE: Under no circumstances will the interest rate on this Note be
less than 5.000% per annum or more than the maximum rate allowed by applicable
law.

       

      PREPAYMENT. Borrower may pay
without penalty all or a portion of the amount owed earlier than it is due.
Early payments will not unless agreed to by Lender in writing, relieve Borrower
of Borrower's obligation to continue to make payments of accrued unpaid
interest. Rather, early payments will reduce the principal balance due. Borrower
agrees not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Grand Bank, NA.; One
Edinburg Road; Hamilton, NJ 08619.

       

      LATE CHARGE. If a payment is
15 days or more late, Borrower will be charged 5.000% of the unpaid portion of
the regularly scheduled payment or $10.00, whichever is greater. This late
charge shall be paid to Lender by Borrower for the purpose of defraying the
expense incident to the handling of the delinquent payment.

       

      INTEREST AFTER DEFAULT. Upon
default, including failure to pay upon final maturity, the interest rate on this
Note shall be increased by adding a 1.500 percentage point margin ("Default Rate
Margin"). The Default Rate Margin shall also apply to each succeeding interest
rate change that would have applied had there been no default. However, in no
event will the interest rate exceed the maximum interest rate limitations under
applicable law.

       

      DEFAULT. Each of the following
shall constitute an event of default ("Event of Default") under this
Note:

       

      Payment Default. Borrower
fails to make any payment when due under this Note.

       

      Other Defaults. Borrower fails
to comply with or to perform any other term, obligation, covenant or condition
contained in this Note 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 Borrower.

       

      Default in Favor of Third
Parties. Borrower or any Grantor defaults 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
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the related
documents.

       

      False Statements. Any
warranty, representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf under this Note 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,

       

      Insolvency. The dissolution or
termination of Borrower's existence as a going business, the insolvency of
Borrower, the appointment of a receiver for any part of Borrower'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 Borrower.

       

      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 Borrower or by any governmental agency against any collateral
securing the loan. This includes a garnishment of any of Borrower's accounts,
including deposit accounts, with Lender. However, this Event of Default shall
not apply if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower 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. Failure to satisfy Lender's requirement set forth in the
Insufficient Market Value of Securities section of the Pledge
Agreement.

       

      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 any 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 evidenced by this Note. In the event of a death, Lender, at its
option, may, but shall not be required to, permit the guarantor's estate to
assume unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event of
Default.

       

      Change In Ownership. Any
change in ownership of twenty-five percent (25%) or more of the common stock of
Borrower.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                PROMISSORY
      NOTE

              
	
                Loan
      No: 503003088

              	
                (Continued)

              	
                Page
      2

              

      

       

      Adverse Change. A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of this Note 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 Borrower has not been given a notice of a breach of the same provision of
this Note within the preceding twelve (12) months, it may be cured if Borrower,
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.

       

      LENDER'S RIGHTS. Upon default
Lender may declare the entire unpaid principal balance under this Note and all
accrued unpaid interest Immediately due, and then Borrower will pay that
amount.

       

      ATTORNEYS' FEES; EXPENSES.
Lender may hire or pay someone else to help collect this Note if Borrower does
not pay. Borrower will pay Lender that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit including attorneys' fees, expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), and appeals. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by
law.

       

      JURY WAIVER. Lender and
Borrower hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the
other.

       

      GOVERNING LAW. This Note 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 Note has been accepted by Lender in the State
of New Jersey.

       

      CHOICE OF VENUE. If there is a
lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of
the courts of Mercer County, State of New Jersey.

       

      RIGHT OF SETOFF. To the extent
permitted by applicable law, Lender reserves a right of setoff in all Borrower's
accounts with Lender (whether checking, savings, or some other account). This
includes all accounts Borrower holds jointly with someone else and all accounts
Borrower 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.
Borrower 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 Lenders option, to administratively freeze all such accounts to allow
Lender to protect Lender's charge and setoff rights provided in this
paragraph.

       

      COLLATERAL. Borrower
acknowledges this Note is secured by Pledged Collateral Account Agreement with
Oppenheimer Account #A81-0740868 which will be funded by a minimum of $1,350,000
of assets maintained by Oppenheimer.

       

      LINE OF CREDIT. This Note
evidences a revolving line of credit. Advances under this Note, as well as
directions for payment from Borrower's accounts, may be requested orally or in
writing by Borrower or by an authorized person. Lender may but need not, require
that all oral requests be confirmed in writing. Borrower agrees to be liable for
all sums either (A) advanced in accordance with the instructions of an
authorized person or (B) credited to any of Borrower's accounts with Lender. The
unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs.

       

      PROVISION FOR THE TIMELY RECEIPT OF
FINANCIAL INFORMATION. BORROWER AND GUARANTORS AGREE TO PROVIDE SIGNED
FINANCIAL STATEMENTS AND TAX RETURNS ON AN ANNUAL BASIS. FAILURE TO PROVIDE
UPDATED FINANCIAL STATEMENTS AND TAX RETURNS SHALL BE A DEFAULT OF THE NOTE.
INCLUDING THE FAILURE OF BORROWER AND/OR GUARANTOR TO PROVIDE THE FINANCIAL
INFORMATION AS REQUIRED HEREUNDER OR UNDER THE LOAN AGREEMENT, THE APPLICABLE
INTEREST RATE TO THE LOAN, FOR PERIOD BEGINNING THIRTY (30) DAYS AFTER WRITTEN
NOTICE OF SUCH DEFAULT AND ENDING UPON THE CURING OF SAID NOTICE DEFAULT, SHALL
INCREASE ONE HALF OF ONE PERCENT (50%) FOR THE FIRST THIRTY (30) DAYS OF SAID
DEFAULT AND INCREASE A ADDITIONAL ONE HALF OF ONE PERCENT (.50%) DURING EACH
THIRTY (30) DAY PERIOD THEREAFTER DURING WHICH THE NOTICE DEFAULT CONTINUES,
SUCH DEFAULT INTEREST RATES SHALL APPLY TO THE OUTSTANDING PRINCIPAL BALANCE OF
THE LOAN, UPON CURING OF THE NOTICED DEFAULT, THE INTEREST RATE ON THE LOAN
SHALL REVERT TO THE INITIALLY AGREED-UPON INTEREST RATE EFFECTIVE ON THE DATE ON
WHICH THE DEFAULT IS CURED.

       

      TAXES AND INSURANCE. Property
taxes and insurance will be paid directly by the Borrower within ten days of the
due date. Despite the foregoing, the Bank reserves the right to escrow for taxes
and insurance at any time during the term of the Loan. The Borrower will be
required to pay the Bank an annual tax service fee of $50.00. The first year's
fee will be collected at closing. Thereafter the Borrower will be billed a tax
service fee every year. The tax service fee is subject to increases over the
term of the Loan.

       

      LIQUIDATION OF COLLATERAL. If
any security within the Pledged Account is liquidated, the funds must be
deposited into the Pledged Account and must be used to payoff the Grand Bank
loan.

       

      SUBMISSION OF MONTHLY OPPENHEIMER
STATEMENTS. It is a condition of this loan that Grand Bank receive
monthly statements from the Oppenheimer account pledged as
collateral.

       

      LOAN TO VALUE REQUIREMENT.
Grand Bank will receive monthly statements from Oppenheimer from the account
pledged as collateral, and the borrower will be required to maintain a maximum
loan to value of no greater than 70% at all times during the term of the loan.
If when one of the monthly Oppenheimer statements is received and it is
determined that the loan to value exceeds 70%, the customer must either pay down
the loan so that the loan to value is 70% or less; or they will have to provide
additional collateral, satisfactory to the bank to maintain a 70% loan to value.
If a 70% loan to value is not maintained, it will be considered an event of
default.

       

      SUCCESSOR INTERESTS. The terms
of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal
representatives, successors and assigns, and shall inure to the benefit of
Lender and its successors and assigns.

       

      NOTIFY US OF INACCURATE INFORMATION
WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report
any inaccurate information about your account(s) to a consumer reporting agency.
Your written notice describing the specific inaccuracy(ies) should be sent to us
at the following address: Grand Bank N.A. One Edinburg Road Hamilton, NJ
08619.

       

      GENERAL PROVISIONS. If any
part of this Note cannot be enforced, this fact will not affect the rest of the
Note. Lender may delay or forgo enforcing any of its rights or remedies under
this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral or impair, fait to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
         

        
          	
                  PROMISSORY
      NOTE

                
	
                  Loan
      No: 503003088

                	
                  (Continued)

                	
                  Page
      3

                

        

         

other
than the party with whom the modification is made. The obligations under this
Note are joint and several.

       

      PRIOR TO
SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE,
INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF
THE NOTE.

       

      BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

       

      

      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.

              	 
      

      

      

      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 Jersey

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