Document:

Unassociated Document

 

LOAN
AND SECURITY AGREEMENT

By
and Between

WESTERNBANK
PUERTO RICO

(BUSINESS
CREDIT DIVISION)

as
Lender

 

And

INYX,
INC. 

And

INYX
USA, LTD. 

as
Borrowers

Dated:
MARCH 31, 2005

 

LOAN
AND SECURITY AGREEMENT

This Loan
and Security Agreement, dated as of March 31, 2005, is entered into by and
between Westernbank Puerto Rico, a Puerto Rico Banking corporation (“Lender”)
and Inyx, Inc.(“Inyx”), a Nevada corporation and Inyx USA, Ltd.(“Inyx USA”), an
Isle Of Man corporation(hereinafter referred to as “Borrower”).

WITNESSETH

WHEREAS,
the Borrower wishes to purchase the assets and business of the
Seller;

 

WHEREAS,
Borrower and certain of its Affiliates have requested that Lender provide
Borrower with a credit facility to be used in part to help pay the purchase
price of such business and assets; and 

 

WHEREAS,
Lender is willing to provide such credit facility and to make loans and provide
such financial accommodations on the terms and conditions set forth
herein;

NOW
THEREFORE, in consideration of the mutual conditions and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

Section
1.  DEFINITIONS

All terms
used herein which are defined in Article 1 or Article 9 of the Uniform
Commercial Code shall have the meanings given therein unless otherwise defined
in this Agreement. All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrower and Lender or pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:

2

1.1  "Accounts" shall mean all
present and future rights of Borrower to payment for goods sold or leased or for
services rendered, which are not evidenced by instruments or chattel paper, and
whether or not earned by performance.

1.2  “Adjusted Net Worth"
shall mean as to any Person, at any time, in accordance with GAAP (except as
otherwise specifically set forth below), on a consolidated basis for such Person
and its subsidiaries (if any), the amount equal to the sum of: (a) the
difference between: (i) the aggregate net book value of all assets of such
Person and its subsidiaries, calculating the book value of inventory for this
purpose on a first-in-first-out basis, after deducting from such book values all
appropriate reserves in accordance with GAAP (including all reserves for
doubtful receivables, obsolescence, depreciation and amortization) and (ii) the
aggregate amount of the indebtedness and other liabilities of such Person and
its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender plus (c) the
aggregate excess of the appraised value of all assets of such Person and its
subsidiaries over the net book value of all assets of such Person and its
subsidiaries (after deducting from such book values all appropriate reserves in
accordance with GAAP, including all reserves for doubtful receivables,
obsolescence, depreciation and amortization), based on appraisals acceptable to
Lender.

1.3  “Affiliate” shall mean,
with respect to a specified Person, any other Person which directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with such Person, and without limiting the generality of
the foregoing, includes (a) any Person which beneficially owns or holds ten
percent (10%) or more of any class of voting stock of such Person or other
equity interests in such Person, (b) any Person of which such Person or a
Subsidiary of such Person beneficially owns or holds ten percent (10%) or more
of any class of voting stock or in which such Person beneficially owns or holds
ten percent (10%) or more of the equity interests and (c) any director or
executive officer of such Person. For the purposes of this definition, the term
“control” (including with correlative meanings, the terms (“controlled by and
under common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting stock, by agreement or otherwise.

1.4  "Availability Reserves"
shall mean, as of any date of determination, such amounts as Lender may from
time to time establish and revise in good faith reducing the amount of Revolving
Loans and Letter of Credit Accommodations which would otherwise be available to
Borrower under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined by Lender in
good faith, do or may affect either (i) the Collateral or any other property
which is security for the Obligations or its value, (ii) the assets, business or
prospects of any Borrower or any Obligor or (iii) the security interests and
other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Lender's good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower, or any Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any
state of facts which Lender determines in good faith constitutes an Event of
Default or may, with notice or passage of time or both, constitute an Event of
Default.

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1.5  “Blocked Accounts” shall
have the meaning set forth in section 6.3 hereof.

1.6  “Business Day” shall mean
any day other than a Saturday, Sunday, or other day on which commercial banks
are authorized or required to close under the laws of the Commonwealth of Puerto
Rico and a day on which Lender is open for the transaction of
business.

1.7  “Capital Lease” shall
mean, as applied to any Person, any lease of (or any agreement conveying the
right to use) any property (whether real, personal or mixed) by such Person as
lessee which in accordance with GAAP, is required to be reflected as a liability
on the balance sheet of such Person.

1.8  “Capital Stock” shall
mean, with respect to any Person, any and all shares, interests, participations
or other equivalents (however designated) of such Person’s capital stock,
partnership interests or limited liability company interests at any time
outstanding, and any and all rights, warrants or options exchangeable for or
convertible into such capital stock or other interests (but excluding any debt
security that is exchangeable for or convertible into such capital
stock).

1.9  “Cash Equivalents” shall
mean, at any time, (a) any evidence of indebtedness with a maturity date of one
hundred eighty (180) days or less issued or directly and fully guaranteed or
insured by the United States of America of any agency or instrumentality
thereof; provided that, the
full faith and credit of the United States of America is pledged in support
thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of
one hundred eighty (180) days or less of any financial institution that is a
member of the Federal Reserve System having combined capital and surplus and
undivided profits of not less than $250,000,000; (c) commercial paper (including
variable rate demand notes) with a maturity of one hundred eighty (180) days or
less issued by a corporation (except an Affiliate of a Borrower) organized under
the laws of any State of the United States of America or the District of
Columbia and rated at least A-1 by Standard & Poor’s Ratings Service, a
division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors
Service, Inc.; (d) repurchase obligations with a term of not more than thirty
(30) days for underlying security of the types described in clause (a) above
entered into with any financial institution having combined capital and surplus
and undivided profits of not less than $250,000,000; (e) repurchase agreements
and reverse repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States of America or issued
by any governmental agency thereof and backed by the full faith and credit of
the United States of America, in each case maturing within one hundred eighty
(180) days or less from the date of acquisition; provided,
that, the
terms of such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the Comptroller of the Currency on October 31, 1985; and
(f) investments in money market funds and mutual funds which invest
substantially all of their assets in securities of the types described in
clauses (a) through (e) above.

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1.10  “Change of Control” shall
mean (a) the transfer (in one transaction or a series of transactions) of all or
substantially all of the assets of a Borrower to any Person or group (as such
term is used in Section 13(d)(3) of the Securities And Exchange Act of 1934[the
Exchange Act]); (b) the liquidation or dissolution of a Borrower or the adoption
of a plan by the stockholders of a Borrower relating to the dissolution or
liquidation of any Borrower; (c) the acquisition by any Person or group (as such
term is used in Section 13(d)(3) of the Exchange Act), of beneficial ownership
directly or indirectly, of a majority of the voting power of the total
outstanding voting stock of any Borrower or (d) during any period of one (1)
year, individuals who at the beginning of such period constituted the Board of
Directors of any Borrower cease for any reason to constitute a majority of the
Board of Directors of such Borrower, then still in office; or (e) the failure of
(i) the present beneficial holders of voting stock of Inyx to own and control,
directly or indirectly fifty percent(50%)of the voting power of the total
outstanding voting stock of Inyx, and (ii) Inyx to own and control, directly or
indirectly, one hundred (100%) percent of the voting power of the total
outstanding voting stock of Inyx USA.

1.11  “Closing Date” shall mean
the date of making of the initial Loans hereunder by Lender for the closing of
the transactions contemplated by the Purchase Agreements.

1.12  “Code” shall mean the
Internal Revenue Code of 1986, as amended.

1.13  "Collateral" shall have
the meaning set forth in Section 5 hereof.

1.14  “Collateral Access
Agreement” shall mean an agreement in writing, in form and substance
satisfactory to Lender, from any lessor of premises to any Borrower or any other
Person to whom any Collateral(including Inventory, Equipment, bills of lading or
other documents of title)is consigned or who has custody, control or possession
of any such Collateral or is otherwise the owner or operator of any premises on
which any of such Collateral is located, pursuant to which such lessor,
consignee or other Person, inter
alia,
acknowledges, in form and substance satisfactory to Lender, Lender’s first
priority lien and security interest in such Collateral, and agrees to waive any
and all claims such lessor, consignee or other Person may at any time have
against such Collateral and agrees to permit Lender access to, and the right to
remain on the premises of such lessor, consignee or other Person, so as to
exercise Lenders rights and remedies and otherwise deal with such Collateral and
in the case of any Person who at any time has custody, control or possession of
any bills of lading or other documents of title, agrees to hold such bills of
lading or other documents as bailee for Lender and to follow all instructions of
Lender with respect thereto.

 

5

1.15  “Contract Manufacturing
Customer” shall mean any Person for whom Borrower manufactures, processes,
provides services, conducts operations or performs work, on or with respect to
Inventory owned by such Person, or sold by such Person to Borrower with the
understanding that such Person will repurchase such Inventory from
Borrower.

1.16  “Debt” shall include, as
to any Person, at any time (without duplication) (a) any liability, whether or
not contingent, of such Person in respect of borrowed money, (b) all obligations
of such Person evidenced by bonds, notes, debentures, or other similar
instruments, (c) all obligations of such Person to pay the deferred purchase
price of property or services, except (i) trade accounts payable not unpaid more
than one hundred twenty (120)days past the invoice date (ii) other accounts
payable and current accrued expenses payable of such Person arising in the
ordinary course of business which are not past due by more than ninety (90)
days, (d) all obligations of such Person under a Capital Lease, (e) all
indebtedness or other obligations of others guaranteed by such Person, (f) all
obligations secured by a lien or security interest existing on property owned by
such Person, whether or not the obligations secured thereby have been assumed by
such Person or are non recourse to the credit of such Person, (g) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers acceptances, surety or other bonds or
similar instruments and (h) all obligations of such Person with respect to
redeemable stock or repurchase or redemption obligations with respect to any
Capital Stock or other equity securities issued by such Person.

1.17  “Dilution” shall mean,
for any period, the ratio of (a) the aggregate amount of reductions in Accounts
other than as a result of payments in cash, for such period to (b) the aggregate
amount of total sales, for such period.

1.18  “Due Date” shall mean
March 31, 2008.

1.19  “EBITDA” shall mean, with
respect to any Person, for the period in question,

the sum
of (a) Net Income After Tax of such Person during such period plus (b) to
the extent deducted in determining Net Income After Tax, the sum of (i) interest
expense during such period, plus (ii) all
provisions for any Federal, Commonwealth, state, local and/or foreign income
taxes made by such Person during such period plus (iii)
all depreciation and amortization expenses of Person during such period all
determined on a consolidated basis for such Person and its Subsidiaries, if
any.

6

1.20  "Eligible Accounts" shall
mean Accounts created by a Borrower which are and continue to be acceptable to
Lender based on the criteria set forth below. In general, Accounts shall be
Eligible Accounts if:

(a) such
Accounts arise from the actual and bona fide sale and
delivery by a Borrower or rendition of services by a Borrower in the ordinary
course of its business which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;

 

(b) such
Accounts are not unpaid (i) more than one hundred twenty (120) days after the
date of the original invoice for them and (ii) more than sixty (60) days past
the due date thereof(but never more than one hundred twenty (120) days past the
original invoice date);

 

(c) such
Accounts comply with the terms and conditions contained in Section 7.2(c) of
this Agreement;

 

(d) such
Accounts do not arise from sales on consignment, guaranteed sale, sale and
return, sale on approval, or other terms under which payment by the account
debtor may be conditional or contingent;

 

(e) the chief
executive office of the account debtor with respect to such Accounts is located
in the United States of America or the Commonwealth of Puerto Rico or at
Lender’s option: if either (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in the United States of America and in U.S. dollars
sufficient to cover such Account in form and substance satisfactory to Lender
and if required by Lender the original of such letter of credit has been
delivered to Lender or Lender’s agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender, or (ii) such
account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender or (iii) such Account is
otherwise acceptable in all respects to Lender (subject to such lending formula
with respect thereto as Lender may determined);

 

(f) such
Accounts do not consist of progress billings, bill and hold invoices or
retainage invoices, except as to progress billings and bill and hold invoices,
if Lender shall have received an agreement in writing from the account debtor in
form and substance satisfactory to Lender confirming the unconditional
obligation of the account debtor, with respect to progress billings, to pay such
progress billings and, with respect to bill and hold invoices, to take the goods
related thereto and pay such invoice;

 

(g) the
account debtor with respect to such Accounts has not asserted a counterclaim,
defense or dispute and does not have, and does not engage in transactions which
may give rise to, any right of setoff against such Accounts (but the portion of
the Accounts of such account debtor in excess of the amount at any time and from
time to time owed by Borrower to such account debtor or claimed owed by such
account debtor may be deemed Eligible Accounts);

 

(h) there are
no facts, events or occurrences which would impair the validity, enforceability
or collect ability of such Accounts or reduce the amount payable or delay
payment thereunder;

 

7

(i) such
Accounts are subject to the first priority, valid and perfected security
interest of Lender and any goods giving rise thereto are not, and were not at
the time of the sale thereof, subject to any liens except those permitted in
this Agreement;

 

(j) neither
the account debtor nor any officer or employee of the account debtor with
respect to such Accounts is an officer, employee or agent of or Affiliated with
any Borrower directly or indirectly by virtue of family membership, ownership,
control, management or otherwise; 

 

(k) the
account debtors with respect to such Accounts are not any foreign government,
the United States of America, any State, political subdivision, department,
agency or instrumentality thereof, unless, if the account debtor is the United
States of America, any State, political subdivision, department, agency or
instrumentality thereof, upon Lender's request, the Federal Assignment of Claims
Act of 1940, as amended or any similar State or local law, if applicable, has
been complied with in a manner satisfactory to Lender;

 

(l) there are
no proceedings or actions which are threatened or pending against the account
debtors with respect to such Accounts which might result in any material adverse
change in any such account debtor's financial condition;

 

(m) such
Accounts of a single account debtor or its affiliates do not constitute more
than fifty percent (50%) of all otherwise Eligible Accounts (but the portion of
the Accounts not in excess of such percentage may be deemed Eligible Accounts);

 

(n) such
Accounts are not owed by an account debtor who has Accounts unpaid more than one
hundred twenty (120) days after the date of the original invoice for them which
constitute more than fifty percent (50%) percent of the total Accounts of such
account debtor;

 

(o) such
Accounts are owed by account debtors whose total indebtedness to Borrower does
not exceed the credit limit with respect to such account debtors as determined
by Lender from time to time (but the portion of the Accounts not in excess of
such credit limit may be deemed Eligible Accounts); and 

 

(p) such
Accounts are owed by account debtors deemed creditworthy at all times by Lender,
as determined by Lender. General criteria for Eligible Accounts may be
established and revised from time to time by Lender in good faith. Any Accounts
which are not Eligible Accounts shall nevertheless be part of the Collateral.

1.21  "Eligible Inventory"
shall mean Inventory consisting of finished goods held for resale in the
ordinary course of the business of Borrower and raw materials for such finished
goods which are acceptable to Lender based on the criteria set forth below. In
general, Eligible Inventory shall not include (a)
work-in-process, except, in Lender’s discretion bulk finished solid drugs,
listed by Borrower as work in process, immediately prior to bottling;
(b)
components which are not part of finished goods; (c) spare
parts for equipment; (d)
packaging and shipping materials; (e)
supplies used or consumed in Borrower's business; (f)
Inventory at premises other than those owned and controlled by Borrower, except
if Lender shall have received an agreement in writing from the person in
possession of such Inventory and/or the owner or operator of such premises in
form and substance satisfactory to Lender acknowledging Lender's first priority
security interest in the Inventory, waiving security interests and claims by
such person against the Inventory and permitting Lender access to, and the right
to remain on, the premises so as to exercise Lender's rights and remedies and
otherwise deal with the Collateral; (g)
Inventory subject to a security interest or lien in favor of any person other
than Lender except those permitted in this Agreement; (h) bill
and hold goods; (i)
unserviceable, obsolete or slow moving Inventory; (j)
Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (k)
returned, damaged and/or defective Inventory; and (l)
Inventory purchased or sold on consignment. General criteria for Eligible
Inventory may be established and revised from time to time by Lender in good
faith. Any Inventory which is not Eligible Inventory shall nevertheless be part
of the Collateral.

8

1.22  "Environmental Laws"
shall mean all foreign, Federal, State and local laws (including common law),
legislation, rules, codes, licenses, permits (including any conditions imposed
therein), authorizations, judicial or administrative decisions, injunctions or
agreements between any Borrower and any governmental authority, (a) relating to
pollution and the protection, preservation or restoration of the environment
(including air, water vapor, surface water, ground water, drinking water,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource), or to human health or safety, (b) relating to the
exposure to, or the use, storage, recycling, treatment, generation, manufacture,
processing, distribution, transportation, handling, labeling, production,
release or disposal, or threatened release, of Hazardous Materials, or (c)
relating to all laws with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials. The term "Environmental
Laws" includes (i) the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
and the Federal Safe Drinking Water Act of 1974, (ii) applicable state
counterparts to such laws, and (iii) any common law or equitable doctrine that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Materials.

1.23  "Equipment" shall mean
all of Borrower’s now owned and hereafter acquired equipment, wherever located,
including machinery, data processing and computer equipment, computers and
computer hardware and software (whether owned or licensed and including embedded
software), vehicles, tools, furniture, fixtures, racks, shelves, material
handling equipment, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.

1.24  "Event of Default" shall
mean the occurrence or existence of any event or condition described in Section
10.1 hereof.

9

1.25  “Excess Availability”
shall mean the amount, as determined by Lender, calculated at any time, equal
to: (a) the lesser of: (i) the amount of the Loans available to Borrower as of
such time based on the applicable lending formulas and subject to the sublimits
and Availability Reserves from time to time established by Lender hereunder, and
(ii) the Maximum Credit minus (b) the
sum of: (i) the amount of all then outstanding and unpaid Obligations plus (ii)
the aggregate amount of all then outstanding and unpaid trade payables and
accrued expenses of Borrower which are more than sixty (60) days past due as of
such time, plus (iii) the amount of checks issued by Borrower to pay trade
payables, but not yet sent and the book overdraft of Borrower.

1.26  “Excess Cash Flow” shall
mean with respect to any Person for any period the difference between (a) the
sum of (i) the Net Income After Tax , plus (ii)
depreciation, plus (iii)
amortization, for such Person for such period, plus (iv) any
non cash charges included in the calculation of Net Income After Tax, of such
Person for such period minus (b) the
sum of (i) regularly scheduled principal payments on Debt(including without
limitation, the principal portion of payments in respect of capitalized lease
obligations), plus (ii)
other capital expenditures in excess of the amount of financing therefore which
financing is permitted under this Agreement, plus (iii)
any non cash gains included in the calculation of Net Income After Tax, of such
Person for such period, all determined on a consolidated basis for such Person
and its Subsidiaries, if any .

1.27  "Financing Agreements"
shall mean, collectively, this Agreement and all notes, guarantees, security
agreement documents and instruments now or at any time hereafter executed and/or
delivered by Borrower or any Obligor in connection with this Agreement, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

1.28  “Foreign Accounts” shall
mean Accounts, the chief executive office of the account debtor with respect to
such Accounts is not located in the United States of America or the Commonwealth
of Puerto Rico.

1.29  "Hazardous Materials"
shall mean any hazardous, toxic or dangerous substances, materials and wastes,
including hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including materials which include hazardous constituents), sewage,
sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that are
or become classified as hazardous or toxic under any Environmental
Law).

10

1.30  “Income Before Taxes”
with respect to any period of Borrower shall mean the amount shown on the line
item denominated “Income before provision (benefit) for income taxes”, shown on
Borrower’s financial statements for such period, prepared in accordance with
GAAP, i.e., the consolidated pre tax net income of Borrower for such
period.

1.31  "Information Certificate"
shall mean the Information Certificate of Borrower, Exhibit A to this Agreement,
containing material information with respect to Borrower and their respective
business and assets, provided by or on behalf of Borrower to Lender in
connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for therein.

1.32  “Intellectual Property”
shall mean as to Borrower such now owned and hereafter arising or acquired
patents, patent rights, patent applications, copyrights, works which are the
subject matter of copyrights, copyright registrations, trademarks, trade names,
trade styles, trademark and service mark applications, and licenses and rights
to use any of the foregoing; all extensions, renewals, reissues, divisions,
continuations, and continuations in part of any of the foregoing; all rights to
sue for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or the license of any
trademark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain
name registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.

1.33  "Inventory"
shall mean all of Borrowers now owned and hereafter existing or acquired raw
materials, work in process, finished goods and all other inventory of whatsoever
kind or nature, wherever located.

1.34  "Letter
of Credit Accommodations" shall mean the letters of credit, merchandise purchase
or other guaranties which are from time to time either (a) issued or opened by
Lender for the account of Borrower or any Obligor or (b) with respect to which
Lender has agreed to indemnify the issuer or guaranteed to the issuer the
performance by Borrower of its obligations to such issuer.

1.35  "Loans" shall mean the
Revolving Loans and the Term Loans.

1.36  “Manati Real Property”
shall mean the real property, together will all buildings, structures and other
improvements located thereon, of Borrower located in Manati, Puerto Rico forming
part of the Purchased Assets and all licenses, easements and appurtenances
thereto.

 1.37  “Manufacturing Contracts”
shall mean the contracts to manufacture products or Inventory by Inyx USA,
pursuant to or forming part of the Purchase Agreements, including the the
agreement, dated March 5, 2004 between Aventis Pharmaceuticals, Inc. and
Aeropharm Technology, Inc. and agreement by Inyx USA and Seller for the
manufacture of Klaron by Inyx USA for Seller, as the same may be amended,
supplemented or modified, and all present and future contracts between Borrower
or Inyx USA and third parties for the manufacture of products or Inventory.
 

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1.38  “Material Adverse Effect”
shall mean a material adverse effect on (a) the financial condition, business,
performance or operation of Borrower, or (b) the legality, validity or
enforceability of this Agreement or any of the other Financing Agreements; (c)
the legality, validity, enforceability, perfection or priority of the security
interests and liens of Lender upon the Collateral or any other property which is
security for the Obligations; (d) the Collateral of Borrower or the value of the
Collateral; (e) the ability of Borrower to repay the Obligations or of Borrower
to perform its obligations under this Agreement or any of the other Financing
Agreements; or (f) the ability of Lender to enforce the Obligations or realize
upon the Collateral or otherwise with respect to the rights and remedies of
Lender under this Agreement or any of the other Financing
Agreements.

1.39  “Material
Contract” shall mean (a) any contract or other agreement (other
than the Financing Agreements), written or oral, of Borrower involving monetary
liability of or to any Person in an amount in excess of $1,000,000 in any fiscal
year and (b) any other contract or other agreement (other than the Financing
Agreements), whether written or oral, to which Borrower is a party as to which
the breach, nonperformance, cancellation or failure to renew by any party
thereto would have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations or prospects of Borrower or
the validity or enforceability of this Agreement, any of the other Financing
Agreements, or any of the rights and remedies of Lender hereunder or
thereunder.

1.40  “Maximum
Credit” shall mean the amount of $46,000,000.

 

1.41  "Net
Amount of Eligible Accounts" shall mean the gross amount of Eligible
Accounts less (a) sales, excise or similar taxes included in the amount thereof
and (b) returns, discounts, claims, credits and allowances of any nature at any
time issued, owing, granted, outstanding, available or claimed with respect
thereto.

 

1.42  “Net
Income After Tax” shall mean, with respect to any Person for any period, the
aggregate of the net income (loss) of such Person and its Subsidiaries, if any
on a consolidated basis, for such period (excluding to the extent included
therein any extraordinary or non-recurring gains and extraordinary non-cash
charges to property, plant and equipment or goodwill) after deducting all
charges (including income taxes) which should be deducted before arriving at the
net income (loss) for such period, all as determined in accordance with GAAP;
provided that, (a) the
net income of any Person that is not a wholly-owned Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid or payable to such
Person or a wholly-owned Subsidiary of such Person; and (b) the effect of any
change in accounting principles adopted by such Person or its Subsidiaries after
the date hereof shall be excluded. For the purposes of this definition, net
income excludes any gain and non-cash loss (but not any cash loss) realized upon
the sale or other disposition of any assets that are not sold in the ordinary
course of business (including, without limitation, dispositions pursuant to sale
and leaseback transactions) or of any capital stock of such Person or a
Subsidiary of such Person and any net income realized as a result of changes in
accounting principles or the application thereof to such Person.

 

12

1.43  "Obligations"
shall mean any and all Revolving Loans, Term Loans, Letter of Credit
Accommodations, and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to Borrower under the Bankruptcy Code or any similar statute (including
the payment of interest and other amounts which would accrue and become due but
for the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired by
Lender.

 

1.44  "Obligor"
shall mean any guarantor, endorser, acceptor, surety or other person liable on
or with respect to the Obligations or who is the owner of any property which is
security for the Obligations, other than Borrower.

1.45  "Payment
Account" shall have the meaning set forth in Section 6.3 hereof.

1.46  “Permitted Liens” shall
mean those liens, encumbrances and security interests (i) allowed by Section
9.8(b) through (f) hereof or (ii) as may otherwise be consented to by Lender, in
writing.

1.47  “Person” or “person”
shall mean any individual, sole proprietorship, partnership, corporation
(including any corporation which elects Subchapter S status under the Internal
Revenue Code of 1986, as amended or N corporation status under the Puerto Rico
Internal Revenue Code of 1994, as amended), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.

1.48  “Prime
Rate” shall mean the rate from time to time advised by Westernbank Puerto Rico,
or its successors, to its clients as its prime rate, whether or not such advised
rate is the best rate available at such bank. 

13

1.49  “Purchase
Agreements” shall mean, individually and collectively, the Asset Purchase
Agreement, dated December 15, 2004 between Inyx USA and Seller, together with
bills of sale, deeds, assignment and assumption agreements and such other
instruments of transfer as are referred to therein and all side letters with
respect thereto, and all agreements, documents and instruments executed and/or
delivered in connection therewith, as all of the foregoing now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, with the consent or approval of Lender; provided,
that, the
term "Purchase Agreements" as used herein shall not include any of the
"Financing Agreements" as such term is defined herein.

1.50  “PUT Agreement” shall
mean an agreement entered into between Lender and a Contract Manufacturing
Customer, in form and substance satisfactory to Lender, pursuant to which the
Contract Manufacturing Customer, among other things, agrees with Lender
to:

 

(a)
Purchase, repurchase, take delivery of, and make payment for, at a price
acceptable to Lender, Inventory purchased by Borrower from the Contract
Manufacturing Customer;

 

(b)
Purchase, at a price acceptable to Lender, services provided or work performed
by Borrower for such Contract Manufacturing Customer;

 

(c)
Purchase, repurchase, take delivery of, and make payment for, at a price
acceptable to Lender, the outstanding amount of Borrower’s purchase orders for
inventory or products for such Contract Manufacturing Customer and all work in
process and finished goods manufactured or processed or worked on by Borrower
for such Contract Manufacturing Customer; and

 

(d) Pay
to Lender all invoices rendered by Borrower for goods and services, in
accordance with the invoice term, without any offset, set-off, defense or
counterclaim whatsoever, for any reason.

1.51  "Purchased
Assets" shall mean all of the assets and properties acquired by Borrower from
Seller pursuant to the Purchase Agreements.

 

1.52  “Real Estate Security”
shall include the mortgage liens on the Real Property and
interests of Borrower described in Schedule 5.1(e) hereto (the Mortgages), (b)
the mortgage notes described on Schedule 5.1(e) hereto pledged or to be pledged
to Lender and (c) liens and security interests in favor of Lender on all other
Real Property of Borrower, all on the terms and subject to the provisions
contained herein and in the other applicable Financing Agreements.

1.53  “Real
Property” shall mean all now owned and hereafter acquired real property of any
Borrower, including (a) those real properties described on 5.1(e) hereto
(including the Manati Real Property), together with all buildings, structures
and other improvements located thereon and all licenses, easements and
appurtenances relating thereto, whenever located.

14

1.54  “Receivables”
shall mean all of the following now owned or hereafter arising
or acquired property of Borrower: (a) all Accounts; (b) all interest, fees, late
charges, penalties, collection fees and other amounts due or to become due or
otherwise payable in connection with any Account; (c) all payment intangibles of
Borrower; (d) all letters of credit, indemnities, guarantees, security or other
deposits and proceeds thereof issued payable to Borrower or otherwise in favor
of or delivered to Borrower in connection with any Account; or (e) all other
accounts, contract rights, chattel paper, instruments, notes, general
intangibles and other forms of obligations owing to Borrower, whether from the
sale and lease of goods or other property, licensing of any property (including
Intellectual Property or other general intangibles), rendition of services or
from loans or advances by Borrower or to or for the benefit of any third person,
including loans or advances to any Affiliates or Subsidiaries of Borrower or
otherwise associated with any Accounts, Inventory or general intangibles of
Borrower (including without limitation, chooses in action, causes of action, tax
refunds, tax refund claims, any funds which may become payable to Borrower in
connection with the termination of any employee benefit plan and any other
amounts payable to Borrower from any employee benefit plan) and claims against
carriers and shippers, rights to indemnification, business interruption
insurance and proceeds thereof, casualty or any similar types of insurance and
any process thereof and proceeds of insurance covering the lives of employees on
which Borrower is a beneficiary.

1.55  "Records"
shall mean all of Borrower’s present and future books of account of every kind
or nature, purchase and sale agreements, invoices, ledger cards, bills of lading
and other shipping evidence, statements, correspondence, memoranda, credit files
and other data relating to the Collateral or any account debtor, together with
the tapes, disks, diskettes, electronic or virtual files and other data and
software storage media and devices, file cabinets or containers in or on which
the foregoing are stored (including any rights of a Borrower with respect to the
foregoing maintained with or by any other person).

 

1.56  “Restricted Junior
Payment” shall mean (a) any dividend or other distribution, direct or
indirect, on account of any shares of any class of Capital Stock of Borrower now
or hereafter outstanding or any payment on account of a return of capital (or
the setting aside or otherwise depositing or investing of any sums for such
purpose) or (b) any redemption, retirement, purchase, defeasance or other
acquisition, direct of indirect, of any shares of any class of Capital Stock of
any Borrower or any Affiliate of a Borrower now or hereafter outstanding (or the
setting aside or otherwise depositing or investing of any sums for such purpose)
or (c) any payment, direct or indirect, of any interest, principal of or
premium, if any, on any redemption, retirement, purchase or other acquisition,
direct or indirect, of any Subordinated Debt (or the setting aside or otherwise
depositing or investing of any sums for such purpose or (d) any payment of money
or transfer of any interest in any asset to any Affiliate of Borrower, except as
permitted by Section 9.11(a) hereof.

1.54  "Revolving
Loans" shall mean the loans now or hereafter made by Lender to or for the
benefit of Borrower on a revolving basis (involving advances, repayments and
readvances) as set forth in Section 2.1 hereof. 

15

1.58  "Seller"
shall mean Aventis Pharmaceuticals Puerto Rico, Inc., a Delaware corporation,
and its successors and assigns.

1.59  “Solvent” shall mean, at
any time with respect to any Person, that at such time such Person (a) is able
to pay its debts as they mature and has (and has a reasonable basis to believe
it will continue to have) sufficient capital (and not unreasonably small
capital) to carry on its business consistent with its practices as of the date
thereof, and (b) the assets and properties of such Person at a fair valuation
(and including as assets for this purpose at a fair valuation all rights of
subrogation, contribution or indemnification arising pursuant to any guarantees
given by such Person) are greater than the indebtedness of such Person, and
including subordinated and contingent liabilities computed at the amount which,
such person has a reasonable basis to believe, represents an amount which can
reasonably be expected to become an actual or matured liability (and including
as to contingent liabilities arising pursuant to any guarantee the face amount
of such liability as reduced to reflect the probability of it becoming a matured
liability).

1.60  “Subordinated
Debt” shall mean all liabilities, indebtedness and obligations of Borrower or
any Obligor to any Person the payment of which is restricted by this Agreement
or any of the other Financing Agreements.

 

1.61  “Subsidiary
or Subsidiaries” shall mean, with respect to any Person, any corporation,
association, limited liability company, limited liability partnership, or other
limited or general partnership, trust, association or other business entity, of
which an aggregate of at least a majority of the outstanding Capital Stock or
other interests entitled to vote in the election of the Board of Directors of
such corporation, managers, trustees or other controlling persons (whether or
not the right so to vote exists or has been suspended by reason of the happening
of a contingency), or an equivalent controlling interest therein, of such Person
is, at the time directly or indirectly, owned by such Person and/or one or more
subsidiaries of such Person.

 

1.62  “Suppressed
Availability” shall mean the amount, as determined by Lender, calculated at any
time, which Borrower shall otherwise be entitled to borrow under applicable
lending formulas but which shall not be available to, and which shall be
withheld from, Borrower.

1.63  “Tangible Net Worth”
shall mean, as of the date of any determination thereof, the difference between
(a) the amount of the capital stock accounts (net of treasury stock, at cost) of
Borrower and its Subsidiaries as of such date plus (or
minus in the case of a deficit) the surplus and retained earnings of Borrower
and its Subsidiaries as of such date, plus
indebtedness of such Borrower and its Subsidiaries which is subordinated in
right of payment to the full and final payment of all of the Obligations on
terms and conditions acceptable to Lender, plus the
portion of the Term Loans maturing more than one(1) from such date of
determination, determined on a consolidated basis and in accordance with GAAP
minus (b) all
Intellectual Property (including any amount for goodwill, however designated,
representing the cost of acquisition of business and investments in excess of
the book value thereof), unamortized debt discount and expense, unamortized
deferred charges, deferred research and development costs, any write-up of asset
value after the date of this Agreement, non-competition covenants, signing
bonuses, prepaid expenses and other forms of prepaid assets, deferred taxes,
loans, advances and/or other amounts due from shareholders, directors, officers,
managers and/or employees, intercompany accounts, investments in and receivables
due from affiliates, deposits for insurance, utilities and the like and any
other assets treated as intangible assets under GAAP, as of such date, all
determined on a consolidated basis for Borrower and its Subsidiaries and in
accordance with GAAP.

16

1.64  “Term Loans” shall mean
the term loans made by Lender to Borrower as provided for in Section 2.3
hereof.

 

1.65  “Uniform
Commercial Code” or “UCC” shall include the Puerto Rico “Commercial
Transactions Act” and “UCC” shall mean the Uniform Commercial Code.

1.66  "Value"
shall mean, as determined by Lender in good faith, with respect to Inventory,
(a) the lower of (i) cost computed on a first-in-first-out basis in accordance
with GAAP or (ii) market value or (b) any other valuation method acceptable to,
and approved in writing by, Lender, in its sole discretion . 

1.67  “Voluntary
Prepayment” shall mean the prepayments in respect of the Term Loans described in
Section 2.3(f) hereof.

1.68  “Voting Stock” or voting
stock shall mean with respect to any Person, (a) one(1) or more classes of
Capital Stock of such Person having general voting powers to elect at least a
majority of the Board of Directors, managers, trustees or other persons
performing similar functions, even if at the time any other class or classes of
Capital Stock have, or might have, voting power by reason of the happening of
any contingency or (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.

 

1.69  "Working
Capital" shall mean as to any Person, at any time, in accordance with GAAP, on a
consolidated basis for such Person and its Subsidiaries (if any), the amount
equal to the difference between: (a) the aggregate net book value of all current
assets of such Person and its subsidiaries (as determined in accordance with
GAAP), calculating the book value of inventory for this purpose on a
first-in-first-out basis and excluding prepaid expenses, and (b) all current
liabilities of such Person and its Subsidiaries (as determined in accordance
with GAAP), provided,
that, as to
Borrower, for purposes of Section 9.14, the liabilities of Borrower to Lender
under this Agreement, shall not be considered current liabilities (whether or
not classified as current liabilities in accordance with GAAP).

17

Section
2.  Credit
Facilities.

2.1  Revolving
Loans.

(a)  Subject
to and upon the terms and conditions contained herein, Lender agrees to make
Revolving Loans to Borrower from time to time in amounts requested by Borrower
up to the amount equal to: 

(i) Up to
eighty five percent (85%) of the Net Amount of Eligible Accounts from the sale
of pharmaceutical products and services, other than Foreign
Accounts;

 

plus
 

 

(ii) Up
to sixty percent (60%) of the Value of Eligible Inventory,

 

less 

 

(iii) Any
Availability Reserves;

 

provided that, except
in Lender’s discretion, the aggregate amount of Revolving Loans at any time
outstanding pursuant to (x) Section 2.1(a)(i) and (ii) hereof shall in no event
exceed Ten Million Dollars ($10,000,000) and (y) Section 2.1(a)(ii) hereof shall
in no event exceed Five Million Dollars ($5,000,000).

 

(b)
Lender may, in its discretion, from time to time, upon not less than five (5)
days prior notice to Borrower, (i) reduce the lending formula with respect to
Eligible Accounts and Eligible Inventory, to the extent that Lender determines
in good faith that: (A) the Dilution with respect to the Accounts for any period
has increased in any material respect or may be reasonably anticipated to
increase in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined or (C) the Dilution as of the
close of any month is greater than five percent (5%) for such month or (ii)
reduce the lending formula(s) with respect to Eligible Inventory, to the extent
that Lender determines that: (A) the number of days of the turnover of the
Inventory for any period has changed in any material respect or (B) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has deteriorated. In
determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing
Availability Reserves. Lender anticipates that any reduction on account of a
determination by Lender under Section 2.1(b)(i)(C) hereof will be at a rate
which is not less than twice the percentage determined thereunder.

 

(c)
Except in Lender's discretion, the aggregate amount of the Loans and the Letter
of Credit Accommodations outstanding at any time shall not exceed the Maximum
Credit. In the event that the outstanding amount of any component of the Loans,
or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations exceed the amounts available under the lending formulas, the
sublimits for the Maximum Amount Of Revolving Loans, for Inventory or for Letter
of Credit Accommodations set forth in Section 2.2(d) or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrower shall, upon
demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for which
payment is demanded.

 

18

(d)
Lender may treat the then undrawn amounts of outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory as Revolving
Loans to the extent Lender is in effect basing the issuance of the Letter of
Credit Accommodations on the Value of the Eligible Inventory being purchased
with such Letter of Credit Accommodations. In determining the actual amounts of
such Letter of Credit Accommodations to be so treated for purposes of the
sublimit, the outstanding Revolving Loans and Availability Reserves shall be
attributed first to any components of the lending formulas in
Section 2.1(a) that are not subject to such sublimit, before being
attributed to the components of the lending formulas subject to such
sublimit.

 

(e)
Subject
to the terms and conditions contained herein, Lender may, in its discretion make
Revolving Loans to Borrower from time to time, in amounts requested by Borrower,
up to a percentage of Foreign Accounts, which meet the criteria of Section
1.20(e)(i), (ii) or (iii) hereof and are otherwise Eligible Accounts, determined
by Lender on an account by account basis from time to time and as may be revised
by Lender from time to time. The amount of any such Revolving Loans shall be
included within the sublimits specified in Section 2.1(a) hereof.

 

(f)
Lender may, in its discretion, increase the advance rate specified in Section
2.1(a)(ii) hereof from sixty percent (60%) to eighty five percent (85%) of the
Value of Eligible Inventory, which is:

 

(i)
Finished goods Inventory, manufactured for a Contract Manufacturing Customer,
and

 

(ii) The
subject of a PUT Agreement, satisfactory to Lender in all respects;

 

 provided that; Lender
shall establish a separate sublimit for Loans with respect to this Inventory,
included within the $5,000,000 sublimit for Eligible Inventory, specified in
Section 2.1(a) hereof .

2.2  Letter
of Credit Accommodations.
Letter
Of Credit Accommodations.

(a)
Subject to and upon the terms and conditions contained herein, at the request of
Borrower, Lender agrees to provide or arrange for Letter of Credit
Accommodations for the account of Borrower containing terms and conditions
acceptable to Lender and the issuer thereof. Any payments made by Lender to any
issuer thereof and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Revolving Loans to Borrower pursuant
to this Section 2.2.

 

(b) In
addition to any charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations Borrower shall pay to Lender
a letter of credit fee at a rate equal to one percent (1.00%) per annum on the
daily outstanding balance of the Letter of Credit Accommodations for the
immediately preceding month (or part thereof), payable in arrears as of the
first day of each succeeding month, except that Borrower shall pay to Lender
such letter of credit fee, at Lender's option, without notice, at a rate equal
to three percent (3.00%) per annum on such daily outstanding balance for: (i)
the period from and after the date of termination or non-renewal hereof until
Lender has received full and final payment of all Obligations (notwithstanding
entry of a judgment against Borrower) and (ii) the period from and after the
date of the occurrence of an Event of Default for so long as such Event of
Default is continuing as determined by Lender. Such letter of credit fee shall
be calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.

 

19

(c) No
Letter of Credit Accommodations shall be available unless on the date of the
proposed issuance of any Letter of Credit Accommodations the Revolving Loans
available to Borrower (subject to the Maximum Credit and any Availability
Reserves) are equal to or greater than: (i) if the proposed Letter of Credit
Accommodation is for the purpose of purchasing Eligible Inventory, other than
Inventory described in Section 2.1(f) hereof, the sum of (A) forty percent (40%)
of the Value of such Eligible Inventory, plus (B) freight, taxes, duty and other
amounts which Lender estimates must be paid in connection with such Inventory
upon arrival and for delivery to one of Borrower's locations for Eligible
Inventory within Puerto Rico or the United States and (ii) if the proposed
Letter of Credit Accommodation is for any other purpose an amount equal to one
hundred percent(100%) of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation an Availability Reserve shall be
established in the applicable amount set forth in Section 2.2(c)(i) or Section
2.2(c)(ii).

 

(d)
Except in Lender's discretion, the amount of all outstanding Letter of Credit
Accommodations and all other commitments and obligations made or incurred by
Lender in connection therewith shall not at any time exceed Two Million Five
Hundred Thousand ($2,500,000) in the aggregate, included within the overall
Revolving Loans. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations and in either case, the Revolving Loans
otherwise available to Borrower shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.

 

(e)
Borrower shall indemnify and hold Lender harmless from and against any and all
losses, claims, damages, liabilities, costs and expenses which Lender may suffer
or incur in connection with any Letter of Credit Accommodations and any
documents, drafts or acceptances relating thereto, including any losses, claims,
damages, liabilities, costs and expenses due to any action taken by any issuer
or correspondent or any other person with respect to any Letter of Credit
Accommodation. Borrower assumes all risks with respect to the acts or omissions
of the drawer under or beneficiary of, or any other person with respect to, any
Letter of Credit Accommodation and for such purposes the drawer or beneficiary
shall be deemed Borrower’s agent. Borrower assume all risks for, and agree to
pay, all foreign, Federal, State and local taxes, duties and levies relating to
any goods subject to any Letter of Credit Accommodations and any documents,
drafts or acceptances thereunder. Borrower hereby releases and holds Lender
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrower, by any issuer or correspondent or otherwise with
respect to or relating to any Letter of Credit Accommodation. The provisions of
this Section 2.2(e) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.

 

20

(f)
Nothing contained herein shall be deemed or construed to grant Borrower any
right or authority to pledge the credit of Lender in any manner. Lender shall
have no liability of any kind with respect to any Letter of Credit Accommodation
provided by an issuer other than Lender unless Lender has duly executed and
delivered to such issuer the application or a guarantee or indemnification in
writing with respect to such Letter of Credit Accommodation. Borrower shall be
bound by any interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of Borrower. Lender
shall have the sole and exclusive right and authority to, and Borrower shall
not: (i) at any time an Event of Default exists or has occurred and is
continuing, (A) approve or resolve any questions of non-compliance of documents,
(B) give any instructions as to acceptance or rejection of any documents or
goods or (C) execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders, and (ii) at all times,
(A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Borrower’s names.

 

(g) Any
rights, remedies, duties or obligations granted or undertaken by Borrower to any
issuer or correspondent in any application for any Letter of Credit
Accommodation, or any other agreement in favor of any issuer or correspondent
relating to any Letter of Credit Accommodation, shall be deemed to have been
granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.

2.3  Term
Loans. Lender
is or will be making four (4) Term Loans to Borrower as
follows:

21

(a)(i)
Lender intends to make a capital expenditures Term Loan to Borrower for the
purpose of purchasing new Equipment to be used in its business and for making
improvements to the Manati Real Property, all as approved by Lender, in the
original principal amount of up to the lesser of (A) $5,000,000 or (B) the sum
of (1) 80% of the “Original Supplier Landed Cost” of “Eligible Equipment” (all
as hereafter defined) and (2) 100% of the “Eligible Construction Project
Costs”(as hereafter defined) of such improvements. This Term Loan (“Term Loan
A”) is and will be (A) evidenced by one or more Term Loan A Promissory Notes in
the original principal amounts disbursed, duly executed and delivered by
Borrower to Lender concurrently with each disbursement of Term Loan A, (B)
repaid together with interest and other amounts, in accordance with this
Agreement, the Term Loan A Promissory Notes, and the other Financing Agreements,
calculated on the basis of 60 consecutive monthly installments payable on the
1st day of
each month commencing April 1, 2007, of which all installments but the last
installment shall each be in the principal amount of (1) the amount disbursed
divided by (2) 60 and the last installment and final payment shall be the amount
of the entire unpaid balance of such Term Loan and Term Loan A Promissory Notes
and due on the Due Date, together with interest and other amounts as provided
herein and in the Term Loan A Promissory Notes and (C) secured by all of the
Collateral. Term Loan A shall in no event exceed $5,000,000, in the aggregate,
during the term of this Agreement. Borrower may not request disbursements of
Term Loan A in amounts of less than $100,000. All amounts drawn under Term Loan
A and all Term Loan A Promissory Notes shall be payable calculated on the basis
of 60 equal monthly payments of principal with a final payment of the then
remaining principal balance, interest and other amounts, as provided herein and
in the Term Loan A Promissory Notes, on the Due Date. Borrower shall execute and
deliver to Lender a Term Loan A Promissory Note at the time of each partial
disbursement of this Term Loan A in the principal amount of such disbursement.
Borrower may request partial disbursements, from time to time, at any time prior
to March 1, 2007 of amounts available under Term Loan A in minimum amounts of
$100,000. Any amounts under Term Loan A not disbursed at or prior to March 1,
2007 will no longer be available after such date. Interest only shall be payable
monthly with respect to Term Loan A until April 1, 2007, on the first day of the
month following the date of each partial disbursement thereof.

 

(ii) In
order to draw amounts under Term Loan A for Eligible Equipment, in addition to
having met and continuing to meet the conditions elsewhere specified
herein:

 

(A) The
Eligible Equipment for which disbursement is being requested shall have been
delivered to Borrower at the Manati Real Property;

 

(B) The
Eligible Equipment for which disbursement is requested shall be free and clear
of all liens, charges, claims of third parties and security interests
whatsoever;

 

(C)
Borrower shall deliver to Lender such documents with respect to such Eligible
Equipment as Lender may request, including but not limited to supplier invoices,
evidence of payment of sales or excise tax thereon, a payback analysis, a letter
requesting Lender to make payment directly to the vendor and a Certificate of
Borrower’s President and Chief Financial Officer as to such matters as Lender
may request; 

 

(D
Borrower shall have executed and delivered to Lender a Term Loan A Promissory
Note in form and substance satisfactory to Lender;

 

22

(E)
Lender shall be satisfied that Borrower shall then have the ability to repay the
amount to be disbursed, by the Due Date; 

 

(F) The
conditions precedent specified Section 4.3 hereof shall be satisfied at and as
of the time of each disbursement of Term Loan A;

 

(G) Each
request for a disbursement hereunder of Term Loan A shall be accompanied by a
certification of the Equipment in place, satisfactorily completed and submitted
by Borrower;

 

(H)
Lender shall have previously approved, in writing (1) the purchase of such
Equipment and (2) a detailed budget submitted by Borrower for such purchase; and

 

(I)The
disbursement requested shall be in accordance with such budget.

 

(iii) As
used in this Section 2.3(a):

(A)
“Eligible Equipment” means Equipment (1) which is not fixtures, (2) which is not
subject to a lien or security interest of any other Person, (3) which is not
leased, (4) which is not worn-out or obsolete (5) which is new Equipment,
purchased from the manufactured or a duly authorized dealer and (6) which has
not been used and is not more than one (1) year old.

 

(B)
“Original Supplier Landed Cost” means supplier invoice price less all excise or
other taxes, less freight to borrower’s location and less all duty.

(iv) In order
to draw amounts under Term Loan A for Eligible Construction Project Costs, in
addition to having met and continuing to meet the conditions elsewhere specified
herein:

 

(A)
Borrower shall have incurred the Eligible Construction Project Costs for which
disbursement is being requested and shall certify to Lender, in form and
substance satisfactory to Lender, that the proceeds of Term Loan A to be
disbursed by Lender hereunder shall be used by Borrower to cover amounts which
shall at the time have been expended and/or be justly due and owing by Borrower
on account of the Eligible Construction Project Costs;

 

(B)
Borrower shall deliver to Lender such documents with respect to such Eligible
Construction Project Costs as Lender may request, including but not limited to
supplier invoices, evidence of payment of excise tax thereon, a payback
analysis, a letter requesting Lender to make payment directly to the vendor and
a Certificate of Borrower’s President and Chief Financial Officer as to such
matters as Lender may request.

 

(C) Borrower
shall have executed and delivered to Lender a Term Loan A Promissory Note in
form and substance satisfactory to Lender;

 

(D)
Lender
shall be satisfied that Borrower shall then have the ability to repay the amount
to be disbursed by the Due Date;

 

(E) The
conditions precedent specified Section 4.3 hereof shall be satisfied at and as
of the time of each disbursement of Term Loan A;

 

(F) Each
request for a disbursement hereunder of Term Loan A for Eligible Construction
Project Costs shall be accompanied by a certification of the work in place,
satisfactorily completed, submitted by Borrower and an independent engineer
satisfactory to Lender;

 

23

 

(G) Lender
shall have previously approved, in writing (1) such improvements and (2) a
detailed budget submitted by Borrower for such Eligible Construction Project
Costs;

 

(H) The
disbursement requested shall be in accordance with such
budget.

(v) As
used in this Section 2.3(a), “Eligible Construction Project Costs” means the
actual direct costs of constructing additional or improvements to the existing
buildings or infrastructure forming part of the Manati Real
Property.

(b)(i)
Lender intends to make a Term Loan to Borrower for the purpose of acquiring the
Purchased Assets and refinancing indebtedness of Borrower to Laurus Master
Funds, Ltd (“Laurus”) and to be used as provided in Section 6.6 hereof, in the
original principal amount of the lesser of (A) $14,200,000 and (B) the lesser of
(1) 65% of the “Fair Market Value” (as hereafter defined) of the “Purchased
Equipment” (as hereafter defined) and (2) 100% of the Orderly Liquidation Value”
of the Purchased Equipment. This Term Loan (“Term Loan B”) is and will be (A)
evidenced by a Term Loan B Promissory Note in the original principal amount
disbursed duly executed and delivered by Borrower to Lender concurrently with
disbursement thereof, (B) repaid together with interest and other amounts, in
accordance with this Agreement, the Term Loan B Promissory Note and the other
Financing Agreements in consecutive monthly installments, payable on the
1st day of
each month, commencing July 1, 2005, of which all installments except the last
installment, shall each be in the principal amount of (1) the amount disbursed
divided by (2) 60 and the last installment and final payment shall be the amount
of the entire unpaid balance of such Term Loan and Term Loan B Promissory Note
and due on the Due Date, together with interest and other amounts as provided
herein and in the Term Loan B Promissory Note and (C) secured by all of the
Collateral. Term Loan B shall in no event exceed $14,200,000, during the term of
this Agreement. All amounts drawn under Term Loan B and the Term Loan B
Promissory Note shall be payable calculated on the basis of 60 equal monthly
payments of principal with a final payment of the then remaining principal
balance, interest and other amounts, as provided herein and in the Term Loan B
Promissory Note, on the Due Date. Borrower shall execute and deliver to Lender a
Term Loan B Promissory Note at the time of disbursement of this Term Loan B in
the principal amount of such disbursement. Interest only shall be payable
monthly with respect to Term Loan B on May 1, 2005 and June 1, 2005.

 

(ii) As
used in this Section 2.3(b), “Purchased Equipment” means Equipment owned by
Borrower (A) which is not fixtures, (B) which is not subject to a lien or
security interest of any other Person, (C) which is not leased, (D) which is not
worn-out or obsolete, (E) which is in good working order and (F) which is part
of the Purchased Assets.

 

(iii) For
purposes of this Section 2.3(b):

 

(A) The
term “Fair Market Value” with respect to the Purchased Equipment means the fair
value of such Equipment determined by appraisals conducted at the expense of
Borrower by independent appraisers acceptable to Lender, and

 

24

(B) The
term “Orderly Liquidation Value”, with respect to Purchased Equipment, means the
value of such Equipment based on the estimated gross amount that such Equipment
should realize if sold piecemeal on a negotiated basis with the seller being
compelled to sell, given a reasonable period of time in which to find a
purchaser, with the purchaser buying as is, where is, for cash, reduced by
expenses, and with the purchaser assuming any costs to dismantle and remove, as
determined by appraisals conducted at Borrower’s expense, by independent
appraisers acceptable to Lender.

(c) (i)
Lender intends to make a Term Loan to Borrower for the purpose of acquiring the
Purchased Assets and refinancing indebtedness of Borrower to Laurus and to be
used as provided in section 6.6 hereof, in the original principal amount of the
lesser of (A) $11,800,000 and (B) 75% of the “Fair Market Value” of the Manati
Real Property. This Term Loan (“Term Loan C”) is and will be (A) evidenced by a
Term Loan C Promissory Note in the original principal amount disbursed duly
executed and delivered by Borrower to Lender concurrently with disbursement
thereof, (B) repaid together with interest and other amounts, in accordance with
this Agreement, the Term Loan C Promissory Note, and the other Financing
Agreements, calculated on the basis of 180 consecutive monthly installments
payable on the 1st day of each month, commencing July 1, 2005, of which all
installments except the last installment, shall each be in the principal amount
of (1) the amount disbursed divided by (2) 180 and the last installment and
final payment shall be the amount of the entire unpaid balance of such Term Loan
and Term Loan C Promissory Note and due on the Due Date, together with interest
and other amounts as provided herein and in the Term Loan C Promissory Note and
(C) secured by all of the Collateral. All amounts drawn under Term Loan C and
the Term Loan C Promissory Note shall be payable calculated on the basis of 180
equal monthly payments of principal with a final payment of the then remaining
principal balance, interest and other amounts, as provided herein and in the
Term Loan C Promissory Note, on the Due Date. Borrower shall execute and deliver
to Lender a Term Loan C Promissory Note at the time of disbursement of this Term
Loan C in the principal amount of such disbursement. Interest only shall be
payable monthly with respect to Term Loan C on May 1, 2005 and June 1,
2005.

(ii) For
purposes of this Section 2.3(c) the term “Fair Market Value” with respect to the
Manati Real Property means the fair value of such property, determined by the
appraisals made by American Appraisal Associates, dated as of November 18,
2004.

(d) (i)
Lender intends to make a Term Loan to Borrower for the purpose of refinancing
existing indebtedness of Borrower to Laurus and for general corporate purposes,
in the principal amount of the lesser of (A) $5,000,000 or (B) the sum of (1)
twenty five percent (25%) of the Net Fair Market Value of the Manati Real
Property plus (2) thirty five percent (35%) of the Fair Market Value of the
Purchased Equipment, owned by Borrower; provided
that; the
amount of the Loans to be disbursed pursuant to this Section 2.3(d)(i)(A)(2)
plus the amount of the Loans to be disbursed pursuant to Section 2.3(b) hereof
shall not exceed 100% of the Orderly Liquidation Value of the Purchased
Equipment. This Term Loan (“Term Loan D”) is and will be (A) evidenced by a Term
Loan D Promissory Note in the original principal amount disbursed, duly executed
and delivered by Borrower to Lender concurrently herewith, (B) repaid together
with interest and other amounts in accordance with this Agreement, the Term Loan
D Promissory Note, and the other Financing Agreements, calculated on the basis
of 60 consecutive monthly installments, payable on the 1st day of
each month commencing July 1, 2005, of which all installments, except the last
installment shall each be in the principal amount of (1) the amount disbursed
divided by (2) 60 and the last installment and final payment shall be the amount
of the entire unpaid balance of such Term Loan and Term Loan D Promissory Note
and due on the Due Date, together with interest and other amounts as provided
herein and in the Term Loan D Promissory Note and (C) secured by all of the
Collateral. All amounts drawn under Term Loan D and the Term Loan D Promissory
Note shall be payable calculated on the basis of 60 equal monthly payments of
principal, with the final payment of the then remaining principal balance,
interest and other amounts, as provided herein and in the Term Loan D Promissory
Note, on the Due Date. Borrower shall execute and deliver to Lender a Term Loan
D Promissory Note at the time of disbursement of this Term Loan D, in the
principal amount of such disbursement. Interest only shall be payable monthly
with respect to Term Loan D on May 1, 2005 and June 1, 2005.

 

25

(ii) Term
Loan D Promissory and the Term Loan D Promissory Note shall be subject to
mandatory prepayments. Borrower shall make and pay to Lender, annually, as a
mandatory prepayment in respect of Term Loan D and the Term Loan D Promissory
Note, on the 30th day
after the close of each fiscal year of Borrower twenty five percent (25%) of
Borrower’s Excess Cash Flow for the preceding fiscal year of
Borrower. Such
mandatory prepayments are in addition to all other payments of principal,
interest and charges payable by Borrower to Lender in respect of Term loan D and
will be due and payable on the thirtieth (30th) day after the close of each
fiscal year of Borrower, based on Borrower’s internally prepared consolidated
financial statements; but adjusted accordingly, if necessary, upon receipt of
Borrower’s audited consolidated financial statements, which Borrowers agree to
furnish to Lender within one hundred twenty (120) days from the close of its
fiscal years. In the event Borrower or any Affiliate of Borrower shall change
its fiscal year, appropriate adjustment shall be made in the periods based on
which the Excess Cash Flow and mandatory prepayments will be determined. All
mandatory prepayments of principal of Term Loan D shall be applied to payments
falling due in inverse order of maturity.

 

(iii) As
used in this Section 2.3(d) the terms “Purchased Equipment” and “Fair Market
Value” shall have the respective meanings prescribed in Section 2.3(b)
hereof(with respect to Equipment) and Section 2.3(c)hereof (with respect to the
Manati Real Property).

(e)
Notwithstanding any other provision of this Agreement or the Term Loan
Promissory Notes all Term Loans and Term Loan Promissory Notes shall become
immediately due and payable upon the termination or non-renewal of this
Agreement, or in Lender’s discretion upon the occurrence of an Event of Default
under this Agreement or any of the other Financing Agreements. 

26

(f) (i)
Borrower may make “Voluntary Prepayments” of up to $9,300,000 of the Term Loans
in integral multiples of $100,000, without premium or penalty but only under the
following terms and conditions:

 

(A) as of
both the date of notice of intent to make such Voluntary Prepayment and the date
of making of such prepayment and after giving effect thereto, no Event of
Default or act, condition or event which with the giving of notice or passage of
time or both would constitute an Event of Default shall exist or have occurred,
including a failure to comply with any of the provisions of Section 9.14, 9.16,
9.15 or 9.17 hereof,

 

(B) as of
both the date of notice of intent to make such Voluntary Prepayment and the date
of making of such prepayment and after giving effect thereto, Borrower shall be
Solvent;

 

(C)
Borrower shall have given Lender at least ten (10) Business Days prior written
notice of its intent to make the Voluntary Prepayment, stating the amount of
such Voluntary Prepayment and the date on which such Voluntary Prepayment is to
be made;

 

(D) All
mandatory prepayments required to be made in respect of Term Loan D, pursuant to
Section 2.3(d) hereof, shall have been made;

 

(E) The
amount of all Voluntary Prepayments made in any fiscal year of Borrower may not
exceed ten percent(10%) of Borrowers’ Excess Cash Flow for the preceding fiscal
year;

 

(F) The
amount of all Voluntary Prepayments made in any fiscal year of Borrower may not
exceed ten percent (10%) of the outstanding balance of all Term Loans as of the
first day of such fiscal year; and

 

(G) The
aggregate amount of all Voluntary Prepayments made during the term of this
Agreement and any renewal thereof shall not exceed $9,300,000.

 

(ii) All
Voluntary Prepayments shall be applied to those of the Term Loans as determined
by Lender and to payments falling due in inverse order of maturity.

 

(iii) The
aggregate amount of all Voluntary Prepayments made during any fiscal year of
Borrower shall reduce the amount of dividends that Borrower may pay, pursuant to
Section 9.19 hereof during such fiscal year; provided
that, the
aggregate amount of all Voluntary Prepayments made and dividends declared or
paid during any fiscal year of Borrowers may not exceed twenty five percent(25%)
of Borrowers’ Excess Cash Flow for the preceding fiscal year.

 

(iv)
Borrower having given notice of the intent to make a Voluntary Prepayment
described in Section 2.3(f)(i)(C) hereof and all of the other conditions
specified in this section 2.3(f) having been met, the amount of the Voluntary
Prepayment specified therein shall be due and payable on the date specified
therein.

 

2.4  Availability
Reserves. All
Revolving Loans otherwise available to Borrower pursuant to the lending formulas
and subject to the Maximum Credit and other applicable limits hereunder shall be
subject to Lender's continuing right to establish and revise Availability
Reserves. 

2.5  Maximum
Credit. Except in
Lender's discretion, the aggregate amount of all of the Loans at any time shall
not exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans, exceed
the amounts available under the lending formulas, or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrower shall, upon
demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for which
payment is demanded. The Maximum Credit shall have the following
sublimits:

 

27

 

	
      (a)
      Revolving Loans-
	 	
      $10,000,000;
      

	
      (b)
      Eligible Inventory (included within the Revolving Loans) -
	 	
      $
      5,000,000;

	
      (c)
      Eligible Inventory Subject to PUT Agreements (including within the
      Eligible Inventory sublimit) -
	 	
      $
      5,000,000;

	
      (d)
      Letter Of Credit Accommodations (included within the Revolving Loans)
      -
	 	
      $
      2,500,000;

	
      (e)
      Term Loan A-
	 	
      $
      5,000,000;

	
      (f)
      Term Loan B-
	 	
      $14,200,000;
      

	
      (g)
      Term Loan C-
	 	
      $11,800,000;
      and

	
      (h)
      Term Loan D
	 	
      $
      5,000,000.

Section
3.  Interest
And Fees.

3.1  Interest.

 

(a)
(a)
Borrower shall pay to Lender interest on the outstanding principal amount of (i)
the non contingent Obligations, except the Term Loans, at the rate of one
percent (1.00%) per annum in excess of the Prime Rate, (ii) Term Loan A, Term
Loan B and Term Loan C, at the rate of two percent (2.00%) per annum in excess
of the Prime Rate and (iii) Term Loan D, at the rate of fifteen percent (15%)
per annum; except that, at
Lender's option, without notice, Borrower shall pay to Lender interest at the
rate of (i) three percent (3.00%) per annum in excess of the Prime Rate: (A) on
all of the non contingent Obligations, except the Term Loans for (1) the period
from and after the date of termination or non-renewal hereof until such time as
Lender has received full and final payment of all such Obligations
(notwithstanding entry of any judgment against Borrower), and (2) the period
from and after the date of the occurrence of an Event of Default for so long as
such Event of Default is continuing as determined by Lender and (B) on the
Revolving Loans, at any time outstanding in excess of the amounts available to
Borrower under Section 2 (whether or not such excess(es), arise or are made with
or without Lender's knowledge or consent and whether made before or after an
Event of Default), (ii) four percent (4.00%) per annum in excess of the Prime
Rate on Term Loan A, Term Loan B and Term Loan C for the periods specified in
Section 3.1(a)(i)(A)(1) and (2) hereof and (iii) seventeen percent (17%) per
annum on Term Loan D for the periods specified in Section 3.1(a)(i)(A)(1) and
(2) hereof; provided 
that, the
minimum interest rate, at all times payable hereunder, shall never be less than
six and one half percent (6.50%) per annum on the non contingent Obligations,
except the Term Loans and (y) seven and one half percent (7.50%) per annum on
Term Loan A, Term Loan B and Term Loan C.

 

28

(b)
Interest shall be payable by Borrower to Lender monthly in arrears not later
than the first day of each calendar month and shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed. The interest
rate shall increase or decrease by an amount equal to each increase or decrease
in the Prime Rate effective on the first day of the month after any change in
such Prime Rate is advised or announced. The increase or decrease shall be based
on the Prime Rate in effect on the last day of the month in which any such
change occurs. All interest accruing hereunder on and after an Event of Default
or termination or non-renewal hereof shall be payable on demand. In no event
shall charges constituting interest payable by Borrower to Lender exceed the
maximum amount or the rate permitted under any applicable law or regulation, and
if any part or provision of this Agreement is in contravention of any such law
or regulation, such part or provision shall be deemed amended to conform
thereto.

3.2  Closing
Fee.
Borrower shall pay to Lender as a closing fee of one percent (1)% of the Maximum
Credit, which shall be fully earned as of and payable on the date
hereof.

3.3  Servicing
Fee.
Borrower shall pay to Lender monthly a servicing fee in an amount equal to
$2,500 in respect of Lender's services for each month (or part thereof) while
this Agreement remains in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be fully earned as of and payable
in advance on the date hereof and on the first day of each month hereafter.

3.4  Unused
Line Fee.
Borrower shall pay to Lender monthly, an unused line fee at a rate equal to one
half of one percent (0.50%) percent per annum calculated upon the amount by
which $10,000,000 exceeds the average daily principal balance of the outstanding
Revolving Loans and Letter of Credit Accommodations during the immediately
preceding month (or part thereof), while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
payable on the first day of each month in arrears.

3.5  Letter
of Credit Fees. Borrower
shall pay Lender fees for Letter of Credit Accommodations as stated in Section
2.2(b) hereof.

3.6  Facility
Fee. Borrower
shall pay to Lender commencing April 1, 2006, and annually thereafter as a
facility fee the amount of $25,000 for providing the revolving credit facility,
which shall be fully earned as of and payable on such dates.

3.7  Success
Fee. In the
event that Borrower has Income Before Taxes equal to or in excess of $200,000
for any three(3) of its fiscal years ending during the Term(including any
renewal thereof) of this Agreement then Borrower shall pay to Lender a “success
fee” in the amount of the greater of (a) $100,000 and (b)one percent (1%) the
Income Before Taxes of Borrower and its subsidiaries for such fiscal year,
determined on a consolidated basis and in accordance with GAAP, for and with
respect to each such fiscal year. Such fee is in addition to all other fees,
interest and charges payable by Borrower to Lender and such fee will be due and
payable on the thirtieth (30th) day after the close of each of fiscal year of
Borrower for which it has Income Before Taxes equal to or greater then $200,000,
based on Borrower’s internally prepared financial statements; but adjusted
accordingly, if necessary, upon receipt of Borrower’s preliminary audited
consolidated and consolidating financial statements, which Borrower agrees to
furnish to Lender within ninety (90) days from the close of Borrower’s fiscal
year. Lender may charge such fees to Borrower’s loan account, without prior
notice. In the event Borrower shall change its fiscal year, appropriate
adjustment shall be made in the periods based on which the “success fee” will be
determined. 

29

3.8  Early
Termination Fee. If for
any reason this Agreement is terminated prior to the end of the then current
term or any renewal term of this Agreement, in view of the impracticality and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Lender’s lost profits as a result
thereof, Borrower agrees to pay to Lender, on demand an early termination fee in
the amount set forth below if such termination or failure is effective in the
period indicated:

	
      Amount
	 	
      Period

	 	 	 
	
      (a)
      5% of the Maximum Credit
	 	
      From
      the date hereof to and including March 31, 2006;

	 	 	 
	
       
	 	 
	
      
      (b)
      3% of the sublimit on Revolving Loans plus 3% of the then
      outstanding balance of the Term Loans

	 	
      From
      April 1, 2006 to and including March 31, 2007; and

	 	 	 
	
      (d)
      1% of the sublimit on Revolving plus 1% of the then outstanding balance of
      the Term Loan
	 	
      From
      April 1, 2007, to and including March 30, 2008 or if this Agreement is
      extended for an additional period as provided herein, to and including the
      end of the then current term;

 

provided that;
Borrower shall pay one half (1/2) the amount of the early termination
computed
above if and only if, all Loans are repaid simultaneously from the proceeds of
the issue
and sale of by Borrower of shares of its Capital Stock. Such early termination
fee shall be presumed to be the amount of damages sustained by Lender as a
result of such early termination and Borrower agrees that it is reasonable under
the circumstances currently existing. In addition, Lender shall be entitled to
such early termination fee upon the occurrence of any Event of Default described
in Sections 10.1(g) or 10.1(h) hereof even if Lender does not exercise its right
to terminate this Agreement; but Lender elects, at its option, to provide
financing to Borrower or permit the use of cash collateral under the Bankruptcy
Code. The early termination fee provided for in this Section 3.8 shall be deemed
included in the Obligations. Borrower waives any claim for reduction of fees
whether or not such fees are treated as a penalty.

 

30

Section
4.  Conditions
Precedent.

4.1  Conditions
Precedent to Initial Loans and Letter of Credit Accommodations. Each of
the following is a condition precedent to Lender making the initial Loans, and
providing the initial Letter of Credit Accommodations hereunder:

(a)
Lender shall have received, in form and substance satisfactory to Lender, (i)
evidence that Lender has valid, perfected and first priority security interests
in and liens upon the Collateral and any other property which is intended to be
security for the Obligations, subject only to Permitted Liens, (ii) all
releases, terminations and such other documents as Lender may request to
evidence and effectuate the termination by others who have provided financial
accommodations to any Borrower of their respective financing arrangements with
each such Borrower and the termination and release by it or them, as the case
may be, of any interest in and to any assets and properties of Borrower, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, (A) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and Borrower, as debtor and (B) satisfactions and discharges of any mortgages,
deeds of trust or deeds to secure debt by any Borrower in favor of others in
form acceptable for recording in the appropriate government office and
(iii) evidence
that the Purchase Agreements have been duly executed and delivered by and to the
appropriate parties thereto and the transactions contemplated under the terms of
the Purchase Agreements have been consummated prior to or contemporaneously with
the execution of this Agreement.

 

(b) All
requisite corporate and other actions and proceedings in connection with this
Agreement and the other Financing Agreements shall be satisfactory in form and
substance to Lender, and Lender shall have received all information and copies
of all documents, including records of requisite corporate and other actions and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities.

 

(c) No
material adverse change shall have occurred in the assets, business or prospects
of Borrower since the date of Lender's latest field examination and no change or
event shall have occurred which would impair the ability of any Borrower to
perform its obligations hereunder or under any of the other Financing Agreements
to which it is a party or of Lender to enforce the Obligations or realize upon
the Collateral.

 

(d)
Lender shall have completed a field review of the Records and such other
information with respect to the Collateral as Lender may require to determine
the amount of Revolving Loans and Term Loans available to Borrower, the results
of which shall be satisfactory to Lender, not more than three (3) business days
prior to the Closing Date.

 

(e)
Lender shall have received, in form and substance satisfactory to Lender, all
consents, waivers, acknowledgments and other agreements from third persons which
Lender may deem necessary or desirable in order to permit, protect and perfect
its security interests in and liens upon the Collateral or to effectuate the
provisions or purposes of this Agreement and the other Financing Agreements,
including acknowledgments by lessors, mortgagees and warehousemen of Lender's
liens and security interests in the Collateral, waivers by such persons of any
security interests, liens or other claims by such persons to the Collateral and
agreements permitting Lender access to, and the right to remain on, the premises
to exercise its rights and remedies and otherwise deal with the
Collateral.

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(f)
Lender shall have received, in form and substance satisfactory to Lender, such
opinion letters of counsel to Borrower with respect to the Purchase Agreements,
the Financing Agreements, and the security interests and liens of Lender in the
Collateral and such other matters as Lender may request. 

 

(g) The
other Financing Agreements requested or submitted by Lender from or to Borrower
and all instruments and documents hereunder and thereunder shall have been duly
executed and delivered to Lender, in form and substance satisfactory to
Lender.

 

(h)
Lender shall have received, in form and substance satisfactory to Lender
(i) all
agreements
with respect to (i) the Blocked Accounts and (ii)all investment property and all
other deposit accounts of Borrower as Lender may require, duly authorized,
executed and delivered by Borrower and the appropriate depository, financial or
other applicable institution.

 

(i)
Excess Availability and Suppressed Availability, as of the Closing Date, shall
not be less than $2,000,000 and $500,000 respectively, after giving the effect
to the Loans to be made to be provided in connection with the initial
transactions hereunder.

 

(j) All
indebtedness owing by (i) Borrower to any Affiliate, (ii) by any guarantor of
the Obligations to Borrower or (iii) by Borrower to any stockholder, officer or
director of Borrower whether of not on Affiliate of Borrower shall have been
fully subordinated to the Obligations, to Lenders satisfaction.

 

(k)
Lender shall have received, in form and substance satisfactory to Lender, (i) a
pro forma and market value balance sheet of Borrower, reflecting the initial
transactions contemplated hereunder, including, but not limited to, (A) the
Loans and Letter Of Credit Accommodations to be provided by Lender to Borrower,
(B) the use of the proceeds of the initial Loans as provided herein and (C) the
consummation of the acquisition of the Purchased Assets by Borrower from Seller
and the other transactions contemplated by the Purchase Agreements and (ii) a
projection and forecast of Borrower’s cash flow for its current and succeeding
fiscal year all accompanied by a certificate, dated as of the Closing Date, of
the chief executive officer and chief financial officer of Borrower, stating
that such pro-forma balance sheet, market value balance sheet and projection of
cash flow, represents the reasonable, good faith opinion of such officers as to
the subject matter thereof as of the date of such certificate and as to such
other matters as Lender may request.

 

(l)
Lender shall have received evidence of insurance and loss payee endorsements
required hereunder and under the other Financing Agreements, in form and
substance satisfactory to Lender, and certificates of insurance policies and/or
endorsements naming Lender as loss payee, all of which insurance shall be in
amounts, for periods, with coverage and otherwise satisfactory to Lender, in
form and substance, including policies covering business and environmental risk
with respect to the Collateral.

 

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(m)
Lender shall have received a pledge in form and substance satisfactory to Lender
of all of the Capital Stock of each Subsidiary of Inyx requested by
Lender.

 

(n)
Lender shall have received assignments of all Material Contracts, leases, rent
proceeds from leases distribution rights, permits, licensing agreements and
Intellectual Property, as Lender shall have requested, all in form and substance
satisfactory to Lender.

 

(o) All
fees, costs and expenses owing to Lender, including the fees and disbursements
of Lender’s counsel shall have been paid, concurrently with the execution
hereof.

 

(p)
Borrower shall have delivered to Lender, at its expense, an environmental audit
of the Manati Real Property conducted by an environmental engineering firm
acceptable to Lender and in form, scope and methodology satisfactory to Lender
confirming that (i) Borrower and Seller is each in compliance with all
Environmental Laws, in all material respects and (ii)there is no material
potential or actual liability of Borrower for any remedial action with respect
to any environmental condition or any other significant environmental
problem.

 

(q)
Lender shall have received evidence of payments or certificates, to its
satisfaction that all Federal, Commonwealth, municipal and other taxes or
charges of any Governmental Agency owing or claimed owing by Borrower have been
paid or adequate provision for the payment thereof, including payment plans, to
Lender’s satisfaction, has been made.

 

(r)
Borrower shall be in full compliance with the financial covenants contained in
Sections 9.14, 9.15, 9.16 and 9.17 hereof.

 

(s)
Borrower shall have furnished evidence to Lender that all property taxes on the
Real Property then due have been paid, Borrower shall have executed and
delivered to Lender all Real Estate Security and Lender shall have received
mortgagee title policies with respect thereto in such amounts and from such
insurers and with such affirmative coverage’s as Lender may request, all in form
and substance satisfactory to Lender.

 

(t)
Lender shall have received recent surveys of the Manati Real Property prepared
by a licensed engineer, satisfactory to Lender, conforming to the descriptions
and showing no encroachments and certified to Lender and Lender shall have
received appraisals for the Real Property from appraisers acceptable to Lender,
addressed to Lender, all in form and substance and showing such values therefor,
as shall be acceptable to Lender.

 

(u) The
market value balance sheet of Borrower, the certificate and the projection
referred to in Section 4.1 (k) hereof shall reflect to Lender’s satisfaction
that Borrower is Solvent.

 

(v)
Lender shall have received evidence of zoning of the Real Property disclosing no
violation of applicable regulations, satisfactory to Lender and flood zone
certificates for the Real Property, satisfactory to Lender.

 

(w)
Lender shall have received, in form and substance satisfactory to Lender, a
guarantee of payment of the Obligations by each Affiliate of Borrower requested
by Lender, secured
by a first and only liens and security interests (except for those permitted by
Section 9.8(a) hereof) in each such Persons assets in favor of Lender, including
real property, Equipment Inventory and Accounts of Inyx Pharma,
Ltd.

 

(x) With
respect to the Purchase Agreements and the Purchased Assets:

 

(i)
Lender shall have received, in form and substance satisfactory to Lender,
evidence that the Purchase Agreements, have been duly executed and delivered by
and to the appropriate parties thereto and the transactions contemplated under
the terms of the Purchase Agreements shall have closed and have been consummated
prior to or contemporaneously with the execution of this Agreement;

 

33

(ii)
Lender shall have received, in form and substance satisfactory to Lender, the
agreement of the Seller consenting to the collateral assignment by Borrower to
Lender of all of Borrower's rights and remedies and claims for damages,
indemnification or other relief under the Purchase Agreements and granting
Lender such other rights as Lender may require, duly authorized, executed and
delivered by Seller;

 

(iii)
Lender shall have received in form and substance satisfactory to Lender
such opinion
letters of counsel to the Seller with respect to the Purchase Agreements, the
consummation of the transactions contemplated thereby and as to such other
matters as Lender may request; 

 

(iv)
Lender shall have received in form and substance satisfactory to Lender evidence
that all payments required to be made by Borrower in connection with the
Purchase Agreements have been, or concurrently with the making of the Initial
Loans will be, made;

 

(v) The
purchase price for the Purchased Assets payable by Borrower to Seller shall not
exceed $15,000,000;

 

(vi)
No court
of competent jurisdiction has issued any injunction, restraining order or other
order which prohibits consummation of the transactions described in the Purchase
Agreements and no governmental or other action or proceeding has been threatened
or commenced, seeking any injunction, restraining order or other order which
seeks to void or otherwise modify the transactions described in the Purchase
Agreements and no law,
regulation, order, judgment or decree of any governmental authority shall exist
which has or could reasonably be expected to have a Material Adverse Effect;
and

 

(vii)
Inyx USA shall have acquired from Seller, pursuant to the Purchase  Agreements,
good and marketable title to the Purchased Assets to Lender’s satisfaction
 free and
clear of all liens, claims, charges, encumbrances, security interest and rights
of  third
parties, except Permitted Liens.

 

(y)
Lender shall have received all such subordination agreements, non-disturbance
agreements, assignments of leases, landlord’s consents and other agreements and
consents from landlords, subtenants, mortgagees and others with respect to the
Real Estate Security and with respect to each Affiliate of Borrowrs, as Lender
shall request.

 

(z)
Lender shall have received estoppel certificates from all of Seller’s landlords,
customers, suppliers and others with whom Borrower will do business or have
contractual arrangements showing that no defaults thereunder exist or that any
alleged default will not have a Material Adverse Effect.

 

(aa)
Lender shall have received appraisals for the Real Estate Security and the
Purchased Equipment from American Appraisal Associates, dated March 9, 2005 and
March 8, 2005, respectively.

 

(bb)
Laurus shall have (i) delivered to Lender a certificate of Laurus, specifying
the amount of Debt of Inyx and its Subsidiaries to Laurus, the security
therefore and the amount to be paid to pay and discharge such Debt in full, (ii)
entered into such agreements with Lender with respect to the payment of such
Debt and the assignment or release of the security therefore as Lender may
request and (iii) assigned to Lender or released of all security for such Debt,
all in form and substance satisfactory to Lender.

 

34

(cc)
Lender shall have received evidence satisfactory to Lender that all payments
required to be made by Borrower (i) to pay and discharge the debt to Laurus and
effect the release of security therefore and (ii) to acquire the Purchased
Assets and pay the purchase price therefore, will be made concurrently with the
making of the Initial Loans.

 

(dd)
Lender shall have received assignments of key man life insurance policies,
satisfactory to Lender in all respects, in the aggregate amount of $4,000,000,
insuring the life of Jack Kachkar. 

 

(ee)
Lender shall have received background reports, satisfactory to Lender in all
respects, on the principal shareholders and officers of Borrower.

 

(ff) The
amount payable to Laurus to pay in full and discharge the Debt of Borrower to
Laurus shall not exceed the amount of $13,000,000.

Notwithstanding
that all conditions specifies in this Section 4.1 have not been complied with or
fulfilled by the Closing Date, Lender may permit Borrower periods of up to sixty
(60) days from the Closing Date to comply with and satisfy one or more of the
conditions specified in this Section 4.1 hereof which have not been complied
with and satisfied as of the Closing Date and may defer funding of, fund
partially or not fund at all, any or all of the initial and future Loans as
Lender shall determine, unless and until such conditions have been satisfied,
all in Lender’s discretion. Lender shall have no liability to Borrower
whatsoever for not funding any or all of the Loans if any such condition is not
satisfied within such 30 day period.

4.2  Conditions
Precedent to All Loans And Letter of Credit Accommodations. Each of
the following is an additional condition precedent to Lender making Loans to
Borrower, including the initial and any future Loans:

(a) all
representations and warranties contained herein and in the other Financing
Agreements shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and as of
the date of the making of each such Loan and after giving effect thereto;

 

(b) no
Event of Default and no event or condition which, with notice or passage of time
or both, would constitute an Event of Default, shall exist or have occurred and
be continuing on and as of the date of the making of such Loan, and after giving
effect thereto;  

 

(c) No
law, regulation, order, judgment or decree of any governmental authority shall
exist, and no action, suit, investigation, litigation or proceeding shall be
pending or threatened in any court or before any arbitrator or Governmental
Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect
(A) the making of the Loans or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has or could reasonably be expected to have a Material Adverse Effect;
and

 

(d)
Lender shall have received such certificates, from such persons and in such
detail, as to the forgoing matters and as to such other matters covered by this
Agreement, as it may have requested.

35

4.3  Additional
Conditions Precedent to Term Loans. Each of
the following is an additional condition precedent to Lender making
disbursements of Term Loan A to Borrower of amounts thereof not disbursed at
closing as part of the initial Loans:

 

(a) Any
condition precedent specified in Section 4.1 hereof or elsewhere herein to the
making of the initial Loans not satisfied at the time of making of the initial
Loans the satisfaction of which had been deferred by Lender shall have been
fulfilled to Lender’s satisfaction;

 

(b) All
such conditions shall have been satisfied within the time prescribed, to Lenders
satisfaction; 

 

(c) No
material adverse change shall have occurred in the assets, business or prospects
of Borrower since the Closing Date and no change or event shall have occurred
which would impair the ability of Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to which it
is a party or of Lender to enforce the Obligations or realize upon the
Collateral; 

 

(d)
Lender shall have approved the purpose for which the proceeds of such Term Loan
are to be used;

 

(e)
Lender shall have received such appraisals as it may have requested;
and

 

(f) All
conditions specified in Section 4.2 hereof must continue to be satisfied at and
as of the date of each disbursement.

Section
5.  Grant
of Security Interest.

5.1  Grant
of Security Interest. To
secure payment and performance of all Obligations, Borrower hereby grants to
Lender a continuing security interest in, a lien upon, and a right of set off
against, and hereby assigns to Lender as security, the following property and
interests in property of Borrower, whether now owned or hereafter acquired or
existing, and wherever located (together with all other collateral security for
the Obligations at any time granted to or held or acquired by Lender
collectively (the “Collateral”).

(a) all
Accounts;

 

(b) all
present and future general intangibles, including all Intellectual
Property;

 

(c) all
Inventory;

 

(d) all
Equipment;

 

(e) all
Real Property and fixtures and all Real Estate Security;

 

(f) all
chattel paper, including all tangible and electronic chattel paper;

 

(g) all
instruments, including all promissory notes;

 

(h) all
documents;

 

(i) all
deposit accounts;

 

(j) all
letters of credit, banker’s acceptances and similar instruments and including
all letter of credit rights;

 

(k) all
supporting obligations and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Receivables and
other Collateral, including (i) rights and remedies under or relating to
guaranties, contracts of surety ship, letters of credit and credit and other
insurance related to the Collateral, (ii) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, (iii) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, Receivables or other collateral, including returned, repossessed and
reclaimed goods, and (iv) deposits by and property of account debtors or other
persons securing the obligations of account debtors;

 

36

(l) all
(i) investment property (including securities, whether certificated or
uncertificated, securities accounts, security entitlements, commodity contracts
or commodity accounts) and (ii) monies, credit balances, deposits and other
property of Borrower, now or hereafter held or received by or in transit to
Lender or at any other depository or other institution from or for the account
of Borrower whether for safekeeping, pledge, custody, transmission, collection
or otherwise;

 

(m) all
commercial tort claims, including, without limitation, those identified in the
Information Certificate;

 

(n) to
the extent not otherwise described above, all Receivables and all
goods;

 

(o) all
Records;

 

(p) the
leases of all premises leased by Borrower(including an assignment
thereof);

 

(q) all
motor vehicles; 

 

(r)
all
shares of capital stock of each Subsidiary of Borrower and the certificates
representing such shares;

 

(s)
assignment
of proceeds of Manufacturing Contracts, including rents;
and

 

(t) all
products and proceeds of the foregoing in any form, including insurance proceeds
and all claims against third parties for loss or damage to or destruction of or
other involuntary conversion of any kind
or nature of any or all of the other collateral and any indemnities, warranties
and guaranties payable by reason of loss or damage to or otherwise with respect
to any of the foregoing items.

5.2  Perfection
of Security Interest.
Borrower irrevocably and unconditionally authorizes Lender (or its agent) to
file at any time and from time to time such financing statements with respect to
the Collateral naming Lender or its designee as the secured party and Borrower
as debtor, as Lender may require, and including any other information with
respect to Borrower or otherwise required by Article 9 of the Uniform Commercial
Code of such jurisdiction as Lender may determine, together with any amendments
and continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Borrower
hereby ratifies and approves all financing statements naming Lender or its
designee as secured party and Borrower as debtor with respect to the Collateral
(and any amendments with respect to such financing statements) filed by or on
behalf of Lender prior to the date hereof and ratify and confirm the
authorization of Lender to file such financing statements (and amendments, if
any). Borrower hereby authorizes Lender to adopt on behalf of Borrower any
symbol required for authenticating any electronic filing. In the event that the
description of the Collateral in any financing statement naming Lender or its
designee as the secured party and Borrower as debtor includes assets and
properties of Borrower that do not at any time constitute Collateral, whether
hereunder, under any of the other Financing Agreements, or otherwise, the filing
of such financing statement shall nonetheless be deemed authorized by Borrower
to the extent of the Collateral included in such description and it shall not
render the financing statements ineffective as to any of the Collateral or
otherwise affect the financing statement as it applies to any of the Collateral.
In no event shall Borrower at any time file, or permit or cause to be filed, any
correction statement or termination statement with respect to any financing
statement (or amendment or continuation with respect thereto) naming Lender or
its designee as secured party and any Borrower as debtor.

37

Section
6.  Collection
And Administration

6.1  Borrower’s
Loan Account. Lender
shall maintain one or more loan account(s) on its books in which shall be
recorded (a) all Loans, Letter of Credit Accommodations and other Obligations
and the Collateral, (b) all payments made by or on behalf of Borrower and (c)
all other appropriate debits and credits as provided in this Agreement,
including fees, charges, costs, expenses and interest. All entries in the loan
account(s) shall be made in accordance with Lender's customary practices as in
effect from time to time.

6.2  Statements. Within
ten(10) Business Days after the first day of the month, Lender shall render to
Borrower each month a statement setting forth the balance in the Borrower’s loan
account(s) maintained by Lender for Borrower pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Lender but shall, absent
manifest errors or omissions, be considered correct and deemed accepted by
Borrower and conclusively binding upon Borrower as an account stated except to
the extent that Lender receives a written notice from Borrower of any specific
exceptions of Borrower thereto within thirty (30) days after the date such
statement has been mailed by Lender. Until such time as Lender shall have
rendered to Borrower a written statement as provided above, the balance in
Borrower’s loan account(s) shall be presumptive evidence of the amounts due and
owing to Lender by Borrower.

6.3  Collection
of Accounts.

 

(a) Borrower
shall establish and maintain, at their expense, blocked accounts or lock boxes
and related blocked accounts (in either case, "Blocked Accounts"), as Lender may
specify, with such banks as are acceptable to Lender into which Borrower shall
promptly deposit and direct their account debtors, to directly remit all
payments on Receivables, including Accounts and all payments constituting
proceeds of Inventory, Equipment or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner. The banks
at which the Blocked Accounts are established shall enter into an agreement, in
form and substance satisfactory to Lender, providing that all items received or
deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose ("Payment Account"). Borrower
agrees that all payments made to such Blocked Accounts or other funds received
and collected by Lender, whether on the Accounts or as proceeds of Inventory,
Equipment or other Collateral or otherwise shall be the property of
Lender.

 

38

(b) For
purposes of calculating the amount of the Loans available to Borrower, such
payments will be applied (conditional upon final collection) to the Obligations
on the Business Day of receipt by Lender of immediately available funds in the
Payment Account provided such payments and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from time to
time and within sufficient time to credit Borrower's loan account on such day,
and if not, then on the next business day. For the purposes of calculating
interest on the Obligations, payments or other funds received will be applied
(conditional upon final collection) to the Obligations one(1) business day(s)
following the date of receipt of immediately available funds by Lender in the
Payment Account provided such payments or other funds and notice thereof are
received in accordance with Lender's usual and customary practices as in effect
from time to time and within sufficient time to credit Borrower's loan account
on such day, and if not, then on the next business day.

 

(c) Borrower
and all of its Subsidiaries and other Affiliates, shareholders, directors,
employees or agents shall, acting as trustee for Lender, receive, as the
property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Lender. In no event
shall the same be commingled with Borrower’s own funds. Borrower agree to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3 shall
survive the termination or non-renewal of this Agreement.

 

(d) In
addition to the account referred to in Section 6.3(a) hereof, Borrower may
establish and maintain, at their expense, deposit account arrangements with the
banks set forth on Schedule 8.8 hereto. The banks set forth on Schedule 8.8
hereto constitute all of the banks with whom Borrower has deposit account
arrangements as of the date hereof and identifies each of the deposit accounts
at such banks and describes the nature of the use of such deposit account by
Borrower. Borrower shall deposit all proceeds from sales of Inventory in every
form (including, without limitation, cash, checks, credit card sales drafts,
credit card sales or charge slips or receipts and other forms of daily store
receipts and the collections and proceeds thereof in whatever form) from each
location of Borrower and all proceeds of Collateral, on each business day into
the deposit accounts of Borrower used solely for such purpose and identified to
each location as set forth on Schedule 8.8 hereto. Borrower shall irrevocably
authorize and direct in writing, in form and substance satisfactory to Lender,
each of the banks into which proceeds from sales of Inventory from each location
of Borrower and any and all other proceeds of Collateral are at any time
deposited as provided above to send by wire transfer on a daily basis, to an
account or accounts designated by Lender, all funds deposited in such account,
and shall irrevocably authorize and direct in writing its account debtors, to
directly remit payments on its Accounts, Receivables and all other payments
constituting proceeds of Inventory and collections to the Blocked Accounts
described in Section 6.3(a) above.

39

6.4  Payments. All
Obligations shall be payable to the Payment Account as provided in Section 6.3
or such other place as Lender may designate from time to time. Lender may apply
payments received or collected from Borrower or for the account of Borrower
(including the monetary proceeds of collections or of realization upon any
Collateral) to such of the Obligations, whether or not then due, in such order
and manner as Lender determines. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments to Lender on the Obligations free and
clear of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrower shall be liable to pay to Lender, and do
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement. Without
limiting the forgoing all payments made by any Borrower un-der this Agreement,
and the other Financing Agreements shall be made without reduction for or on
account of, any pre-sent or future income or other taxes, levies, imposts,
duties, charges, fees, deductions, withholdings, now or here-after imposed,
levied, collected, withheld or assessed by any country (or by any political
subdivision or taxing authority thereof or therein, including England) other
than taxes of the Commonwealth of Puerto Rico measured by or based upon the
overall net income of the Lender (such taxes being called "Taxes"). If any Taxes
are required to be withheld from any amounts payable to the Lender hereunder or
any other Financing Agreement, the amounts so payable to the Lender shall be
increased to the extent necessary to yield to the Lender (after payment of all
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement or such other Financing Agreement. It is
understood and agreed that the Borrowers shall be obligated to so "gross-up"
with respect to payments to the Lender under or in connection with the Loans and
Letter of Credit Accommodations even though the Borrower claims an exemption
from the
payment or withholding of Taxes imposed under the laws of England or any
governmental agency or body thereof with respect to such payments to the Lender.
Whenever any Tax is payable by a Borrower, as promptly as possible thereafter,
such Borrower shall send to the Lend-er, a certified copy of an original
official receipt showing payment thereof. If the Borrower fails to pay any Taxes
when due to the appropriate taxing authority or fails to remit to the Lender the
required re-ceipts or other required documentary evidence, the Borrower shall
indemnify the Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.

 

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6.5  Authorization
to Make Loans. Lender
is authorized to make the Loans and provide Letter of Credit Accommodations
based upon telephonic or other instructions received from anyone purporting to
be an officer of Borrower or other authorized person or, at the discretion of
Lender, if such Loans are necessary to satisfy any Obligations. All requests for
Loans and Letter of Credit Accommodations, hereunder shall specify the date on
which the requested advance is to be made or established (which day shall be a
Business Day) and the amount of the requested Loan and Letter of Credit
Accommodation. Requests received before 11:00 a.m. Atlantic Standard Time on a
Business Day shall be processed on that day. Requests received after 11:00 a.m.
Atlantic Standard time on any day shall be deemed to have been made as of the
opening of business on the immediately following business day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower’s Agent or in
accordance with the terms and conditions of this Agreement.

6.6  Use of
Proceeds.
Borrower shall use the initial proceeds of the Loans provided by Lender to
Borrower hereunder only for: (a) payments to each of the persons listed in the
disbursement direction letter furnished by Borrower to Lender on or about the
date hereof including (i) payments to the Seller in respect of the purchase
price for the Purchased Assets under the Purchase Agreements, and (ii) payments
to Laurus to pay and discharge in full all Debt of Borrower to Laurus, (b)
working capital and (c) costs, expenses and fees in connection with the
preparation, negotiation, execution and delivery of this Agreement and the other
Financing Agreements, all in the amounts shown on Schedule 6.6 hereto. All other
Loans and Letter of Credit Accommodations made by Lender to Borrower pursuant to
the provisions hereof shall be used by Borrower only for general operating,
working capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or for
the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans to be considered a "purpose credit" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended. Lender may, on behalf of and for the account of Borrower, pay
directly to the Seller, to Laurus and to the other Persons specified in the
disbursement direction letter, the respective amounts payable to them, pursuant
to such letter and this Section 6.6.

Section
7.  Collateral
Reporting And Covenants.

7.1  Collateral
Reporting.
Borrower shall provide Lender with the following documents in a form
satisfactory to Lender: (a) on a regular basis as required by Lender, a schedule
of Accounts, sales made, credits issued and cash received; (b) on a monthly
basis or more frequently as Lender may request, (i) perpetual inventory reports
or other inventory reports acceptable to Lender, (ii) inventory reports by
category, (iii) aging of accounts payable, (iv) a report of any Inventory
shrinkage or Equipment which has been stolen, and (v) a report of any Equipment
which has been sold, exchanged or otherwise transferred or disposed of, (c) upon
Lender's request, (i) copies of customer statements and credit memos, remittance
advices and reports, and copies of deposit slips and bank statements, (ii)
copies of shipping and delivery documents, and (iii) copies of purchase orders,
invoices and delivery documents for Inventory and Equipment acquired by
Borrower; (d) aging of accounts receivable on a weekly basis or more frequently
as Lender may request; and (e) such other reports as to the Collateral as Lender
shall request from time to time. If any of Borrower's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, Borrower hereby irrevocably authorize such service,
contractor, shipper or agent to deliver such records, reports, and related
documents to Lender and to follow Lender's instructions with respect to further
services at any time that an Event of Default exists or has occurred and is
continuing.

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7.2 Accounts
Covenants.

(a)
Borrower shall notify Lender promptly of: (i) any material delay in Borrower’s
performance of any of its obligations to any account debtor or the assertion of
any claims, offsets, defenses or counterclaims by any account debtor, or any
disputes with account debtors, or any settlement, adjustment or compromise
thereof, (ii) all material adverse information relating to the financial
condition of any account debtor and (iii) any event or circumstance which, to
Borrower’s knowledge would cause Lender to consider any then existing Accounts
as no longer constituting Eligible Accounts. No credit, discount, allowance or
extension or agreement for any of the foregoing shall be granted to any account
debtor without Lender's consent, except in the ordinary course of Borrower’s
business in accordance with practices and policies previously disclosed in
writing to Lender. So long as no Event of Default exists or has occurred and is
continuing, Borrower shall have the right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor. At any time that
an Event of Default exists or has occurred and is continuing, Lender shall, at
its option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any credits,
discounts or allowances.

 

(b)
Without limiting the obligation of Borrower to deliver any other information to
Lender, Borrower shall promptly report to Lender any return of Inventory by any
one account debtor if the inventory so returned in such case has a value in
excess of $10,000. At any time that Inventory is returned, reclaimed or
repossessed, the Account (or portion thereof) which arose from the sale of such
returned, reclaimed or repossessed Inventory shall not be deemed an Eligible
Account. In the event any account debtor returns Inventory when an Event of
Default exists or has occurred and is continuing, Borrower shall, upon Lender's
request, (i) hold the returned Inventory in trust for Lender, (ii) segregate all
returned Inventory from all of its other property, (iii) dispose of the returned
Inventory solely according to Lender's instructions, and (iv) not issue any
credits, discounts or allowances with respect thereto without Lender's prior
written consent.

 

(c) With
respect to each Account: (i) the amounts shown on any invoice delivered to
Lender or schedule thereof delivered to Lender shall be true and complete, (ii)
no payments shall be made thereon except payments immediately delivered to
Lender pursuant to the terms of this Agreement, (iii) no credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted to
any account debtor except as reported to Lender in accordance with this
Agreement and except for credits, discounts, allowances or extensions made or
given in the ordinary course of Borrower’s business in accordance with practices
and policies previously disclosed to Lender, (iv) there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to Lender in accordance with the terms
of this Agreement and (v) none of the transactions giving rise thereto will
violate any applicable Commonwealth, State or Federal laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.

 

42

(d)
Lender shall have the right at any time or times, in Lender's name or in the
name of a nominee of Lender, to verify the validity, amount or any other matter
relating to any Account or other Collateral, by mail, telephone, facsimile
transmission or otherwise.

 

(e)
Borrower shall deliver or cause to be delivered to Lender, with appropriate
endorsement and assignment, with full recourse to Borrower, all chattel paper
and instruments which a Borrower now owns or may at any time acquire immediately
upon a Borrower=s receipt
thereof, except as Lender may otherwise agree.

(f)
Lender may, at any time or times that an Event of Default exists or has occurred
and is continuing, (i) notify any or all account debtors or other obligors in
respect thereof that the Receivables, including the Accounts have been assigned
to Lender and that Lender has a security interest therein and Lender may direct
any or all accounts debtors and other obligors to make payment of thereof
directly to Lender, (ii) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all Receivables including the Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Receivables, including the Accounts or such other
obligations, but without any duty to do so, and Lender shall not be liable for
its failure to collect or enforce the payment thereof nor for the negligence of
its agents or attorneys with respect thereto and (iv) take whatever other action
Lender may deem necessary or desirable for the protection of its interests. At
any time that an Event of Default exists or has occurred and is continuing, at
Lender's request, all invoices and statements sent to any account debtor shall
state that the Accounts and such other obligations have been assigned to Lender
and are payable directly and only to Lender and Borrower shall deliver to Lender
such originals of documents evidencing the sale and delivery or lease of goods
or the performance of services giving rise to any Accounts as Lender may
require. 

7.3  Inventory
Covenants. With
respect to the Inventory: (a) Borrower shall at all times maintain inventory
records reasonably satisfactory to Lender, keeping correct and accurate records
itemizing and describing the kind, type, quality and quantity of Inventory, each
Borrower's cost therefor and daily or weekly withdrawals therefrom and additions
thereto; (b) Borrower shall conduct (i) a physical count of the Inventory at
least once each year, but at any time or times as Lender may request on or after
an Event of Default, and (ii) test counts of inventory at any time or times as
Lender may request utilizing a third party service therefore designated by
Lender, and promptly following such physical inventory and test counts of
inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such physical
count and test counts; (c) Borrower shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of Borrower’s
business and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) upon Lender's request, Borrower
shall, at its expense, no more than four times in any twelve (12) month period,
but at any time or times as Lender may request on or after an Event of Default,
deliver or cause to be delivered to Lender written reports or appraisals as to
the Inventory in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) Borrower shall produce, use, store and maintain
the Inventory with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto); (f) Borrower
shall assume all responsibility and liability arising from or relating to the
production, use, sale or other disposition of the Inventory; (g) Borrower shall
not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate Borrower to repurchase such
Inventory; (h) Borrower shall keep the Inventory in good and marketable
condition, and (i) Borrower shall not, without prior written notice to Lender,
acquire or accept any Inventory on consignment or approval. 

 

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7.4  Equipment
Covenants. With
respect to the Equipment: (a) upon Lender's request, Borrower shall, at its
expense, at any time or times as Lender may request on or after an Event of
Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Equipment in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender; (b) Borrower shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (c) Borrower shall use the Equipment with all reasonable
care and caution and in accordance with applicable standards of any insurance
and in conformity with all applicable laws; (d) the Equipment is and shall be
used in Borrower’s business and not for personal, family, household or farming
use; (e) Borrower shall not remove any Equipment from the locations set forth or
permitted herein, except to the extent necessary to have any Equipment repaired
or maintained in the ordinary course of the business of Borrower or to move
Equipment directly from one location set forth or permitted herein to another
such location and except for the movement of motor vehicles used by or for the
benefit of Borrower in the ordinary course of business; (f) the Equipment is now
and shall remain personal property and Borrower shall not permit any of the
Equipment to be or become a part of or permanently affixed to real property; and
(g) Borrower assumes all responsibility and liability arising from the use of
the Equipment. Borrower shall deliver to Lender within five(5) Business Days of
the close of 

each
month a schedule of all Equipment at the Manati Real Property used by a Borrower
that has been furnished by a third party for use by a Borrower in connection
with a Manufacturing Contract and is not owned by such Borrower, in such detail,
containing such information and in such form as shall be satisfactory to Lender
and accompanied by a certificate of an officer of Borrower, in form and
substance satisfactory to Lender.

 

7.5  Trade
Name Covenants. With
respect to its trade names and trademarks (a) Borrower shall at all times
maintain its registered trade names and trademarks, except for trade names and
trademarks no longer used or useful in Borrower’s business; (b) Borrower shall
not at any time, grant any person, a license except for trade names and
trademarks no longer used or useful in Borrower’s business, to use any trade
name or trademarks; (c) upon Lender’s request, Borrower shall, at its expense,
no more than twice in any twelve (12) months period, but at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to its trade names and
trademarks in form, scope and methodology acceptable to Lender and by an
appraisers acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; and (d) Borrower shall not use its trade names or
trademarks to sell any assets or property other than assets and property in a
business classification similar to that currently being carried on by
Borrower.

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7.6  Power
of Attorney.
Borrower hereby irrevocably designate and appoint Lender (and all persons
designated by Lender) as Borrower’s true and lawful attorney-in-fact, and
authorizes Lender, in Borrower’s or Lender’s name, to: (a) at any time an Event
of Default or event which with notice or passage of time or both would
constitute an Event of Default exists or has occurred and is continuing (i)
demand payment on Accounts or chattel paper or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Receivables including Accounts by
legal proceedings or otherwise, (iii) enforce and exercise all of Borrower’s
rights and remedies to collect any Receivables including Accounts or other
Collateral, (iv) sell or assign any Receivable, including any Accounts upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew any Receivable, including any
Account or any Chattel Paper (vi) discharge and release any Receivable,
including any Account, (vii) prepare, file and sign Borrower’s name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to Borrower, and (ix) do all acts and things which are necessary,
in Lender's determination, to fulfill Borrower’s obligations under this
Agreement and the other Financing Agreements and (b) at any time to (i) take
control in any manner of any item of payment or proceeds thereof, (ii) have
access to any lockbox or postal box into which any Borrower's mail is deposited,
(iii) endorse any Borrower's name upon any items of payment or proceeds thereof
and deposit the same in the Lender's account for application to the Obligations,
(iv) endorse any Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Receivables including
Account or any goods pertaining thereto or any other Collateral, (v) sign any
Borrower's name on any verification of Accounts and notices thereof to account
debtors and (vi) execute in any Borrower's name and file any UCC financing
statements or amendments thereto. Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
willful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.

7.7  Right
to Cure. Lender
may, at its option, (a) cure any default by Borrower under any agreement with a
third party or pay or bond on appeal any judgment entered against Borrower, (b)
discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral, (c) pay or bond on appeal
any judgment entered against Borrower and (d) pay any amount, incur any expense
or perform any act which, in Lender's judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Lender
with respect thereto. Lender may add any amounts so expended to the Obligations
and charge Borrower’s account therefor, such amounts to be repayable by Borrower
on demand. Lender shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower. Any payment made or other action taken by Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.

45

7.8  Access
to Premises. From
time to time as requested by Lender, at the cost and expense of Borrower (a)
Lender or its designee shall have complete access to all of Borrower’s premises
during normal business hours and after notice to Borrower or at any time and
without notice to Borrower if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrower’s books and records, including the Records, and
(b) Borrower shall promptly furnish to Lender such copies of such books and
records or extracts therefrom as Lender may request, and (c) use during normal
business hours such of Borrower’s personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing and if an Event of Default exists
or has occurred and is continuing for the collection of Accounts and realization
of other Collateral.

 

7.9  Chattel
Paper Covenants. (a)
Borrower represents and warrants to Lender that Borrower does not have any
chattel paper (whether tangible or electronic) or instruments as of the date
hereof, except as set forth in Schedule 7.9 hereto. In the event that Borrower
shall be entitled to or shall receive any chattel paper or instrument after the
date hereof, Borrower shall promptly notify Lender thereof in writing. Promptly
upon the receipt thereof by or on behalf of Borrower (including by any agent or
representative), Borrower shall deliver, or cause to be delivered to Lender, all
tangible chattel paper and instruments that Borrower has or may at any time
acquire, accompanied by such instruments of transfer or assignment duly executed
in blank as Lender may from time to time specify in each case except as Lender
may otherwise agree. At Lender’s option, Borrower shall, and Lender may at any
time on behalf of Borrower, cause the original of any such instrument or chattel
paper to be conspicuously marked in a form and manner acceptable to Lender with
the following legend referring to chattel paper or instruments as applicable:
“This ______________________________________ is subject to the security interest
of Westernbank Puerto Rico and any sale, transfer, assignment or encumbrance of
this ___________________________________________ violates the rights of such
secured party”.

 

(b) In
the event that Borrower shall at any time hold or acquire an interest in any
electronic chattel paper or any “transferable record” (as such term is defined
in Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction), Borrower shall promptly notify Lender
thereof in writing. Promptly upon Lenders request, Borrower shall take, or cause
to be taken, such actions as Lender may request to give Lender control of such
electronic chattel paper under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures in
Global and National Commence Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such
jurisdiction.

 

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7.10  Letters
of Credit.
Borrower represents and warrants to Lender that Borrower is not the beneficiary
or otherwise entitled to any right to payment under any letter of credit,
banker’s acceptance or similar instrument as of the date hereof. In the event
that Borrower shall be entitled to or shall receive any right to payment under
any Letter of Credit banker’s acceptance or any similar instrument, whether as
beneficiary thereof or otherwise after the date hereof, Borrower shall promptly
notify Lender thereof in writing. Borrower shall immediately, as Lender may
specify, either (i) deliver, or cause to be delivered to Lender, with respect to
any such letter of credit, banker’s acceptance or similar instrument, the
written agreement of the issuer and any other nominated person obligated to make
any payment in respect thereof (including any confirming or negotiating bank),
in form and substance satisfactory to Lender consenting to the assignment of the
proceeds of the letter of credit to Lender by Borrower and agreeing to make all
payment thereon directly to Lender or as Lender may otherwise direct or (ii)
cause Lender to become, at such person’s expense, the transferee beneficiary of
the letter of credit, banker’s acceptance or similar instrument (as the case may
be.

7.11  Deposit
Accounts. Borrower
represents and warrants to Lender that Borrower does not have any deposit
accounts as of the date hereof, except as set forth in Schedule 8.8 hereto.
Borrower shall not, directly or indirectly, after the date hereof open,
establish or maintain any deposit account unless each of the following
conditions is satisfied: (i) Lender shall have received not less than fifteen
(15) Business Days prior written notice of the intention of a Borrower to open
or establish such account which notice shall specify in reasonable detail and
specificity acceptable to Lender the name of the account, the owner of the
account, the name and address of the bank at which such account is to be opened
or established, the individual at such bank with whom such Lender is dealing and
the purpose of the account and Lender shall have consented thereto in writing,
(ii) the bank where such account is opened or maintained shall be reasonably
acceptable to Lender and (iii) on or before the opening of such deposit account,
Borrowers shall as Lender may specify, either (A) deliver to ender a Deposit
Account Control Agreement in form and substance satisfactory to Lender with
respect to such deposit account duly authorized, executed and delivered by such
Person and the bank at which such deposit account is opened and maintained or
(B) arrange for Lender to become the customer of the bank with respect to the
deposit account on terms and conditions acceptable to lender. The terms of this
subsection 7.11 shall not apply to deposit accounts specifically and exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to
or for the benefit of a Borrower’s salaried employees.

7.12  Investment
Property. Borrower
represents and warrants to Lender that Borrower does not own or hold, directly
or indirectly, beneficially or as record owner or both, any investment property,
as of the date hereof, or have any investment account, securities account,
commodity account or other similar account with any bank or other financial
institution or other securities intermediary or commodity intermediary as of the
date hereof, in each case except as set forth in Schedule 7.12 hereto. In the
event that any Borrower shall be entitled to or shall at any time after the date
hereof hold or acquire any certificated securities, Borrower shall promptly
endorse, assign and deliver the same to Lender, accompanied by such instruments
of transfer or assignment duly executed in blank as Lender may from time to time
specify. If any securities now owned or hereafter acquired by Borrowers are
uncertificated and are issued to a Borrower or its nominee directly by the
issuer thereof, Borrower shall immediately notify Lender thereof and shall as
Lender may specify, either (i) cause the issuer to agree to comply with
instructions from Lender as to such securities, without further consent of any
of Borrower or such nominee, or (ii) arrange for Lender to become the registered
owner of the securities. Borrower shall not, directly or indirectly, after the
date hereof open, establish or maintain any investment account, securities
account, commodity account or any other similar account (other than a deposit
account) with any securities intermediary or commodity intermediary unless each
of the following conditions is satisfied (i) Lender shall have received not less
than fifteen (15) Business Days prior written notice of the intention of
Borrower to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Lender the name of the account,
the owner of the account, the name and address of the securities intermediary or
commodity intermediary at which such account is to be opened or established, the
individual at such intermediary with whom Borrower are dealing and the purpose
of the account and Lender shall have consented thereto in writing, (ii) the
securities intermediary or commodity intermediary (as the case may be) where
such account is opened or maintained shall be acceptable to Lender, and (iii) on
or before the opening of such investment account, securities account or other
similar account with a securities intermediary or commodity intermediary, such
person shall as Lender may specify, either (A) execute and deliver, and cause to
be executed and delivered to Lender, a Pledge Agreement and an Investment
Property Control Agreement in form and substance satisfactory to Lender with
respect thereto duly authorized, executed and delivered by Borrower and such
securities intermediary or commodity intermediary or (B) arrange for Lender to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Lender. 

47

7.13  Tort
Claims. Borrower
represents and warrants to Lender that Borrower does not have any commercial
tort claims as of the date hereof, except as set forth on Schedule 7.11 hereto.
In the event that Borrower shall at any time after the date hereof have any
commercial tort claims Borrower shall promptly notify Lender thereof in writing,
which notice shall (i) set forth in reasonable detail the basis for and nature
of such commercial tort claim and (ii) include the express grant by Borrower to
Lender of a security interest in such commercial tort claim (and the proceeds
thereof). In the event that such notice does not include such grant of a
security interest, the sending thereof by Borrower to Lender shall be deemed to
constitute such grant to Lender. Upon the sending of such notice, any commercial
tort claim described therein shall constitute part of the Collateral and shall
be deemed included therein. Without limiting the authorization of Lender
provided herein or otherwise arising by the execution by Borrower of this
Agreement or any of the other Financing Agreements, Lender is hereby irrevocably
authorized from time to time and at any time to file such financing statements
naming Lender or its designee as secured party and Borrower as debtor, or any
amendments to any financing statements, covering any such commercial tort claim
as Collateral. In addition, Borrower shall promptly upon request by Lender,
execute and deliver, or cause to be executed and delivered, to Lender such other
agreements, documents and instruments as Lender may require in connection with
such commercial tort claim.

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7.14  Third
Party Possession.
Borrower represents and warrants to Lender that it does not have any goods,
documents of title or other collateral in the custody, control or possession of
a third party as of the date hereof, except for goods located in the United
States in transit to a location of Borrower permitted herein in the ordinary
course of business of Borrower in the possession of the carrier transporting
such goods. In the event that any goods, documents of title or other collateral
are at any time after the date hereof in the custody, control or possession of
any other person or such carriers, Borrower shall promptly notify Lender thereof
in writing; provided that, as to
such carriers, Borrower need only notify Lender on an aggregate basis. Promptly
upon Lender’s request, Borrower shall deliver a Collateral Access Agreement in
form and substance satisfactory to Lender, duly authorized, executed and
delivered by any such person and Borrower.

7.15  Additional
Actions.
Borrower shall take any other actions reasonably requested by Lender from time
to time to cause the attachment, perfection and first priority of, and the
ability of Lender to enforce, the security interest of Lender in any and all of
the Collateral, including, without limitation, (i) executing, delivering and,
where appropriate, filing, financing statements and amendments relating thereto
under the UCC or other applicable law, to the extent, if any, Borrower’s
signature thereon is required therefor, (ii) causing Lender’s name to be noted
as secured party on any certificate of title for a titled good if such notation
is a condition to attachment, perfection or priority of, or ability of Lender to
enforce, the security interest of Lender in such Collateral, (iii) complying
with any provision of any statute, regulation or treaty of the United States,
any State of the United States, Puerto Rico and the United States Virgin Islands
as to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of Lender to enforce, the
security interest of Lender in such Collateral, (iv) obtaining the consents and
approvals of any governmental authority or third party, including, without
limitation, any consent of any licensor, lessor or other person obligated on
Collateral, and taking all actions required by any earlier versions of the UCC
or by other law, as applicable in any relevant jurisdiction and (v) transferring
any and all deposit accounts and investment property to a financial institution
or account specified by Lender.

Section
8.  Representations
And Warranties.

 

Borrower
hereby represents and warrants to Lender the following (which shall survive the
execution and delivery of this Agreement), the truth and accuracy of which are a
continuing condition of the making of Loans and providing Letter of Credit
Accommodations by Lender to Borrower:

8.1  Corporate
Existence, Power And Authority; Subsidiaries. Inyx is
a corporation duly organized and in good standing under the laws of the State of
Nevada. Inyx Pharma, Ltd. is a corporation duly organized and in good standing
under the laws of England And Wales. Inyx USA is a corporation duly organized
and in good standing under the laws of the Isle Of Man. Each such Person is duly
qualified as a foreign corporation in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or
the ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder (a) are all within Borrower’s corporate or partnership powers, (b)
have been duly authorized, (c) are not in contravention of law or the terms of
Borrower’s certificate of incorporation, by-laws, or other organizational
documentation, or any indenture, agreement or undertaking to which Borrower is a
party or by which Borrower or its property is bound and (d) except for those
arising pursuant to the Financing Agreements will not result in the creation or
imposition of, or require or give rise to any obligation to grant, any lien,
security interest, charge or other encumbrance upon any property of Borrower.
This Agreement and the other Financing Agreements constitute legal, valid and
binding obligations of Borrower enforceable in accordance with their respective
terms. 

49

8.2  Financial
Statements; No Material Adverse Change. All
financial statements relating to Borrower or its Affiliates which have been or
may hereafter be delivered by Borrower or any of its Affiliates to Lender have
been prepared in accordance with GAAP and fairly present the financial condition
and the results of operations of Borrower and such Affiliates as of the dates
and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrower or any of its Affiliates to Lender
prior to the date of this Agreement, there has been no material adverse change
in the assets, liabilities, properties and condition, financial or otherwise, of
Borrower or any of its Affiliates since the date of the most recent audited
financial statements furnished by to Lender prior to the date of this
Agreement.

8.3  Chief
Executive Office; Collateral Locations. The
chief executive office of Borrower and such Person’s Records concerning Accounts
are located only at the address set forth below on the signature page hereto and
its only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in the Information Certificate. The Information
Certificate correctly identifies any of such locations which are not owned by
Borrower and sets forth the owners and/or operators thereof and to the best of
Borrower’s knowledge, the holders of any mortgages on such
locations.

 

8.4  Priority
of Liens; Title to Properties. The
security interests and liens granted to Lender under this Agreement and the
other Financing Agreements constitute valid and perfected first priority liens
and security interests in and upon the Collateral subject only to those non
material liens indicated on Part 1 of Schedule 8.4 hereto the existence of which
has previously been approved, in writing by Lender. Borrower has good and
marketable title to all of its properties and assets, including the Purchased
Assets subject to no liens, mortgages, pledges, security interests, encumbrances
or charges of any kind, except those granted to Lender and such others as may be
specifically listed on Parts 1 and 2 of Schedule 8.4 hereto and as to those
listed, if any, on Part 2 of Schedule 8.4 hereto only as specifically set forth
therein and only on the assets and properties specifically identified
therein.

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8.5  Tax
Returns. Except
as disclosed in the Information Certificate, Borrower has filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it (without requests for extension, except as previously
disclosed in writing to Lender). All information in such tax returns, reports
and declarations is complete and accurate in all material respects. Borrower has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, Commonwealth, county, local, foreign and
other taxes whether or not yet due and payable and whether or not
disputed.

8.6  Litigation. Except
as set forth on the Information Certificate or in Schedule 8.6 hereto, there is
no present investigation by any governmental agency pending, or to the best of
Borrower’s knowledge threatened, against or affecting Borrower, its assets or
business and there is no action, suit, proceeding or claim by any Person
pending, or to the best of Borrower’s knowledge threatened, against Borrower or
its assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, which if adversely determined against Borrower would result in
any material adverse change in the assets, business or prospects of Borrower or
would impair the ability of Borrower to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce any Obligations or realize upon any Collateral.

8.7  Compliance
with Other Agreements and Applicable Laws.
Borrower is not in default in any material respect under, or in violation in any
material respect of any of the terms of, any agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental
authority.

8.8  Bank
Accounts. All of
the deposit accounts, merchant payment accounts, investment accounts or other
accounts in the name of or used by Borrower maintained at any bank or other
financial institution are set forth on Schedule 8.8 hereto.

8.9  Accuracy
and Completeness of Information. All
information furnished by or on behalf of Borrower in writing to Lender in
connection with this Agreement, or any other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a Material Adverse Effect which has not been fully and accurately
disclosed to Lender in writing.

51

8.10  Survival
of Warranties; Cumulative. All
representations and warranties contained in this Agreement or any of the other
Financing Agreements shall survive the execution and delivery of this Agreement
and shall be deemed to have been made again to Lender on the date of each
additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations and
warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which Borrower shall now or hereafter give, or
cause to be given, to Lender.

8.11  Intellectual
Property.
Borrower owns or licenses or otherwise has the right to use all Intellectual
Property materially necessary for the operations of its business as presently
conducted or proposed to be conducted. As of the date hereof, Borrower does not
have any Intellectual Property registered, or subject to pending applications,
in the United States Patent and Trademark Office or any similar office or agency
in the United States, any State thereof, any political subdivision thereof or in
any other country, other than those described in Schedule 8.11 hereto and has
not granted any licenses with respect thereto, other than as set forth in
Schedule 8.11 hereto. To Borrower’s knowledge, after reasonable investigation,
no event has occurred which permits or would permit after notice or passage of
time or both, the revocation, suspension or termination of such rights. Except
as otherwise disclosed by Borrower to Lender in writing to the best of
Borrower’s knowledge, no slogan or other advertising device, product, process,
method, substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold as part of the Purchased
Assets by Seller or employed by Borrower infringes any patent, trade mark,
service mark, trade name, copyright, license or other Intellectual Property
owned by any other Person presently and no claim or litigation is pending or
threatened against or affecting Seller or Borrower or contesting Seller’s or
Borrower’s rights to sell or use any such Intellectual Property. Schedule 8.11
sets forth all of the agreements or other arrangements of Borrower pursuant to
which Borrower has a license or other right to use any trademarks, logos,
designs, representations or other intellectual Property owned by another person
as in effect on the date hereof and the dates of the expiration of such
agreements or other arrangements of h Borrower as in effect on the date hereof
and after giving effect to the transactions contemplated by the Purchase
Agreements. No trademark, service mark or other intellectual Property at any
time used by Seller or Borrower which is owned by another person, or owned by
Seller or Borrower which are part of the Purchased Assets subject to any
security interest, lien, collateral assignment, pledge or other encumbrance in
favor of any person other than Lender, is affixed to any Eligible
Inventory.

8.12  Capitalization.

 

(a) All
of the issued and outstanding shares of Capital Stock of Borrower are directly
and beneficially owned and held by those persons specified on Schedule 8.12
hereto, in the amounts specified therein and all of such shares of Capital Stock
have been duly issued and are fully paid and non-assessable, free and clear of
all claims, liens, pledges and encumbrances of any kind except those in favor of
Lender.

 

(b)
Except as set forth on Schedule 8.12 hereto, Borrower does not have any
Subsidiary.

 

(c)
Borrower is Solvent and will continue to be Solvent after (i) the creation of
Obligations and the security interests of Lender and (ii) the consummation of
the other transactions contemplated hereunder and under the Purchase
Agreements.

52

8.13  Environmental
Compliance.

 

(a)
Except as set forth on Schedule 8.13 hereto, no Person has with respect to any
Real Property including any Real Estate Security, generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off any such property (whether or not owned by it) in
any manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder and
the present or proposed operations of Borrower complies in all material respects
with all Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.

 

(b)
Except as set forth on Schedule 8.13 hereto, there has been no investigation,
proceeding, complaint, order, directive, claim, citation or notice by any
governmental authority or any other person nor is any pending or to the best of
Borrower’s knowledge threatened, with respect to any non-compliance with or
violation of the requirements of any Environmental Law by any Person with
respect to any Real Property including any Real Estate Security or the release,
spill or discharge, threatened or actual, of any Hazardous Material or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which affects Borrower or any Real Property including
any Real Estate Security or Borrower’s business, operations or assets or any
properties at which Borrower has transported, stored or disposed of any
Hazardous Materials.

 

(c)
Borrower has no material liability (contingent or otherwise) in connection with
a release, spill or discharge, threatened or actual, of any Hazardous Materials
or the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials.

 

(d) Except
as set forth on Schedule 8.13 hereto, Borrower has all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the present and proposed operations of Borrower under
any Environmental Law and all of such licenses, permits, certificates, approvals
or similar authorizations are valid and in full force and
effect.

8.14  Employee
Benefits. (a)
Except as set forth on Schedule 8.14 hereto, Borrower has not engaged in any
transaction in connection with which Borrower or any of its ERISA Affiliates
could be subject to either a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the code, including any accumulated
funding deficiency described in Section 8.14(c) hereof and any deficiency with
respect to vested accrued benefits described in Section 8.14(d)
hereof.

 

(b) No
liability to the Pension Benefit Guaranty Corporation has been or is expected by
Borrower to be incurred with respect to any employee benefit plan of Seller or
of Borrower or any of its ERISA Affiliates. There has been no reportable event
(without the meaning of Section 4043(b) of ERISA) or any other event or
condition with respect to any employee pension benefit plan of Borrower or any
of its ERISA Affiliates which presents a risk of termination of any such plan by
the Pension Benefit Guaranty Corporation. No liability to the Pension Benefit
Guaranty Corporation has been or will be incurred by Borrower with respect to
any employee benefit plan of Seller or any of its ERISA Affiliates

 

53

(c) Full
payment has been made of all amounts which Borrower or any of its ERISA
Affiliates is required under Section 302 of ERISA and Section 412 of the Code to
have paid under the terms of each employee benefit plan as contributions to such
plan as of the last day of the most recent fiscal year of such plan ended prior
to the date hereof, and no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any employee benefit plan, including any penalty or tax described in
Section 8.14(a) hereof and any deficiency with respect to vested accrued
benefits described in section 8.14(d) hereof.

 

(d) The
current value of all vested accrued benefits under all employee benefit plans
maintained by Borrower or any of its ERISA Affiliates that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.14(a) hereof any accumulated funding deficiency described
in Section 8.14(c) hereof. The terms A current
value@ and
Aaccrued
benefit@ have the
meanings specified in ERISA.

 

(e)
Neither Borrower nor any of its ERISA Affiliates is or has ever been obligated
to contribute to any Amulti
employer plan@ (as such
term is defined in section 4001(a)(3) of ERISA) that is subject to Title IV of
ERISA.

8.15  Credit
Card Agreements.
Borrower has no credit card agreements or any other agreement, document or
instrument existing as of the date hereof between or among Borrower, and any
credit card issuer or any credit card processor.

8.16  Acquisition
of Purchased Assets.

 

(a) The
Purchase Agreements and the transactions contemplated thereunder have been duly
executed, delivered and performed in accordance with their terms by the
respective parties thereto in all respects, including the fulfillment (not
merely the waiver, except as may be disclosed to Lender and consented to in
writing by Lender) of all conditions precedent set forth therein and giving
effect to the terms of the Purchase Agreements and the assignments to be
executed and delivered by Seller (or any of its Affiliates or Subsidiaries)
thereunder, Borrower acquired and has good and marketable title to the Purchased
Assets, free and clear of all claims, liens, pledges and encumbrances of any
kind, except as permitted hereunder. 

 

(b) All
actions and proceedings, required by the Purchase Agreements, applicable law or
regulation (including, but not limited to, compliance with the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, as amended) have been taken and the
transactions required thereunder have been duly and validly taken and
consummated.

 

(c) No court
of competent jurisdiction has issued any injunction, restraining order or other
order which prohibits consummation of the transactions described in the Purchase
Agreements and no governmental or other action or proceeding has been threatened
or commenced, seeking any injunction, restraining order or other order which
seeks to void or otherwise modify the transactions described in the Purchase
Agreements.

 

(d) Borrower
has delivered, or caused to be delivered, to Lender, true, correct and complete
copies of the Purchase Agreements.

54

8.17  Interrelated
Business.
Borrowers share an identity of interest such that any benefit received by one
benefits the other. Each Borrower renders services to or for the benefit of the
other Borrower, make loans and advances to or for the benefit of the other
Borrower, shares research and development and Intellectual Property and provides
administrative, marketing, payroll or management services to or for the benefit
of the other Borrower. Borrowers have centralized accounting and legal
services

 

Section
9.  Affirmative
And Negative Covenants.

 

9.1  Maintenance
of Existence.
Borrower shall at all times preserve, renew and keep in full, force and effect
its corporate or other existence and rights and franchises with respect thereto
and maintain in full force and effect all permits, licenses, trademarks, trade
names, approvals, authorizations, leases and contracts necessary to carry on its
business as presently or proposed to be conducted. Borrower shall give Lender
thirty (30) days prior written notice of any proposed change in any of its
corporate or other names, which notice shall set forth the new name(s) and
Borrower shall deliver to Lender a copy of the amendment to the Certificate of
Incorporation or other organizational document of Borrower providing for the
name change certified by the Secretary of State of the jurisdiction of
incorporation or organization of such Person as soon as it is
available.

9.2  New
Collateral Locations.
Borrower may open any new location within Puerto Rico or any State of the United
States provided (a) Borrower gives Lender thirty (30) days prior written notice
of the intended opening of any such new location and (b) Borrower executes and
delivers, or causes to be executed and delivered, to Lender such agreements,
documents, and instruments as Lender may deem reasonably necessary or desirable
to protect its interests in the Collateral at such location, including UCC
financing statements.

 

9.3  Compliance
with Laws, Regulations, Etc. (a)
Borrower shall, at all times, comply in all material respects with all laws,
rules, regulations, licenses, permits, approvals and orders applicable to it and
duly observe all requirements of any Federal, State or local governmental
authority, including the Employee Retirement Security Act of 1974, as amended,
the Occupational Safety and Health Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, and all statutes, rules, regulations, orders,
permits and stipulations relating to environmental pollution and employee health
and safety, including all of the Environmental Laws.

 

(b)
Borrower shall establish and maintain, at its expense, a system to assure and
monitor its continued compliance with all Environmental Laws in all of its
operations, which system shall include annual reviews of such compliance by
employees or agents of Borrower who are familiar with the requirements of the
Environmental Laws. Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by Borrower to Lender. Borrower shall take
prompt and appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such
response.

 

55

(c)
Borrower shall give both oral and written notice to Lender immediately upon
Borrower’s receipt of any notice of, or Borrower's otherwise obtaining knowledge
of, (i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any Environmental Law by (1)
Borrower or (2) any Obligor with respect to any Real Estate Security or (B) the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(C) the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects (1) Borrower or its
business, operations or assets or any properties at which Borrower transported,
stored or disposed of any Hazardous Materials or (2) any Real Estate Security
given by any Obligor.

 

(d)
Without limiting the generality of the foregoing, whenever Lender reasonably
determines that there is non-compliance, or any condition which requires any
action by or on behalf of Borrower with respect to any Real Estate Security, in
order to avoid any material non-compliance, with any Environmental Law, Borrower
shall, at Lender's request and Borrower’s expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where Borrower's non-compliance or alleged non-compliance with such
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such
non-compliance, or Borrower’s response thereto or the estimated costs thereof,
shall change in any material respect.

 

(e)
Borrower shall indemnify and hold harmless Lender, its directors, officers,
employees, agents, invitees, representatives, successors and assigns, from and
against any and all losses, claims, damages, liabilities, costs, and expenses
(including attorneys' fees and legal expenses) directly or indirectly arising
out of or attributable to the use, generation, manufacture, reproduction,
storage, release, threatened release, spill, discharge, disposal or presence of
a Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of Borrower or any
Real Estate Security given by it and the preparation and implementation of any
closure, remedial or other required plans. All representations, warranties,
covenants and indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination or non-renewal of this
Agreement.

 

9.4  Payment
of Taxes and Claims.
Borrower shall duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on their books. Borrower shall be
liable for any tax or penalties imposed on Lender as a result of the financing
arrangements provided for herein and Borrower agrees to indemnify and hold
Lender harmless with respect to the foregoing, and to repay to Lender on demand
the amount thereof, and until paid by Borrower such amount shall be added and
deemed part of the Loans, provided,
that, nothing
contained herein shall be construed to require Borrower to pay any income or
franchise taxes attributable to the income of Lender from any amounts charged or
paid hereunder to Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this
Agreement.

56

 

9.5  Insurance.
Borrower shall at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated (including product liability insurance). Said
policies of insurance shall be satisfactory to Lender as to form, amount and
insurer. Borrower shall furnish certificates, policies or endorsements to Lender
as Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its Affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.

9.6  Financial
Statements and Other Information.

(a)
Borrower shall keep proper books and records in which true and complete entries
shall be made of all dealings or transactions of or in relation to the
Collateral and the business of Borrower and its Subsidiaries (if any) in
accordance with GAAP. Borrower shall (i) promptly furnish or cause to be
furnished to Lender all such financial and other information as Lender may
request relating to the Collateral and the assets, business and operations of
Borrower and shall notify the independent public accountants acting as auditors
to Borrower that Lender is authorized to obtain such information directly from
such accountants. Without limiting the foregoing Borrower shall cause to be
furnished to Lender: (i) within fifteen (15) days after the end of each fiscal
month, monthly unaudited consolidated and consolidating financial statements of
Borrower and its Subsidiaries (including in each case balance sheets, statements
of income and loss, statements of cash flow, and statements of shareholders'
equity), all in reasonable detail, fairly presenting the financial position and
the results of the operation of Borrower and its Subsidiaries as of the end of
and through such fiscal month, (ii) within forty five (45) days after the end of
each fiscal quarter, unaudited consolidated and consolidating financial
statements of 

 

57

Borrower
and its Subsidiaries (including the information specified in Section 9.6(a)(i)
hereof),as of the end and through the fiscal quarter then ended and (iii) within
ninety (90) days after the end of each fiscal year, drafts of audited
consolidated and consolidating financial statements of Borrower and its
Subsidiaries and drafts of audited separate financial statements of each
Borrower(including balance sheets, statements of income and loss, statements of
cash flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower as of the end of and for such fiscal
year and (iv) within one hundred twenty (120) days after the end of each fiscal
year, audited consolidated and consolidating financial statements Borrower and
its Subsidiaries and separate audited financial statements of each Borrower
(including balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its Subsidiaries and of each
Borrower separately, as of the end of and for such fiscal year, together with
the unqualified opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Borrower and
reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Borrower as of the end of and for the fiscal year
then ended. The financial statements(i) referred to in Section 9.6(a)(i), (ii)
and (iii) hereof shall be accompanied by a certificate of the Chief Financial
Officer of Borrower to the effect that such financial statements are correct in
all material respects, subject to normal year end audit adjustments, (ii)
referred to in Section 9.6(a)(ii), (iii) and (iv) hereof shall be accompanied by
a certificate of the Chief Financial Officer of Borrower to the effect that
Borrower is in compliance with the covenants set forth in Sections 9.14, 9.15
and 9.16 hereof , as of the close of the period to which such financial
statements relate, together with a schedule showing the calculations used in
determining such compliance and that no Event of Default or event which would
with the giving of notice or passage of time, constitute an Event of Default
exists and is continuing, (iii) referred to in Section 9.6(a)(iv) hereof shall
be accompanied by a certificate of the Chief Financial Officer of Borrower to
the effect that Borrower is in compliance with the covenants set forth in
Sections 9.14, 9.15, 9.16 and 9.17 hereof , as of the close of the period to
which such financial statements relate, together with a schedule showing the
calculations used in determining such compliance and that no Event of Default or
event which would with the giving of notice or passage of time, constitute an
Event of Default exists and is continuing and (iv) referred to in Section
9.6(a)(ii),(iii) and (iv) hereof shall be accompanied by a certificate of the
Chief Executive Officer and Chief Financial Officer of Borrower setting forth
the Adjusted Net Worth of Borrower as of the respective dates of such financial
statements and shall be accompanied by a schedule showing the calculations used
in determining such Adjusted Net Worth and the appraisals on which such
calculations are based, which appraisals( and the appraisers performing such
appraisals) must be acceptable to Lender in all respects; provided
that, for
purposes of determining Adjusted Net Worth (A) at any time an Event Of Default
or act, condition or event which with the giving of notice or passage of time or
both would constitute an Event of Default shall exist or (B) on the request of
Lender, but not more often than once in any two(2) year period, Borrower shall,
within fifteen(15) working days after request of Lender therefor furnish to
Lender new appraisals of all of the assets of Borrower, in form and substance
and from appraisers satisfactory to Lender.

 

58

(b)
Borrower shall promptly notify Lender in writing of the details of (i) any loss,
damages, investigation, action, suit, proceeding or claim which has or could
result in a Material Adverse Effect, (ii) any Material Contract of Borrower
being terminated or amended or any new Material Contract entered into (in which
event Borrower shall provide Lender with a copy of such Material Contract),
(iii) any order, judgment or decree in excess of $50,000 which has been entered
against Borrower or any of its properties or assets, (iv) any notification from
a governmental authority of violation of laws or regulations received by
Borrower, (v) any ERISA Event and (vi) the occurrence of any Event of Default or
act, condition or event which with the giving of notice or the passage of time
or both, would constitute an Event of Default.

 

(c)
Borrower shall promptly after the sending or filing thereof furnish or cause to
be furnished to Lender copies of all reports which it sends to its stockholders
generally and copies of all reports and registration statements which it files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.

 

(d)
Borrower shall furnish or cause to be furnished to Lender such budgets,
forecasts, projections and other information respecting the Collateral and the
business of Borrower as Lender may, from time to time, reasonably request.
Lender is hereby authorized to deliver a copy of any financial statement or any
other information relating to the business of Borrower to any court or other
government agency upon request therefor or to any participant or assignee or
prospective participant or assignee. Borrower hereby irrevocably authorizes and
directs all of its accountants or auditors to deliver to Lender, at Borrower’s
expense, copies of the financial statements of Borrower and any reports or
management letters prepared by such accountants or auditors on behalf of
Borrower and to disclose to Lender such information as they may have regarding
the business of Borrower. Any documents, schedules, invoices or other papers
delivered to Lender may be destroyed or otherwise disposed by Lender one (1)
year after the same are delivered to Lender, except as otherwise designated by
Borrower to Lender in writing.

 

(e)
Borrower shall immediately notify Lender in writing of (i) the occurrence or
existence of any Event of Default or any act, condition or event which is an
Event of Default or which with the giving of notice or passage of time or both
would be an Event of Default, hereunder and (ii) the occurrence or existence of
any default or event of default or any act, condition or event which is a
default or an event of default or which with the giving of notice or passage of
time or both would be an event of default, under any agreement or instrument to
which any Affiliate of a Borrower is a party, relating to any Debt.

 

(f)
Borrower shall deliver, or cause to be delivered, to Lender, within ninety (90)
days from the date hereof, an opening balance sheet of Borrower after giving
effect to the transactions contemplated by this Agreement and the Purchase
Agreements, together with the opinion of independent certified public
accountants, which accountants shall be an independent accounting firm selected
by Borrower and reasonably acceptable to Lender, to the effect that such opening
balance sheet has been prepared in accordance with GAAP and presents fairly the
financial condition of Borrower as of such date.

 

9.7  Sale
of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not directly or indirectly, (a) merge into or with or consolidate with any
other Person or permit any other Person to merge into or with or consolidate
with it or (b) sell, assign, lease, transfer, abandon or otherwise dispose of
(i) any Capital Stock, except in a transaction involving public offering, or
indebtedness to any other Person or (ii) any of its assets to any other Person
(except for (A) sales of Inventory in the ordinary course of business, (B) the
disposition of Equipment no longer used in the business of Borrower so long as
(1) any proceeds are paid to Lender and (2) such sales do not involve Equipment
having an aggregate fair market value in excess of $50,000 for all such
Equipment disposed of in any fiscal year of Borrower, (C) sales of Equipment (1)
to which Lender shall have consented in writing and(2) any proceeds of which are
paid to Lender for application as determined by Lender or (c) form or acquire
any Subsidiary, or transfer any assets to any Subsidiary, or (d) wind up,
liquidate or dissolve or (e) agree to do any of the foregoing. Within thirty
(30) days from the date hereof, Borrower shall liquidate and dissolve Inyx USA,
Ltd.

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9.8  Encumbrances.
Borrower shall not create, incur, assume or suffer or permit to exist any
security interest, mortgage, pledge, lien, charge or other encumbrance of any
nature whatsoever on any of its assets or properties, including the Collateral,
except: (a)
liens and security interests of Lender; (b) liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the payment of
taxes) arising in the ordinary course of Borrower’s business to the extent: (i)
such liens secure indebtedness which is not overdue or (ii) such liens secure
indebtedness relating to claims or liabilities which are fully insured and being
defended at the sole cost and expense and at the sole risk of the insurer or
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrower, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate reserves have been
set aside on its books; (d) zoning restrictions, easements, licenses, covenants
and other restrictions affecting the use of Real Property which do not interfere
in any material respect with the use of such Real Property or ordinary conduct
of the business of Borrower as presently conducted or proposed to be conducted,
thereon or materially impair the value of the Real Property which may be subject
thereto; (e) purchase money security interests in Equipment (including Capital
Leases entered into after the date hereof), not to exceed $100,000 in the
aggregate at any time outstanding so long as such security interests and
mortgages do not apply to any property of Borrower other than the Equipment so
acquired, and the indebtedness secured thereby does not exceed the cost of the
Equipment so acquired, as the case may be and (f) the security interests and
liens set forth on Schedule 8.4 hereto.

9.9  Indebtedness.
Borrower shall not incur, create, assume, become or be liable in any manner with
respect to, or suffer or permit to exist, any obligations or indebtedness,
except:

 

(a) the
Obligations;

(b) trade
accounts payable and other trade obligations and normal accruals in the ordinary
course of business not yet due and payable, or with respect to which Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on their books;

 

60

(c)
purchase money indebtedness (including Capital Leases) to the extent not
incurred or secured by liens (including Capital Leases) in violation of any
other provision of this Agreement;

 

(d)
unsecured indebtedness of Borrower for borrowed money incurred after the date
hereof, owing to any Person other than any shareholder, officer, director,
agent, employee or Affiliate of Borrower on commercially reasonable rates and
terms pursuant to an arm's length transaction; provided,
that, (i)
Lender shall have received not less than five (5) Business Days prior written
notice of the intention to incur such indebtedness, which notice shall set forth
in reasonable detail satisfactory to Lender, the amount of such indebtedness,
the person to whom such indebtedness will be owed, the interest rate, the
schedule of repayments and maturity date with respect thereto and such other
information as Lender may reasonably request with respect thereto, (ii) Lender
shall have received true, correct and complete copies of all agreements,
documents and instruments evidencing or otherwise related to such indebtedness,
(iii) the aggregate amount of such indebtedness at any time outstanding shall
not exceed $100,000, (iv) on and before the date of incurring such indebtedness
and after giving effect thereto, no Event of Default, or event which with the
giving notice or the passage of time or both would constitute an Event of
Default, shall exist or have occurred and be continuing, (v) Borrower may only
make regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date of the
execution thereof, and (vi) Borrower shall not, directly or indirectly, (A) make
any prepayments or other non-mandatory payments in respect of such indebtedness,
or (B) amend, modify, alter or change the terms of such indebtedness or any
agreement, document or instrument related thereto, or (C) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (vii) Borrower shall
furnish to Lender all notices, demands or other materials in connection with
such indebtedness either received by Borrower or on its behalf, promptly after
the receipt thereof, or sent by Borrower, or on its behalf, concurrently with
the sending thereof, as the case may be; and

 

(e)
indebtedness of Borrower described on Schedule 9.9 hereto; provided,
that: (i) the
individual principal amounts of such indebtedness and aggregate principal
amounts of all such indebtedness shall not exceed the amounts shown on such
Schedule 9.9 hereto less the aggregate amount of all repayments, repurchases or
redemptions, whether optional or mandatory in respect thereof, plus interest
thereon at the rate provided for in such agreement or instrument as in effect on
the date hereof, (ii) Borrower may only make regularly scheduled payments of
principal and interest in respect of such indebtedness in accordance with the
terms of the agreement or instrument evidencing or giving rise to such
indebtedness, (iii) Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such indebtedness or any agreement,
document or instrument related thereto or (B) redeem, retire, defease, purchase
or otherwise acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose, and (iv) Borrower shall furnish to Lender all
notices or demands in connection with such indebtedness either received by
Borrower or on its behalf, promptly after the receipt thereof, or sent by
Borrower or on its behalf, concurrently with the sending thereof, as the case
may be. 

61

9.10  Loans,
Investments, Guarantees, Etc. Borrower
shall not directly or indirectly, make or permit to exist any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or indebtedness or all
or a substantial part of the assets or property of any Person, or form or
acquire any Subsidiaries or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except: (a) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in cash or Cash Equivalents; provided that, as to
any of the foregoing, unless waived in writing by Lender, Borrower shall take
such actions as are deemed necessary by Lender to perfect the security interest
of Lender in such investments; (c) the loans, advances and guarantees set forth
on Schedule 9.10 hereto; provided,
that, as to
such loans, advances and guarantees, (i) Borrower shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such loans, advances
or guarantees or any agreement, document or instrument related thereto, or (B)
as to such guarantees, redeem, retire, defease, purchase or otherwise acquire
the obligations arising pursuant to such guarantees, or set aside or otherwise
deposit or invest any sums for such purpose, and (ii) Borrower shall furnish to
Lender all notices or demands in connection with such loans, advances or
guarantees or other indebtedness subject to such guarantees either received by
Borrower or on its behalf, promptly after the receipt thereof, or sent by
Borrower or on its behalf, concurrently with the sending thereof, as the case
may be; and (d) loans and advances not in excess of the amount of $100,000
outstanding in the aggregate for all such loans and advances during the term of
this Agreement; provided
that, no such
loan or advance shall be made to any Affiliate of Borrower, to the holder of any
Capital Stock of Borrower or to any Person described on Schedule 9.21
hereto.

9.11  Transactions
with Affiliates.
Borrower shall not, directly or indirectly, (a) purchase, acquire or lease any
property from, or sell, transfer or lease any property to, any officer,
director, agent or Person Affiliated with Borrower, except in the ordinary
course of business and pursuant to the reasonable requirements of Borrower’s
business and upon fair and reasonable terms no less favorable to Borrower than
such Person would obtain in a comparable arm's length transaction with an
unaffiliated person (but in no event may Borrower sell, transfer or lease any
property to any Subsidiary) or (b) make any payments (i) of any indebtedness
owing to any officer, employee, shareholder or director or other person
Affiliated with Borrower or (ii) of any compensation to any employee, except
reasonable compensation to employees for services rendered to in the ordinary
course of business.

 

9.12  Additional
Bank Accounts.
Borrower shall not, directly or indirectly, open, establish or maintain any
deposit account, investment account or any other account with any bank or other
financial institution, other than the Blocked Accounts and the accounts set
forth in Schedule 8.8 hereto, except: (a) as to any new or additional Blocked
Accounts and other such new or additional accounts which contain any Collateral
or proceeds thereof, with the prior written consent of Lender and subject to
such conditions thereto as Lender may establish and (b) as to any accounts used
by Borrower to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Lender. 

9.13  Compliance
with ERISA. (a)
Borrower shall not, with respect to any “employee benefit plans” maintained by
Borrower or any of its ERISA Affiliates: (i) terminate any of such employee
benefit plans so as to incur any liability to the Pension Benefit Guaranty
Corporation established pursuant to ERISA, (ii) allow or suffer to exist any
prohibited transaction involving any of such employee benefit plans or any trust
created thereunder which would subject Borrower or such ERISA Affiliate to a tax
or penalty or other liability on prohibited transactions imposed under Section
4975 of the Code or ERISA, (iii) fail to pay to any such employee benefit plan
any contribution which it is obligated to pay under Section 302 of ERISA,
Section 412 of the Code or the terms of such plan, (iv) allow or suffer to exist
any accumulated funding deficiency, whether or not waived, with respect to any
such employee benefit plan, (v) allow or suffer to exist any occurrence of a
reportable event(other than those as to which the Pension Benefit Guaranty
Corporation has waived notice pursuant to Regulation) or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such employee benefit plan that is a single employer
plan, that is a single employer plan, which termination could result in any
liability to the Pension Benefit Guaranty Corporation, (vi) incur any withdrawal
liability with respect to any multi employer pension plan; and (vii) fail to
maintain each employee benefit plan in compliance in all material respects with
the applicable provisions of ERISA, the Code and other Federal State and
Commonwealth Law.

 

62

(b) As
used in this Section 9.13 and Section 8.14 the terms (i) “employee benefit
plans”, “accumulated funding deficiency and reportable event” shall have the
respective meanings assigned to them in ERISA, and the term “prohibited
transaction” shall have the meaning assigned to it in Section 4975 of the Code
and “ERISA”, (ii) “ERISA Affiliate” shall mean any Person required to be
aggregated with Borrower or any of its Subsidiaries under Sections 414(b),
414(c), 414(m) or 414(o) of the Code and “ERISA” shall mean the United States
Employee Retirement Income Security Act of 1974 .

9.14  Working
Capital.
Borrower shall, at all times, maintain Working Capital of not less than
$7,500,000.

9.15  Net
Worth.
Borrower shall, at all times, maintain (a) an Adjusted Net Worth of not less
than $15,000,000 and (b) a Tangible Net Worth of not less than $
____________________________.

9.16  Suppressed
Availability. (a)
Borrower shall, maintain with Lender, at all times after the date hereof,
Suppressed Availability of not less than $500,000. Lender may, but shall not be
required to and in addition to its other rights, in its discretion, use the
amount of Suppressed Availability (i) to pay costs and expenses incurred by
Borrower or chargeable to Borrower under this Agreement, (ii) to cure defaults
of Borrower under this Agreement, or by Borrower or any other Obligor under any
of the other Financing Agreements or any other agreement of Borrower with any
third party, (iii) to pay taxes of Borrower and (iv) for, any other purpose
permitted by, or to make any other payment which Lender is authorized to make,
under this Agreement.

 

(b) If
the amount of Suppressed Availability, shall at any time be less than $500,000
Borrower shall, at all times, on notice by Lender, immediately take such actions
as are required by Lender, including delivery to Lender of cash collateral so
that the amount of Suppressed Availability shall not be less than
$500,000.

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9.17  Excess
Cash Flow.
Borrower shall, for each of its fiscal years during the Term of this Agreement,
have Excess Cash Flow of not less than $ 400,000.

9.18  Changes
in Equity.
Borrower shall not (a) cease to have its Capital Stock or other equity interests
owned by the Persons now owning such Capital Stock or other equity interests in
the same percentages of ownership now held by such Persons or (b) issue, sell or
deliver any shares of its Capital Stock or other equity interests or rights,
options, warrants or calls to purchase any shares of its Capital Stock other
equity interests or securities convertible into shares of its Capital Stock or
other equity interests, except in each case as a result of a transaction
involving a public offering.

9.19  Restricted
Junior Payments. (a)
Borrower shall not, directly or indirectly, make, or agree to make, any
Restricted Junior Payment; except
that,
Borrower may declare and pay dividends during any fiscal year Borrower not in
excess of the difference between (x) twenty five percent (25%) of Borrowers
Excess Cash Flow for the preceding fiscal year of Borrower (y) any Voluntary
Prepayments made by Borrower in the fiscal year in which such dividend is to be
paid; provided that, each of
the following conditions are satisfied:

 

(i) such
dividend shall be made with funds legally available therefore,

 

(ii) such
dividend shall not violate any law or regulation or the terms of any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its properties are bound,

 

(iii) as
of both the date of declaration and the date of payment of such dividend and
after giving effect thereto, no Event of Default or act, condition or event
which with the giving of notice or passage of time or both would constitute an
Event of Default shall exist or have occurred, including a failure to comply
with any of the provisions of Section 9.14, 9.16, 9.15 or 9.17
hereof,

 

(iv) as
of both the date of declaration and the date of payment of such dividend and
after giving effect thereto, Borrower shall be Solvent;

 

(v)
during the 90 day period prior to both the date of declaration and the date of
payment of such dividend Borrower shall have maintained Excess Availability of
not less than $500,000; and

 

(vi)
Borrower shall have given Lender at least ten (10) Business Days prior written
notice of its intent to declare such dividend and Lender shall not have advised
Borrower that, in Lender’s reasonable opinion, Borrower will not be able to
maintain Excess Availability of at least $500,000 during the 90 day period
following the payment of such dividend.

 

(b)
Borrower shall at all time during the 90 day period following the payment of any
dividend permitted by Section 9.19(a) hereof maintain Excess Availability of not
less then $500,000.

 

(c) The
aggregate amount of all Voluntary Prepayments made during any fiscal year of
Borrower shall reduce the amount of dividends that Borrower may pay, pursuant to
this Section 9.19 hereof during such fiscal year; provided
that, the
aggregate amount of all Voluntary Prepayments made and dividends declared or
paid during any fiscal year of Borrowers may not exceed twenty five percent(25%)
of Borrowers’ Excess Cash Flow for the preceding fiscal year.

64

9.20  Costs
and Expenses.
Borrower shall pay to Lender on demand all costs, expenses, filing fees and
taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Lender's rights in the Collateral,
this Agreement, the other Financing Agreements and all other documents related
hereto or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including: (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) all costs and expenses and fees for insurance premiums,
environmental audits, surveys, assessments, engineering reports and inspections,
appraisal fees and search fees; (c) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (d) charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) costs and expenses
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Lender, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Lender arising out of the transactions contemplated hereby
and thereby (including preparations for and consultations concerning any such
matters); (g) all out-of-pocket expenses and costs heretofore and from time to
time hereafter incurred by Lender during the course of periodic field
examinations of the Collateral and Borrower's operations including the costs of
field testing by third party providers retained by Lender, plus a per diem
charge at the rate of $750.00 per person per day plus travel, hotel and all
other out of pocket expenses for Lender's examiners in the field and office; and
(h) the fees and disbursements of counsel (including legal assistants) to Lender
in connection with any of the foregoing.

9.21  Environmental
Audits. Within
ninety (90) days from of a request by Lender, from time to time, Borrower shall
deliver to Lender, at its expense updated environmental audits of the Real
Property and the Real Estate Security conducted by an environmental firm
acceptable to Lender and in form, scope and methodology satisfactory to Lender
confirming that (a) Borrower is in compliance with all Environmental Laws, in
all material respects and (b) there is no material potential or actual liability
of Borrower for any remedial action with respect to any environmental condition
or any other significant environmental problems; provided 
that, if such
audits cannot confirm such compliance or that there is no such liability,
Borrower shall forthwith at their expense, diligently take all remedial action
necessary to cure such condition, effect such compliance and discharge such
liability, to such firm’s satisfaction.

9.22  Management
Compensation. Borrower
will not directly or indirectly, pay compensation or management, consulting or
other fees for management or similar services directly or indirectly, to or for
the benefit of (a) as to those Persons listed on Schedule 9.21 hereto in per
annum amounts in the aggregate in excess of that set forth and determined as
described on Schedule 9.21 hereto, including performance and incentive bonuses,
for each such person, (b) as to all other officers, directors or consultants
amounts in excess of that which is reasonable, ordinary and necessary and (c) as
to Inyx Canada, Inc., amounts in excess of that paid during Borrower’s fiscal
year ended December 31, 2004, as shown on Schedule 9.22.

65

9.23  Business
Names.
Borrower shall not use any trade names in the conduct of its business and
operations other than (a)those listed on Schedule 8.11 hereto and (b)those trade
names which Borrower may hereafter use after (i) having given Lender at least 15
Business Days notice after the filing for registration of such name and (ii)
taking all such actions and executing and delivering all such agreements,
instruments, notices and documents as Lender shall request to(A) grant to Lender
a valid and perfected first and prior security interest and lien therein and (B)
protect and preserve Lender’s security interests and liens in the other
Collateral.

9.24  Additional
Covenants.

(a)
Borrower shall deliver to Lender, within 30 days after request by Lender a
report of essential payments made and expenses incurred by Borrower, during the
period requested by Lender in such detail as Lender may
request.

(b)
Borrower shall deliver to Lender, within 15 days after request by Lender, a
comparison of its actual availability for the period designated by Lender with
its budgeted availability for such period.

 

(c)
Borrower shall provide Lender, in addition to the other financial information to
be provided by Borrower hereunder, balance sheets, income statements, cash
flows, availability

projections(including
underlying assumptions therefore), inventory locations and a detail of
transactions with Affiliates, in a level of detail acceptable to Lender, on a
monthly basis until March 31, 2006 and on a quarterly basis
thereafter.

9.25  Loan
Amount Certificate. Borrower
shall, promptly upon the request of Lender, but not more often the 4 times in
any fiscal year and in any event together with the quarterly and audited
Financial Statements referred to in Section 9.6 hereof furnish to Lender a
certificate, signed by its President and Chief Financial Officer, stating as of
the date thereof (a) the then outstanding balance of the Loans, (b) that no
defense, offset or counterclaim exists with respect to Borrower’s obligation to
pay such Loans or if any such defense, offset or counterclaim does exist,
specifying in detail the nature and amount thereof and the facts upon which
based and (c) that they have reviewed this Agreement and the other Financing
Agreements to which Borrower is a party and have made, or caused to be made
under their supervision, a review in reasonable detail of the transactions and
condition of the Borrower and that, based on such review, the Borrower has
observed or performed all of their covenants and other agreements(including
those related to Environmental Laws), and satisfied every condition, contained
in this Agreement and the other Financing Agreements to be observed, performed
or satisfied by the Borrower and that such review has not disclosed the
existence, and that such officers do not have knowledge of the existence as at
the date of the certificate, of any Event of Default or event or condition
which, with the giving of notice or the lapse of time or both, would constitute
an Event of Default or if such officer has any knowledge of any such Event of
Default or other event or condition, specifying same and what action the
Borrower is taking or proposes to take with respect thereto.

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9.26  Further
Assurances. At the
request of Lender at any time and from time to time, Borrower shall at its
expense, duly execute and deliver, or cause to be duly executed and delivered,
such further agreements, documents and instruments, and do or cause to be done
such further acts as may be necessary or proper to evidence, perfect, maintain
and enforce the security interests of Lender, and the priority thereof, in the
Collateral and to otherwise effectuate the provisions or purposes of this
Agreement or any of the other Financing Agreements. Lender may at any time and
from time to time request a certificate from an officer of Borrower representing
that all conditions precedent to the making of Loans and providing Letter of
Credit Accommodations contained herein are satisfied. In the event of such
request by Lender, Lender may, at its option, cease to make any further Loans
and providing Letter of Credit Accommodations until Lender has received such
certificate and, in addition, Lender has determined that such conditions are
satisfied. Where permitted by law, Borrower hereby authorizes Lender to execute
and file one or more UCC financing statements signed only by
Lender.

Section
10.  Events
of Default And Remedies.

10.1  Events
of Default. The
occurrence or existence of any one or more of the following events are referred
to herein individually as an "Event of Default" and collectively as "Events of
Default": 

 

(a) Borrower
(i) fails to pay when due any of the Obligations (including any mandatory
prepayment of Term Loan D or any Voluntary Prepayment, notice of intent to pay
has been given by Borrower to Lender) or (ii) Borrower fails to perform any of
the terms, covenants, conditions or provisions contained in this Agreement or
any of the other Financing Agreements except those described in Section 10(a)(i)
above and such failure shall continue for ten (10) days; except that, such
ten (10) day cure period shall not be applicable in the case of (A) any failure
which cannot be cured at all or within such ten (10) day period, (B) an
intentional breach by Borrower or (C) a failure which has been the subject of a
prior failure within the preceding three (3) months;

 

(b) any
representation, warranty or statement of fact made by Borrower to Lender in this
Agreement, the other Financing Agreements or any other agreement, schedule,
confirmatory assignment or otherwise shall when made or deemed made be false or
misleading in any material respect; 

 

(c)  any
Obligor revokes, terminates or fails to perform any of the terms, covenants,
conditions or provisions of any guarantee, endorsement or other agreement of
such party in favor of Lender or any representation, warranty or statements of
fact made by any such Person in any such document shall when made or deemed made
be false or misleading in any material respect;

 

(d) any
judgment for the payment of money is rendered against Borrower or any Obligor in
excess of $100,000 in any one case, or in excess of $200,000 in the aggregate
and shall remain undischarged or unvacated for a period in excess of sixty (60)
days or execution shall at any time not be effectively stayed, or any judgment
other than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any Obligor or any of their
assets;

 

67

(e)
Borrower or any Obligor which is a partnership, limited liability company,
limited liability partnership or a corporation(wherever organized or
constituted), dissolves or suspends or discontinues doing business;

 

(f)
Borrower shall not be Solvent or Borrower shall make an assignment for the
benefit of creditors, make or send notice of a bulk transfer or call a meeting
of its creditors or principal creditors; 

 

(g) a
case or proceeding under the bankruptcy laws of the United States of America now
or hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at law or in equity) is filed
against Borrower or any Obligor or all or any part of their respective
properties and such petition or application is not dismissed within thirty(30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of any such action or proceeding or the
relief requested is granted sooner.

 

(h) a
case or proceeding under the bankruptcy laws of the United States of America now
or hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at a law or equity) is filed by
Borrower or any Obligor or for all or any part of its property;

 

(i) any
default by Borrower or any Obligor under any agreement, document or instrument
relating to any indebtedness for borrowed money owing to any person other than
Lender, or under any Capital Lease obligations, contingent indebtedness in
connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favor of any person other than Lender, in any case in an amount in
excess of $100,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by Borrower any Obligor
under any Material Contract, lease, license, or other obligation to any person
other than Lender, which default continues for more than the applicable cure
period, if any, with respect thereto;

(j) there
shall be a Change of Control or change in the present senior management of
Borrower;

 

(k) the
indictment or threatened indictment of Borrower or any Obligor under any
criminal statute, or commencement or threatened commencement of any criminal or
civil proceedings against Borrower or any Obligor, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
any of the property of Borrower or any Obligor;

 

(l) there
shall be a material adverse change in the business, assets or prospects of
Borrower or any Obligor after the date hereof; or

 

(m) there
shall be an event of default under any of the other Financing
Agreements.

10.2  Remedies.

 

(a) At any
time an Event of Default exists or has occurred and is continuing, Lender shall
have all rights and remedies provided in this Agreement, the other Financing
Agreements, the Uniform Commercial Code and other applicable law, all of which
rights and remedies may be exercised without notice to or consent by Borrower or
any Obligor except as such notice or consent is expressly provided for hereunder
or required by applicable law. All rights, remedies and powers granted to Lender
hereunder, under any of the other Financing Agreements, the Uniform Commercial
Code or other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.

68

(b) Without
limiting the foregoing, at any time an Event of Default exists or has occurred
and is continuing, Lender may, in its discretion and without limitation, (i)
accelerate the payment of all Obligations and demand immediate payment thereof
to Lender (provided,
that, upon
the occurrence of any Event of Default described in Sections 10.1(g), or
10.1(h), all Obligations shall automatically become immediately due and
payable), (ii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iii) require
Borrower at Borrower’s expense, to assemble and make available to Lender any
part or all of the Collateral at any place and time designated by Lender, (iv)
collect, foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (v) remove any or all of the Collateral from any premises on or in
which the same may be located for the purpose of effecting the sale, foreclosure
or other disposition thereof or for any other purpose, (vi) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral
(including entering into contracts with respect thereto, public or private sales
at any exchange, broker's board, at any office of Lender or elsewhere) at such
prices or terms as Lender may deem reasonable, for cash, upon credit or for
future delivery, with the Lender having the right to purchase the whole or any
part of the Collateral at any such public sale, all of the foregoing being free
from any right or equity of redemption of Borrower, which right or equity of
redemption is hereby expressly waived and released by Borrower and/or (vii)
terminate this Agreement. If any of the Collateral is sold or leased by Lender
upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Lender. If
notice of disposition of Collateral is required by law, ten (10) days prior
notice by Lender to Borrower designating the time and place of any public sale
or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrower waives any other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, Borrower waives the posting of any bond which might otherwise be
required.

 

(c) Lender
may apply the cash proceeds of Collateral actually received by Lender from any
sale, lease, foreclosure or other disposition of the Collateral to payment of
the Obligations, in whole or in part and in such order as Lender may elect,
whether or not then due. Borrower shall remain liable to Lender for the payment
of any deficiency with interest at the highest rate provided for herein and all
costs and expenses of collection or enforcement, including attorneys' fees and
legal expenses.

 

69

(d) Without
limiting the foregoing, upon the occurrence of an Event of Default or an event
which with notice or passage of time or both would constitute an Event of
Default, Lender may, at its option, without notice, (i) cease making Loans or
providing Letter of Credit Accommodations or reduce the lending formulas or
amounts of Loans and Letter of Credit Accommodations available to Borrower
and/or (ii) terminate any provision of this Agreement providing for any future
Loans or Letter of Credit Accommodations to be made or provided by Lender to
Borrower.

 

(e) For
the purpose of enabling Lender to exercise the rights and remedies hereunder,
Borrower hereby grants to Lender, effective as of the occurrence of any Event of
Default, to the extent assignable, an irrevocable, non-exclusive license (
exercisable without payment of royalty or other compensation to Borrower) to use
or assign any of the trademarks, service marks, trade names, business names,
trade styles, designs, logos and other source of business identifiers and other
Intellectual Property and general intangibles now owned or hereafter acquired by
Borrower, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the complication or printout
thereof.

10.3  Special
Event of Default.

 

(a) The
occurrence or existence of the following event shall be an additional “Event of
Default”:

 

(i) Any
condition precedent specified in Section 4.1 hereof, the satisfaction of which
has been deferred by Lender, is not fulfilled and satisfied on or prior to the
date to which fulfillment and satisfaction thereof has been deferred (whether or
not such condition is capable of being fulfilled or satisfied by Borrower);
and

 

(ii)
Lender shall give notice to Borrower that it is declaring an Event of
Default.

 

(b) On
the occurrence and during the continuance of an Event of Default specified in
this Section 10.3 Lender shall be entitled to all rights and remedies hereunder,
including without limitation those set forth in Section 10.2 hereof, under the
other Financing Agreements, and at law.

 

Section
11.  Jury
Trial Waiver; Other Waivers And Consents; Governing Law.

11.1  Governing
Law; Choice of Forum; Service of Process; Jury Trial Waiver.

 

(a) The
validity, interpretation and enforcement of this Agreement and the other
Financing Agreements and any dispute arising out of the relationship between the
parties hereto with respect thereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the Commonwealth of Puerto
Rico (without giving effect to principles of conflicts of law).

 

(b) Borrower
and Lender irrevocably consent and submit to the non-exclusive jurisdiction of
the United States District Court for the District of Puerto Rico and to the
Court of First Instance, (Superior Court) of San Juan, Puerto Rico and waive any
objection based on venue or forum non conveniences with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against Borrower and its property).

 

70

(c) Borrower
hereby waives personal service of any and all process upon it and consents that
all such service of process may be made by certified mail (return receipt
requested) directed to its address set forth on the signature pages hereof and
service so made shall be deemed to be completed ten (10) days after the same
shall have been so deposited in the U.S. mails, or, at Lender's option, by
service upon Borrower in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, the Person so served shall
appear in answer to such process, failing which such Person shall be deemed in
default and judgment may be entered by Lender against such Person for the amount
of the claim and other relief requested.

(d) BORROWER
AND LENDER EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE
OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT,
EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREE AND CONSENT THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

(e) Lender
shall not have any liability to Borrower (whether in tort, contract, equity or
otherwise) for losses suffered by it in connection with, arising out of, or in
any way related to the transactions or relationships contemplated by this
Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court order
binding on Lender, that the losses were the result of acts or omissions
constituting gross negligence or willful misconduct. In any such litigation,
Lender shall be entitled to the benefit of the rebuttable presumption that it
acted in good faith and with the exercise of ordinary care in the performance by
it of the terms of this Agreement.

11.2  Waiver
of Notices.
Borrower hereby expressly waives demand, presentment, protest and notice of
protest and notice of dishonor with respect to any and all instruments and
commercial paper, included in or evidencing any of the Obligations or the
Collateral, and any and all other demands and notices of any kind or nature
whatsoever with respect to the Obligations, the Collateral and this Agreement,
except such as are expressly provided for herein. No notice to or demand on
Borrower which Lender may elect to give shall entitle it to any other or further
notice or demand in the same, similar or other circumstances.

71

11.3  Amendments
and Waivers. Neither
this Agreement nor any provision hereof shall be amended, modified, waived or
discharged orally or by course of conduct, but only by a written agreement
signed by an authorized officer of Lender, and as to amendments, as also signed
by an authorized officer of Borrower. Lender shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
rights, powers and/or remedies unless such waiver shall be in writing and signed
by an authorized officer of Lender. Any such waiver shall be enforceable only to
the extent specifically set forth therein. A waiver by Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Lender would otherwise have
on any future occasion, whether similar in kind or otherwise.

11.4  Waiver
of Counterclaims.
Borrower waives all rights to interpose any claims, deductions, setoffs or
counterclaims of any nature (other than compulsory counterclaims) in any action
or proceeding with respect to this Agreement, the Obligations, the Collateral or
any matter arising therefrom or relating hereto or thereto.

 

11.5  Indemnification.
Borrower shall indemnify and hold Lender, and its directors, agents, employees
and counsel (collectively “Indemnified Persons”), harmless from and against any
and all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreement, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or by the Purchase Agreements or any act, omission, event or transaction related
or attendant thereto, including amounts paid in settlement, court costs, and the
fees and expenses of counsel (the “Indemnified Liabilities”). To the extent that
the undertaking to indemnify, pay and hold harmless set forth in this Section
may be unenforceable because it violates any law or public policy, Borrower
shall pay the maximum portion which it is permitted to pay under applicable law
to Lender in satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.

 

Section
12.  Term
of Agreement; Miscellaneous.

12.1  Term.

 

(a) This
Agreement and the other Financing Agreements shall become effective as of the
date set forth on the first page hereof and shall continue in full force and
effect for a term ending on March 31, 2008 (the “Renewal Date”) and from year to
year thereafter, unless sooner terminated pursuant to the terms hereof. Lender
or Borrower may terminate this Agreement and the other Financing Agreements
effective on the Renewal Date or on the anniversary of the Renewal Date in any
year by giving the other party at least ninety (90) days prior written notice;
provided that, this
Agreement and all other Financing Agreements must be terminated simultaneously.
Upon the effective date of termination or non-renewal of the Financing
Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, Atlantic
Standard time.

 

72

(b) No
termination of this Agreement or the other Financing Agreements shall relieve or
discharge Borrower or any Obligor of its respective duties, obligations and
covenants under this Agreement, the other Financing Agreements, until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements, and applicable law,
shall remain in effect until all such Obligations have been fully and finally
discharged and paid.

 

(c) Upon
the written request of Borrower, after the effective date of the termination or
non-renewal of this Agreement, Lender shall deliver to Borrower, at Borrower’s
cost and expense, UCC-3 termination statements and a release and reassignment of
trademarks, patents, and copyrights, each in form and substance satisfactory to
Lender, necessary to evidence the termination of Lender’s security interests in
and lien upon the Collateral, provided that, each of
the following conditions is satisfied: (i) Lender shall have received payment in
full in cash and performance of all outstanding and unpaid Obligations and the
delivery to Lender of cash collateral in such amounts as Lender determines are
reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys= fees and
legal expenses, in connection with any contingent Obligations, including issued
and outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment, and upon the release of all claims
against Lender, (ii) Lender shall have received a written release by Borrower
and all Obligors, of Lender and the other Indemnified Parties, in form and
substance satisfactory to Lender, duly authorized, executed and delivered by
Borrower and all Obligors, and (iii) no suits, actions, proceedings or claims
are pending or threatened against any Indemnified Person asserting any damages,
losses or liabilities that are Indemnified Liabilities. Accordingly Borrower
waives any rights which it may have under the Uniform Commercial Code to demand
the filing of termination statements with respect to the Collateral and Lender
shall not be required to send such termination statements to Borrower or to file
them with any filing office, unless and until this Agreement is terminated in
accordance with its terms, the conditions specified in this Section 12.1(c)
satisfied and all of the Obligations indefeasibly paid in immediately available
funds.

73

12.2  Notices. All
notices, requests and demands hereunder shall be in writing and (a) made to
Lender at its address set forth below and to Borrower at Borrower’s chief
executive office set forth below, or to such other address as any party may
designate by written notice to the other in accordance with this provision, and
(b) deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing.

12.3  Partial
Invalidity. If any
provision of this Agreement is held to be invalid or unenforceable, such
invalidity or unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable and the rights and
obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.

12.4  Successors. This
Agreement, the other Financing Agreements and any other document referred to
herein or therein shall be binding upon and inure to the benefit of and be
enforceable by Lender, Borrower and its successors and assigns, except that
Borrower may not assign its rights under this Agreement, the other Financing
Agreements and any other document referred to herein or therein without the
prior written consent of Lender. Lender may, after notice to Borrower, assign
its rights and delegate its obligations under this Agreement and the other
Financing Agreements and further may assign, or sell participation in, all or
any part of the Loans, the Letter of Credit Accommodations or any other interest
herein to another financial institution or other person, in which event, the
assignee or participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if it were the
Lender hereunder, except as otherwise provided by the terms of such assignment
or participation.

12.5  Entire
Agreement. This
Agreement, the other Financing Agreements, any supplements hereto or thereto,
and any instruments or documents delivered or to be delivered in connection
herewith or therewith represents the entire agreement and understanding
concerning the subject matter hereof and thereof between the parties hereto, and
supersedes all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written. In the
event of any inconsistency between the terms of this Agreement and any schedule
or exhibit hereto, the terms of this Agreement shall govern.

12.6  Additional
Interpretative Provision. (a) All
financial computations hereunder shall be computed unless otherwise specifically
provided herein, in accordance with GAAP as consistently applied and using the
same method for inventory valuation as used in the preparation of the financial
statements of Borrower most recently received by Lender prior to the date
hereof.

 

(b) In
the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including”, the words “to” and “until”
each mean “to but excluding” and the word “through” means “to and
including”.

 

74

(c)
Unless otherwise expressly provided herein, (i) references herein to any
agreement, document or instrument shall be deemed to include all subsequent
amendments, modifications, supplements, extensions, renewals, restatements or
replacements with respect thereto, but only to the extent the same are not
prohibited by the terms hereof or of any other Financing Agreement, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
recodifying, supplementing or interpreting the statute or
regulation.

 

(d) The
captions and headings of this Agreement are for convenience of reference only
and shall not affect the interpretation of this Agreement.

 

(e) This
Agreement and other Financing Agreements may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and shall each be performed
in accordance with their terms.

 

(f) This
Agreement and the other Financing Agreements are the results of negotiations
among and have been reviewed by counsel to Lender and the other parties, and are
the products of all parties. Accordingly, this Agreement and the other Financing
Agreements shall not be construed against Lender merely because of Lender’s
involvement in their preparation.

 

(g)
Whenever any action or inaction hereunder is based on or may be taken or omitted
in the discretion of Lender such discretion shall mean the sole and absolute
discretion of Lender.

12.7  Counterparts,
Etc. This
Agreement or any of the other Financing Agreements may be executed in any number
of counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of this Agreement or any of the other Financing Agreements by
telefacsimile shall have the same force and effect as the deliver of an original
executed counterpart of this Agreement or any of such other Financing
Agreements. Any party delivering an executed counterpart of any such agreement
by telefacsimile shall also deliver an original executed counterpart, but the
failure to do so shall not affect the validity, enforceability or binding effect
of such agreement.

 

12.8  Consolidated
Determinations.
Notwithstanding any other provision of this Agreement, the Adjusted Net Worth,
Tangible Net Worth, EBITDA, Excess Cash Flow, Net Income After Tax, Income
Before Taxes and Working, Capital of Borrower and any other determinations which
under GAAP or otherwise would be made on a consolidated basis, shall, if
specified by Lender, be determined for Inyx, Inyx Pharma and Inyx USA
separately, Inyx, Inyx Pharma and Inyx USA on a consolidated and consolidating
basis or for Inyx and its Subsidiaries on a consolidated basis, as Lender may
elect.

12.9  Multiple
Borrowers.
References to Borrower wherever used in this Agreement, shall mean each and all
of Borrowers, if more than one and their respective successors and assigns,
individually and collectively, jointly and severally, primarily and
unconditionally. The liability of each Borrower hereunder shall be absolute,
primary and unconditional, joint and several.

 

75

12.10  Examples
Of Computations.
Examples of computations for purposes of Sections 2.3(d)(ii), 9.14, 9.15 and
9.17 hereof are shown in Schedule 12.10 hereto.

IN
WITNESS WHEREOF, Lender and Borrower have caused these presents to be duly
executed as of the day and year first above written.

	 	 	 
	 	
      LENDER:

	 	 
	 	Westernbank Puerto Rico
	 
 	 
 	 
 
		By:  	/s/ Miguel
  Vazquez
	 	
      

      Miguel Vazquez
	 	Title: President
Business
      Credit Division
	 	
	 	
      Address:
      268 Munoz Rivera Avenue
Suite
      600 6th
      Floor
Westernbank
      World Plaza
Hato
      Rey, Puerto Rico 00918

	 	 	 
	 	
      BORROWER:

	 	 
	 	Inyx, Inc.
	 
 	 
 	 
 
		By:  	/s/ Jack Kachkar
	 	
      

      Jack Kachkar
	 	Title: Chairman of the Board
      And
Chief
      Executive Officer
	(SEAL)	 
	 	Address:
      825 Third Avenue, 40th
      Floor
New
      York, NY 10022
	Attest:	 
	 	 
	
      /s/  Rima Goldshmidt
      

      
Rima Goldshmidt	 
	Secretary 	 

76

	 	 	 
	 	Inyx USA, Ltd.
	 
 	 
 	 
 
	Date: 	By:  	/s/ Jack Kachkar
	 	
      

      Jack Kachkar
	 	
      Title:
      Director
Address:
      San Jose Rd
Cotto
      Norte Industrial Park
Manati,
      PR 00674

	 	 
	(SEAL)	 
	 	 
	Attest:	 
	 	 
	 /s/ Rima Goldshmidt 
      

      Rima Goldshmidt	 
	Assistant Secretary	 
	 	 
	CODE
      7-INYX- Loan & Security Agr.	 

 

77--------------------------------------------------------------------------------
        ACQUISITION OF ANTI-DEPRESSION BIOHEALTH SOLUTIONS, INC. (ADBSI).
                                       by
                               SWISS MEDICA, INC.
--------------------------------------------------------------------------------

                        AGREEMENT AND PLAN OF ACQUISITION

      This Agreement and Plan of Acquisition (this "Agreement") is entered into
by and between Anti-Depression BioHealth Solutions, Inc., a Florida corporation,
("ADBSI"), UTEK CORPORATION, a Delaware corporation, (UTEK), and Swiss Medica,
Inc., a Delaware corporation, ("SWME").

      WHEREAS, UTEK owns 100% of the issued and outstanding shares of common
stock of ADBSI (the "ADBSI Shares"); and

      WHEREAS, before the Closing (as defined below), ADBSI will acquire an
exclusive license to, among other things, develop and market patented and
proprietary dietary products developed under certain patents (the "Technology"),
pursuant to a License Agreement to be entered into between ADBSI and Back Bay
Scientific, Inc. ("BBS" or "BACK BAY") in the form attached hereto as Exhibit A
(the "BBS License Agreement").

      WHEREAS, BBS obtained its rights to the Technology pursuant to a License
Agreement BBS entered into with Wurt Corporation, the owner of the Technology,
on or about January 5th, 2001, a true and correct copy of which is attached
hereto as Exhibit B (the "Wurt License Agreement").

      WHEREAS, before the Closing, and in connection with the BBS License
Agreement, ADBSI shall enter (a) into a Consulting Agreement with BBS in the
form attached hereto as Exhibit C (the "Consulting Agreement"), pursuant to
which BBS shall, among other things, provide consulting services to ADBSI in
connection with the Technology, and (b) an Option Agreement with BBS in the form
attached hereto as Exhibit D (the "Option Agreement," and together with the BBS
License Agreement and the Consulting Agreement, the "Ancillary Agreements"),
pursuant to which ADBSI shall obtain an option to obtain an exclusive license
with respect to certain future proprietary products created by ADBSI.

      WHEREAS, SWME desires to purchase from UTEK, and UTEK desires to sell to
SWME, all of the ADBSI Shares (the "Acquisition"); and

      WHEREAS, for federal income tax purposes, it is intended that the
Acquisition qualifies within the meaning of Section 368 (a)(1)(B) of the
Internal Revenue Code of 1986, as amended (Code).

      NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are by
this Agreement acknowledged, the parties agree as follows:

                                    ARTICLE 1
                         THE STOCK-FOR-STOCK ACQUISITION

      1.01  The Acquisition
            ---------------

            (a) Acquisition Agreement. Subject to the terms and conditions of
this Agreement, upon the Closing, as defined below, all ADBSI Shares shall be
acquired from UTEK by SWME in accordance with the respective corporation laws of
their state and the provisions of this Agreement and the separate corporate
existence of ADBSI, as a wholly-owned subsidiary of SWME, shall continue after
the closing.

                                  Page 1 of 21
<PAGE>

            (b) Effective Date. The Acquisition shall become effective upon the
Closing (as defined below).

      1.02  Exchange of Stock. Upon the Closing, by virtue of the Acquisition,
all of the ADBSI Shares that are issued and outstanding as of the Closing, shall
be exchanged for a total of 2,068,966* unregistered shares of Class A common
stock of SWME (the "SWME Shares") (* said number of SWME shares to be adjusted
to a value of $600,000 based on the average closing price of the SWME Shares on
the over-the-counter bulletin board for the 10 trading days immediately
preceding the date of the Closing; as follows:

              UTEK Corporation                             1,862,069 shares
              Back Bay Scientific, Inc.                      206,897 shares
                                                           ----------------
     Total Shares:                                         2,068,966 shares

      1.03  Cash Consideration. Upon the Closing, SWME shall pay UTEK $96,673.00
in cash. --

      1.04  Effect of Acquisition.

            (a) Rights in ADBSI Cease. At and after the Effective Date, the
holder of each certificate of common stock of ADBSI shall cease to have any
rights as a shareholder of ADBSI.

            (b) Closure of ADBSI Shares Records. From and after the Effective
Date, the stock transfer books of ADBSI shall be closed, and there shall be no
further registration of stock transfers on the records of ADBSI.

      1.05  Closing. Subject to the terms and conditions of this Agreement, the
Closing of the Acquisition shall take place on March 31st, 2005 (the "Closing").

                                    ARTICLE 2
                         REPRESENTATIONS AND WARRANTIES

      2.01 Representations and Warranties of UTEK and ADBSI. UTEK and ADBSI
jointly and severally represent and warrant to SWME that the facts set forth
below are true and correct:

            (a) Organization. ADBSI and UTEK are corporations duly organized,
validly existing and in good standing under the laws of Florida, and Delaware,
respectively, and they have the requisite power and authority to conduct their
business and consummate the transactions contemplated by this Agreement. True,
correct and complete copies of the articles of incorporation, bylaws and all
corporate minutes of ADBSI have been provided to SWME and such documents are
presently in effect and have not been amended or modified.

            (b) Authorization. The execution of this Agreement and the
consummation of the Acquisition and the other transactions contemplated by this
Agreement have been duly authorized by the board of directors and shareholders
of ADBSI and the board of directors of UTEK; no other corporate action by the
respective parties is necessary in order to execute, deliver, consummate and
perform their respective obligations hereunder; and ADBSI and UTEK have all
requisite corporate and other authority to execute and deliver this Agreement
and consummate the transactions contemplated by this Agreement.

                                  Page 2 of 21
<PAGE>

            (c) Capitalization. The authorized capital stock of ADBSI consists
of 1,000,000 shares of common stock with a par value $1.00 per share. As of the
date of this Agreement, 1,000 ADBSI Shares are issued and outstanding and are
all held by UTEK. All of the issued and outstanding ADBSI Shares have been duly
authorized and validly issued and are fully paid and non-assessable shares and
have not been issued in violation of any preemptive or other rights of any other
person or any applicable laws. ADBSI is not authorized to issue any preferred
stock. All dividends on ADBSI Shares which have been declared prior to the date
of this Agreement have been paid in full. There are no outstanding options,
warrants, commitments, calls or other rights or agreements requiring ADBSI to
issue any ADBSI Shares or securities convertible into ADBSI Shares to anyone for
any reason whatsoever. None of the ADBSI Shares is subject to any change, claim,
condition, interest, lien, pledge, option, security interest or other
Encumbrance (as defined below) or restriction, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership. Upon delivery of the ADBSI Shares to SWME as herein provided, SWME
will acquire good and marketable title to the ADBSI Shares, free and clear of
any Encumbrances. ADBSI does not presently own or control, directly or
indirectly, and has no stock or other interest as owner or principal in, any
other entity.

      The term "Encumbrance(s)" means and includes (x) any security interest,
mortgage, deed of trust, charge, pledge, proxy, adverse claim, lien, equity,
power of attorney, or restriction of any kind, including, but not limited to,
any restriction or servitude on the use, transfer, receipt of income, or other
exercise of any attributes of ownership, and (y) any Uniform Commercial Code
financing statements, or other public filing, notice, or record that by its
terms purports to evidence or notify interested parties of any of the matters
referred to in clause (x) above that has not been terminated or released by
another proper public filing, notice or record.

            (d) Binding Effect. The execution, delivery, performance and
consummation of this Agreement, the Ancillary Agreements (collectively, the
"Transaction Documents"), the Acquisition and the transactions contemplated by
the Transaction Documents will not violate any obligation to which ADBSI or UTEK
is a party and will not create a default under any such obligation or under any
agreement to which ADBSI or UTEK is a party. This Agreement constitutes a legal,
valid and binding obligation of each of UTEK and ADBSI, enforceable against each
in accordance with its terms, except as the enforcement may be limited by
bankruptcy, insolvency, moratorium, or similar laws affecting creditor's rights
generally and by the availability of injunctive relief, specific performance or
other equitable remedies.

            (e) Litigation Relating to this Agreement. There are no suits,
actions or proceedings pending or, to the best of ADBSI's and UTEK's knowledge,
information and belief, threatened, which seek to enjoin the Acquisition or the
transactions contemplated by the Transaction Documents which, if adversely
decided, could have a Material Adverse Effect. For purposes of this Agreement,
"Material Adverse Effect" means an action, event or occurrence if it has, or
could reasonably be expected to have, a material adverse effect on the
Acquisition, the consummation of any of the transactions contemplated by any of
the Transaction Documents, or on the assets, liabilities, business, financial
condition or results of operations of ADBSI.

            (f) No Conflicting Agreements. Neither the execution and delivery of
the Transaction Documents, nor the fulfillment of or compliance by ADBSI or UTEK
with the terms or provisions of the Transaction Documents, or any other
documents or agreements, nor the consummation of the transactions contemplated
by the Transaction Documents will (a) cause a breach of the terms, conditions or
provisions of, or constitute a default under, or result in a violation of,
ADBSI's or UTEK's articles of incorporation or bylaws, or any agreement,
contract, instrument, order, judgment or decree to which ADBSI or UTEK is a
party or by which ADBSI or UTEK or any of their respective assets is bound, (b)
violate any provision of any applicable law, rule or regulation or any order,
decree, writ or injunction of any court or government entity which would
materially affect UTEK's or ADBSI's respective assets or businesses, or (c)
result in the suspension, revocation, impairment, forfeiture or non-renewal of
any material permit, license, authorization or approval applicable to ADBSI or
UTEK, or either of their businesses or operations or any of their assets or
properties.

            (g) Consents. No consent from or approval of any court, governmental
entity or any other person is necessary in connection with the execution and
delivery of this Agreement by ADBSI and UTEK or the performance of the
obligations of ADBSI or UTEK hereunder, or under any other agreement to which
ADBSI or UTEK is a party, including, but not limited to, the Ancillary
Agreements; and the consummation of the transactions contemplated by this
Agreement will not require the approval of any entity or person in order to
prevent the termination of the Technology, the Ancillary Agreements, or any
other material right, privilege, license or agreement relating to ADBSI or its
assets or business.

                                  Page 3 of 21
<PAGE>

            (h) Title to Assets. There is no financing statement under the
Uniform Commercial Code or similar law that names ADBSI as debtor, affects or
could affect any of the ADBSI's assets or its business, or has been filed in any
jurisdiction and is still in effect. In addition, ADBSI is not a party to or
bound by any agreement or arrangement authorizing any party to file any such
financing statement. The Ancillary Agreements are the only agreements to which
ADBSI is a party or otherwise bound, and which along with the assets shown in
the financial statements for ADBSI which are attached hereto as Exhibit E, are
the sole assets of ADBSI. ADBSI currently has, and as of the Closing will have,
good and marketable title to all of its assets, free and clear of all liens,
claims, charges, mortgages, options, security agreements and other Encumbrances
of every kind or nature whatsoever.

            (i) Intellectual Property

                  (1) BBS has all rights, power, authority, ownership and
entitlement to file, prosecute and maintain in effect the Patent and Patent
applications with respect to the Inventions described in the BBS License
Agreement.

                  (2) Wurt Corporation granted to BBS the exclusive license to
develop, make, have made, use, sell, offer to sell, lease, market, import and
export PMS Escape, including the right to enter into agreements for the
manufacture, distribution and marketing of the products and/or seek out license
agreements with third parties. Wurt Corporation granted to BBS the exclusive
right and the full authority to enter into any commercial or license agreements,
including, but not limited to, the License Agreement, and BBS has full
responsibility for all aspects of implementing such agreements. All costs
associated with such agreements shall be borne exclusively by BBS. Furthermore,
BBS has the exclusive rights to all revenues derived from the Wurt License
Agreement in connection with, among other things, NOVEL THERAPEUTIC CARBOHYDRATE
BLENDS USEFUL FOR AIDING PREMENSTRUAL SYNDROME which comprise PMS Escape and the
PMS Escape trademark.

                  (3) ADBSI represents and warrants that subject to the terms of
the BBS License Agreement, the Patent Rights and the Intellectual Property
Rights are held by ADBSI without any conflict with or infringement of the valid
rights of others. ADBSI also represents and warrants that the consummation of
the transactions contemplated by the Transaction Documents, will not result in
the termination or impairment of BBS's rights under the Wurt License Agreement,
or ADBSI's rights under the BBS License Agreement. UTEK makes the
representations and warranties included in this Section 2.01(i)(3), to the best
of its knowledge.

                  (4) The License Agreement between BACK BAY and ADBSI covering
the Inventions is legal, valid, binding and will be enforceable in accordance
with its terms as contained in Exhibit A. -

                  (5) Except as otherwise set forth in this Agreement, SWME
acknowledges and understands that UTEK and ASBSI make no representations and
provides no assurances that the rights to the Technology and Intellectual
Property contained in the License Agreement do not, and will not in the future,
infringe or otherwise violate the rights of third parties, and

                  (6) Except as otherwise expressly set forth in this Agreement,
UTEK and ADBSI make no representations and extends no warranties of any kind,
either express or implied, including, but not limited to warranties of
merchantability, fitness for a particular purpose, non-infringement and validity
of the Intellectual Property.

                                  Page 4 of 21

<PAGE>

            (j) Liabilities of ADBSI. On the date hereof and as of the Closing,
ADBSI does not have (and will not have) any liabilities except for those under
the Transaction Documents. When used in this Agreement, "liabilities" means
debts, liabilities, obligations, duties and responsibilities of any kind and
description, whether absolute or contingent, monetary or non-monetary, direct or
indirect, known or unknown or matured or unmatured, or of any other nature.

            (k) Financial Statements. The unaudited financial statements of
ADBSI, including a balance sheet dated as of March 1, 2005, attached to Exhibit
E and made a part of this Agreement (the "Financial Statements") have been
prepared from the books and records of ADBSI, are in all respects, true,
complete and correct and present fairly ADBSI's financial position and the
results of its operations on the dates and for the periods shown in this
Agreement. Such Financial Statements have been prepared in accordance with
generally accepted accounting principles. ADBSI has not engaged in any business
not reflected in its financial statements. There have been no material adverse
changes in the nature of its business, prospects, the value of assets or the
financial condition since the date of its Financial Statements. There is no
information known to ADBSI or UTEK that would prevent the financial statements
of ADBSI from being audited in accordance with generally accepted accounting
principles. The records and books of account of ADBSI reflect all transactions
thereof and have been regularly kept and maintained consistently applied. None
of the Financial Statements, including the notes thereto, contains any untrue
statement of fact, or omits to state any fact necessary in order to make the
statements contained in this paragraph or in the Financial Statements not
misleading.

            (l) Taxes. All returns, reports, statements and other similar
filings required to be filed by ADBSI with respect to any federal, state, local
or foreign taxes, assessments, interests, penalties, deficiencies, fees and
other governmental charges or impositions have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such tax returns
and other related filings are required to be filed; all such tax returns
properly reflect all liabilities of ADBSI for taxes for the periods, property or
events covered by this Agreement; and all taxes, whether or not reflected on
those tax returns, and all taxes claimed to be due from ADBSI by any taxing
authority, have been properly paid, except to the extent reflected on ADBSI's
Financial Statements. ADBSI has not received any notice of assessment or
proposed assessment in connection with any tax returns, nor is ADBSI a party to
or to the best of its knowledge, expected to become a party to any pending or
threatened action, proceeding, or investigation relating to, or any assessment
or collection of, taxes. ADBSI has not extended or waived the application of any
statute of limitations of any jurisdiction regarding the assessment or
collection of any taxes. There are no tax liens (other than any lien which
arises by operation of law for current taxes not yet due and payable) on any of
its assets. There is no basis for any additional assessment of taxes, interest
or penalties. ADBSI has made all deposits required by law to be made with
respect to employees' withholding and other employment taxes, including without
limitation the portion of such deposits relating to taxes imposed upon ADBSI.
ADBSI is not and has never been a party to any tax sharing agreements with any
other person or entity.

            (m) Absence of Certain Changes or Events. From the date of the full
execution of the Term Sheet until the Closing, neither ADBSI nor UTEK have not,
and without the written consent of SWME, and they will not have:

                  (1) Sold, granted, encumbered, licensed, assigned, permitted
to lapse or transferred any of its assets, or any rights related thereto,
including without limitation the Intellectual Property, any of the Ancillary
Agreements, or any other material asset;

                  (2) Amended or terminated the Ancillary Agreements or any
other agreements, or done any act or omitted to do any act which would cause the
breach of the Ancillary Agreements or any other agreement;

                  (3) Suffered any damage, destruction or loss whether or not in
control of ADBSI;

                  (4) Made any commitments or agreements for capital
expenditures or otherwise;

                                  Page 5 of 21
<PAGE>

                  (5) Entered into any transaction or made any commitment not
disclosed in writing to SWME;

                  (6) Incurred any obligation or liability for borrowed money in
the aggregate in excess of $500;

                  (7) Suffered any other event of any character, which is
reasonable to expect, would have a Material Adverse Affect; or

                  (8) Taken any action that could reasonably be foreseen to make
any of the representations or warranties made by ADBSI or UTEK untrue as of the
date of this Agreement, or as of the Closing.

            (n) Agreements. Except for the Ancillary Agreements, ADBSI is not a
party to any agreement, nor contemplates entering into any agreement with any
third party, and ADBSI is not in default under any of the Ancillary Agreements.
In addition:

                  (1) There are no outstanding promissory notes, mortgages,
indentures, deeds of trust, security agreements and other agreements and
instruments relating to the borrowing of money by or any extension of credit to
ADBSI; and

                  (2) There are no outstanding operating agreements, lease
agreements or similar agreements by which ADBSI is bound; and

                  (3) The complete final drafts of the Ancillary Agreements and
the Wurt License Agreement are attached as Exhibits hereto; and

                  (4) Except as set forth in (3) above, there are no outstanding
licenses to or from any other party, including, but not limited to, licenses of
any intellectual property or trade names; and

                  (5) There are no outstanding agreements or commitments to
sell, lease, license or otherwise dispose of any of ADBSI's property; and

                  (6) There are no breaches of any agreement to which ADBSI is a
party.

            (o) Compliance with Laws. ADBSI is in compliance with all applicable
laws, rules, regulations and orders promulgated by any federal, state or local
government body or agency relating to its business and operations.

            (p) Litigation. There is no suit, action or any arbitration,
administrative, legal or other proceeding of any kind or character, or any
governmental investigation pending or to the best knowledge of ADBSI or UTEK,
threatened against ADBSI or UTEK, which could have an adverse effect on the
Technology, the rights granted under the BBS License Agreement, the transactions
contemplated by the Transaction Documents, or on ADBSI's assets or business
(financial or otherwise), and neither ADBSI nor UTEK is in violation of or in
default with respect to any judgment, order, decree or other finding of any
court or government authority relating to the assets, business or properties of
ADBSI or the transactions contemplated by the Transaction Documents. There are
no pending or threatened actions or proceedings before any court, arbitrator or
administrative agency, which would, if adversely determined, individually or in
the aggregate, could have a Material Adverse Affect.

            (q) Employees. ADBSI has no and never had any employees. ADBSI is
not a party to or bound by any employment agreement or any collective bargaining
agreement with respect to any employees. ADBSI is not in violation of any law,
regulation relating to employment of employees.

                                  Page 6 of 21
<PAGE>

            (r) Other Material Issues. Neither ADBSI nor UTEK has any knowledge
of anythreatened or existing occurrence, action or development that could cause
a Material Adverse Affect.

            (s) Employee Benefit Plans. ADBSI does not have and has never had
any employee benefit plans, and there are no commitments to create any,
including without limitation as such term is defined in the Employee Retirement
Income Security Act of 1974, as amended, in effect, and there are no outstanding
or un-funded liabilities nor will the execution of this Agreement and the
actions contemplated in this Agreement result in any obligation or liability to
any present or former employee.

            (t) Books and Records. The books and records of ADBSI are complete
and accurate in all material respects, fairly present its business and
operations, have been maintained in accordance with good business practices, and
applicable legal requirements, and accurately reflect in all material respects
its business, financial condition and liabilities.

            (u) No Broker's Fees. Neither UTEK nor ADBSI has incurred any
investment banking, advisory or other similar fees or obligations in connection
with this Agreement or the transactions contemplated by this Agreement.

            (v) Restrictions on Business Activities. Except as otherwise set
forth in the BBS License Agreement, there is no agreement (non-compete or
otherwise), commitment, judgment, injunction, order or decree to which ADBSI is
a party or which is otherwise binding upon ADBSI, which has or reasonably could
be expected to have the effect of prohibiting or impairing any business practice
of ADBSI contemplated by this Agreement or the Ancillary Agreements.

            (w) Full Disclosure. All representations or warranties of UTEK and
ADBSI contained herein or in any Schedule or Exhibit are true, correct and
complete in all material respects as of the date of this Agreement and shall be
true, correct and complete in all material respects as of the Closing as if they
were made on the date of the Closing.

      2.02  Representations and Warranties of SWME. SWME represents and warrants
to UTEK and ADBSI that the facts set forth are true and correct.

            (a) Organization. SWME is a corporation duly organized, validly
existing and in good standing under the laws of Delaware.

            (b) Authorization. The execution of this Agreement and the
consummation of the Acquisition and the other transactions contemplated by this
Agreement have been duly authorized by the board of directors of SWME; no other
corporate action on SWME's part is necessary in order to execute, deliver,
consummate and perform their obligations hereunder; and SWME has all requisite
corporate and other authority to execute and deliver this Agreement and
consummate the transactions contemplated by this Agreement.

            (c) Capitalization. The authorized capital stock of SWME consists of
(i) 10,000,000 shares of preferred stock with par value $0.001 per share, none
of which are issued and outstanding, (ii) 100,000,000 shares of Class A common
stock with par value $0.001 per share (the "SWME Shares"), 80,703,162 of which
(not including the 2,068,966 SWME Shares issued to UTEK and to be adjusted at
the Closing) will be issued and outstanding as of the Closing, and (iii)
50,000,000 shares of Class B common stock with par value $.001 per share,
2,000,000 shares of which are issued and outstanding. All issued and outstanding
SWME Shares have been duly and validly issued and are fully paid and
non-assessable shares and have not been issued in violation of any preemptive or
other rights of any other person or any applicable laws.

                                  Page 7 of 21
<PAGE>

            (d) Binding Effect. The execution, delivery, performance and
consummation of the Acquisition and the transactions contemplated by this
Agreement will not violate any obligation to which SWME is a party and will not
create a default hereunder, and this Agreement constitutes a legal, valid and
binding obligation of SWME, enforceable in accordance with its terms, except as
the enforcement may be limited by bankruptcy, insolvency, moratorium, or similar
laws affecting creditor's rights generally and by the availability of injunctive
relief, specific performance or other equitable remedies.

            (e) Litigation Relating to this Agreement. There are no suits,
actions or proceedings pending against SWME or to its knowledge threatened which
seek to enjoin the Acquisition or the transactions contemplated by the
Transaction Documents, or which, if adversely decided, would have a materially
adverse effect on SWME's business, results of operations, assets, or prospects.

            (f) No Conflicting Agreements. Neither the execution and delivery of
this Agreement nor the fulfillment of or compliance by SWME with the terms or
provisions of this Agreement will result in a breach of the terms, conditions or
provisions of, or constitute default under, or result in a violation of, SWME's
corporate charter or bylaws, or any agreement, contract, instrument, order,
judgment or decree to which it is a party or by which it or any of its assets
are bound, or violate any provision of any applicable law, rule or regulation or
any order, decree, writ or injunction of any court or governmental entity which
materially affects its assets or business.

            (g) Consents. Assuming the correctness of UTEK's and ADBSI's
representations and warranties, no consent from or approval of any court,
governmental entity or any other person is necessary in connection with SWME's
execution and delivery of this Agreement; and the consummation by SWME of the
transactions contemplated by this Agreement will not require the approval of any
entity or person in order to prevent the termination of any material right,
privilege, license or agreement relating to SWME or its assets or business.

            (h) Financial Statements. The financial statements of SWME contained
in the Form 10-K for the period ending December 31, 2004, which is attached
hereto as Exhibit F, present fairly SWME's financial position and the results of
its operations on the dates and for the periods specified therein. SWME has not
engaged in any business not reflected in its financial statements. There have
been no material adverse changes in the nature of its business, prospects, the
value of assets or the financial condition since the date of its financial
statements. There are no outstanding obligations or liabilities of SWME except
as specifically set forth in SWME's financial statements.

            (i) Full Disclosure. All representations or warranties of SWME are
true, correct and complete in all material respects on the date of this
Agreement and shall be true, correct and complete in all material respects as of
the Closing as if they were made as of the Closing. No statement made by them in
this Agreement or in the exhibits to this Agreement or any document delivered by
them or on their behalf pursuant to this Agreement contains an untrue statement
of material fact or omits to state all material facts necessary to make the
statements in this Agreement not misleading in any material respect in light of
the circumstances in which they were made.

            (j) Compliance with Laws. SWME is in compliance with all applicable
laws, rules, regulations and orders promulgated by any federal, state or local
government body or agency relating to its business and operations, except where
any such non-compliance would not have a material adverse effect on SWME.

                                  Page 8 of 21
<PAGE>

                  (k) Litigation. There is no suit, action or any arbitration,
administrative, legal or other proceeding of any kind or character, or any
governmental investigation pending or, to the best knowledge of SWME, threatened
against SWME materially affecting its assets or business (financial or
otherwise), and SWME is not in violation of or in default with respect to any
judgment, order, decree or other finding of any court or government authority.
There are no pending or threatened actions or proceedings before any court,
arbitrator or administrative agency, which would, if adversely determined,
individually or in the aggregate, materially and adversely affect its assets or
business.

      2.03 Investment Representations of UTEK. UTEK represents and warrants to
SWME that:

            (a) General. It has such knowledge and experience in financial and
business matters as to be capable of evaluating the risks and merits of an
investment in SWME Shares pursuant to the Acquisition. It is able to bear the
economic risk of the investment in SWME Shares, including the risk of a total
loss of the investment in SWME Shares. The acquisition of SWME Shares is for its
own account and is for investment and not with a view to the distribution of
this Agreement. Except a permitted by law, it has a no present intention of
selling, transferring or otherwise disposing in any way of all or any portion of
the shares. All information that it has supplied to SWME is true and correct. It
has conducted all investigations and due diligence concerning SWME to evaluate
the risks inherent in accepting and holding the shares which it deems
appropriate, and it has found all such information obtained fully acceptable. It
has had an opportunity to ask questions of the officers and directors of SWME
concerning SWME Shares and the business and financial condition of and prospects
for SWME, and the officers and directors of SWME have adequately answered all
questions asked and made all relevant information available to them. UTEK is an
accredited investor, as the term is defined in Regulation D, promulgated under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.

            (b) Stock Transfer Restrictions. UTEK acknowledges that the SWME
Shares will not be registered and UTEK will not be permitted to sell or
otherwise transfer the SWME Shares in any transaction in contravention of the
following legend, which will be imprinted in substantially the following form on
the stock certificate representing SWME Shares:

              THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE
              NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933,
              AS AMENDED (THE ACT), OR UNDER THE SECURITIES  LAWS OF
              ANY STATE.  THESE SECURITIES MAY NOT BE SOLD,  OFFERED
              FOR SALE, ASSIGNED,  TRANSFERRED OR OTHERWISE DISPOSED
              OF UNLESS REGISTERED  PURSUANT TO THE PROVISION OF THE
              ACT AND THE LAWS OF SUCH  STATES  UNDER  WHOSE  LAWS A
              TRANSFER   OF   SECURITIES   WOULD  BE  SUBJECT  TO  A
              REGISTRATION REQUIREMENT,  UNLESS UTEK CORPORATION HAS
              OBTAINED  AN  OPINION  OF  COUNSEL  STATING  THAT SUCH
              DISPOSITION   IS  IN  COMPLIANCE   WITH  AN  AVAILABLE
              EXEMPTION FROM SUCH REGISTRATION.

                                    ARTICLE 3
                          TRANSACTIONS PRIOR TO CLOSING

      3.01. Corporate Approvals. Prior to the Closing, each of the parties shall
submit this Agreement to its board of directors and when necessary, its
respective shareholders and obtain approval of this Agreement. Copies of
corporate actions taken shall be provided to each party.

      3.02 Access to Information. Each party agrees to permit, upon reasonable
notice, the attorneys, accountants, and other representatives of the other
parties reasonable access during normal business hours to its properties and its
books and records to make reasonable investigations with respect to its affairs,
and to make its officers and employees available to answer questions and provide
additional information as reasonably requested.

                                  Page 9 of 21
<PAGE>

      3.03 Expenses. Each party agrees to bear its own expenses in connection
with the negotiation and consummation of the - Acquisition and the transactions
contemplated by this Agreement.

      3.04 Covenants. Except as permitted in writing, each party agrees that it
will:

            (a) Use its good faith efforts to obtain all requisite licenses,
permits, consents, approvals and authorizations necessary in order to promptly
consummate the Acquisition; and

            (b) Notify the other parties upon the occurrence of any event which
would have a materially adverse effect upon the Acquisition or the transactions
contemplated by this Agreement or upon the business, assets or results of
operations; and

            (c) Not modify its corporate structure, except as necessary or
advisable in order to consummate the Acquisition and the transactions
contemplated by this Agreement.

                                    ARTICLE 4
                              CONDITIONS PRECEDENT

      The obligation of the parties to consummate the Acquisition and the
transactions contemplated by this Agreement are subject to the following
conditions that must be satisfied or waived in writing by the party or parties
to which such condition precedent is intended to benefit:

      4.01. Each party must obtain the approval of its board of directors, and
if applicable, its shareholders, and such approval shall not have been rescinded
or restricted.

      4.02. Each party shall obtain all requisite licenses, permits, consents,
authorizations and approvals required to complete the Acquisition and the
transactions contemplated by this Agreement or the Ancillary Agreements.

      4.03. There shall be no claim or litigation instituted or threatened by
any person or government authority seeking to restrain or prohibit any of the
transactions contemplated by this Agreement or the Ancillary Agreements, or
which challenges the right, title and interest of UTEK in the ADBSI Shares or
the right of ADBSI or UTEK to consummate the Acquisition contemplated hereunder.

      4.04. The representations and warranties of the parties shall be true and
correct in all material respects as of the Closing.

      4.05. The Technology and Intellectual Property has been prosecuted in good
faith with reasonable diligence.

      4.06. The Ancillary Agreements and the Wurt License Agreement are valid
and in full force and effect without any default.

      4.07. SWME shall have received, before the Closing, each of the following:

            (a) the stock certificates representing the ADBSI Shares, duly
endorsed (or accompanied by duly executed stock powers);

            (b) all documentation relating to ADBSI's business, all in a form
and substance satisfactory to SWME;

                                  Page 10 of 21
<PAGE>

            (c) such agreements, files and other data and documents pertaining
to ADBSI's business as SWME may reasonably request;

            (d) copies of the general ledgers and books of account of ADBSI, and
all federal, state and local income, franchise, property and other tax returns
filed by ADBSI since the inception of ADBSI;

            (e) certificates of (i) the Secretary of State of the State of
Florida as to the legal existence and good standing, as applicable, (including
tax) of ADBSI in Florida;

            (f) the original corporate minute books of ADBSI, including the
articles of incorporation and bylaws of ADBSI, and all other documents filed in
this Agreement;

            (g) all consents, assignments or related documents of conveyance
necessary to give SWME the benefit of the transactions contemplated hereunder;

            (h) such documents as may be needed to accomplish the Closing under
the corporate laws of the states of incorporation of SWME and ADBSI, and

            (i) such other documents, instruments or certificates as SWME, or
their counsel may reasonably request.

      4.08. SWME shall have completed due diligence investigation of ADBSI to
SWME's satisfaction in their sole discretion.

      4.09. SWME shall receive the resignation effective as of the Closing of
each director and officer of ADBSI.

                                    ARTICLE 5
                                   LIMITATIONS

      5.01. Survival of Representations and Warranties.

            (a) The representations and warranties made by UTEK and ADBSI shall
survive for a period of 1 year after the date of the Closing, and thereafter all
such representations and warranties shall be extinguished, except with respect
to claims then pending for which specific notice has been given during such
1-year period.

            (b) The representations and warranties made by SWME shall survive
for a period of 1 year after the date of the Closing, and thereafter all such
representations and warranties shall be extinguished, except with respect to
claims then pending for which specific notice has been given during such 1-year
period.

                                  Page 11 of 21
<PAGE>

      5.02 Limitations on Liability. Notwithstanding any other provision to this
Agreement to the contrary, neither party to this Agreement shall be liable to
the other party for any cost, damage, expense, liability or loss under this
indemnification provision until after the sum of all amounts individually when
added to all other such amounts in the aggregate exceeds $1,000 and then such
liability shall apply only to matters in excess of $1,000.

      5.03 Indemnification. UTEK and ADBSI agree to jointly and severally
indemnify, defend and hold harmless SWME, its subsidiaries, affiliates and their
respective officers, directors, employees and shareholders, against and from any
and all losses, liabilities, costs, damages (including lost profits), claims and
expenses (including, without limitation, attorneys' fees, consultants',
accountants' and disbursements) (collectively, "Damages"), which SWME may
sustain at any time by reason of UTEK's or ADBSI's breach or inaccuracy of or
failure to comply with any of the warranties, representations, conditions,
covenants or agreements made by UTEK or ADBSI in this Agreement. SWME agrees to
indemnify, defend and hold harmless UTEK, ADBSI, their subsidiaries, affiliates
and their respective officers, directors, employees and shareholders, against
and from any and all Damages, which UTEK or ADBSI may sustain at any time by
reason of SWME's breach or inaccuracy of or failure to comply with any of the
warranties, representations, conditions, covenants or agreements made by SWME in
this Agreement.

                                    ARTICLE 6
                                    REMEDIES

      6.01 Specific Performance. Each party's obligations under this Agreement
are unique. If any party should default in its obligations under this Agreement,
the parties each acknowledge that it would be extremely impracticable to measure
the resulting damages. Accordingly, the non-defaulting party, in addition to any
other available rights or remedies, may sue in equity for specific performance,
and the parties each expressly waive the defense that a remedy in damages will
be adequate.

      6.02 Costs. If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.

                                    ARTICLE 7
                                   ARBITRATION

      In the event a dispute arises with respect to the interpretation or effect
of this Agreement or concerning the rights or obligations of the parties to this
Agreement, the parties agree to negotiate in good faith with reasonable
diligence in an effort to resolve the dispute in a mutually acceptable manner.
Failing to reach a resolution of this Agreement, either party shall have the
right to submit the dispute to be settled by arbitration under the Commercial
Rules of Arbitration of the American Arbitration Association. The parties agree
that, unless the parties mutually agree to the contrary such arbitration shall
be conducted in Hillsborough, Florida. The cost of arbitration shall be borne by
the party against whom the award is rendered or, if in the interest of fairness,
as allocated in accordance with the judgment of the arbitrators. All awards in
arbitration made in good faith and not infected with fraud or other misconduct
shall be final and binding. The arbitrators shall be selected as follows: one by
SWME, one by UTEK and a third by the two selected arbitrators. The third
arbitrator shall be the chairman of the panel.

                                  Page 12 of 21
<PAGE>

                                    ARTICLE 8
                                 OTHER COVENANTS

      8.01 Confidentiality. Each of the parties acknowledge that it will have
access to certain Confidential Information (as defined below) of the other
parties, and their subsidiaries, and agrees that it will not use for its own
account or the account of any third party (except as required by law), or
disclose to any third party (except to its attorney's, accountants and other
advisors, and except as otherwise required by law), any of such other parties'
Confidential Information, and will take reasonable precautions to protect the
confidentiality of such information. "Confidential Information" includes the
contents and existence of this Agreement and the Schedules and Exhibits hereto,
and such parties' trade secrets, business plans, financial information and any
other information relating to such other parties or their subsidiaries and
affiliates, which is not generally known to the public. Each party acknowledges
that the other parties shall suffer irreparable injury not compensable by money
damages in the event of an unauthorized use or disclosure of their Confidential
Information, and therefore, agrees that such other parties shall be entitled, in
addition to any other remedy at law or equity available to such party, to
injunctive relief to prevent or curtail any such use or disclosure, threatened
or actual, without the necessity of posting a bond. Information is not
Confidential Information if it (a) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (b)
becomes known to the receiving party directly or indirectly from a source other
than the disclosing party or a person having an obligation of confidentiality to
the disclosing party; (c) becomes publicly known or otherwise ceases to be
secret or confidential, except through a breach of this Agreement; or (d) is
independently developed by the receiving party.

                                    ARTICLE 9
                                  MISCELLANEOUS

      9.01. No party may assign this Agreement or any right or obligation of it
hereunder without the prior written consent of the other parties to this
Agreement. No permitted assignment shall relieve a party of its obligations
under this Agreement without the separate written consent of the other parties.

      9.02. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective permitted successors and assigns.

      9.03. Each party agrees that it will comply with all applicable laws,
Xrules and regulations in the execution and performance of its obligations under
this Agreement.

      9.04. This Agreement shall be governed interpreted and construed by and in
accordance with the laws of the State of Florida without regard to principles of
conflicts of law.

      9.05. This Agreement constitutes a complete and entire agreement among the
parties with reference to the subject matters set forth in this Agreement. No
statement or agreement, oral or written, made prior to or at the execution of
this Agreement and no prior course of dealing or practice by either party shall
vary or modify the terms set forth in this Agreement without the prior consent
of the other parties to this Agreement. This Agreement may be amended only by a
written document signed by the parties.

      9.06 Any notice or communication required to be given hereunder may be
delivered by hand, deposited with an overnight courier, sent by confirmed
facsimile, or mailed by registered or certified mail, to the Chief Executive
Officer of the party receiving such notice, at the address or fax number for
such party as listed on the signature page to this Agreement. Notice shall be
deemed received on the date sent if sent by facsimile or personal delivery;
three days after the date sent if sent by registered or certified mail; and one
day after the date it is sent by overnight courier.

                                  Page 13 of 21
<PAGE>

      9.07. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

      9.08. This Agreement may be executed in multiple counterparts, each of
which shall constitute one and a single Agreement.

      9.09 Any party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, nor prevent that party thereafter from enforcing each and every
other provision of this Agreement. The rights granted to both parties herein are
cumulative and shall not constitute a waiver of either party's right to assert
all other legal remedies available to it under the circumstances.

      9.10 Each of the parties acknowledges that it has been represented by
independent legal counsel in connection with this Agreement and has consulted
with such legal counsel.

      9.11 The parties shall issue a joint press release approved by both
parties, announcing the existence and terms of this Agreement.

      9.12 Any facsimile signature of any part to this Agreement or to any other
agreement or document executed in connection with this Agreement should
constitute a legal, valid and binding execution by such parties.

                    [SIGNATURE PAGE TO ACQUISITION AGREEMENT]

Swiss Medica, Inc.                   Anti-Depression BioHealth Solutions, Inc.

By: /s/ Raghu Kilambi                By: /s/ Joel Edelson
   --------------------------           ------------------------------
   Raghu Kilambi,                       Joel Edelson
   Chief Executive Officer              President

   Address:                             Address:
   53 Yonge Street, 3rd Fl.             202 South Wheeler Street
   Toronto, Ontario M5E1J73             Plant City, Florida 33563
   Canada
   Fax: (416) 352-1840                  Fax:  (813) 754-2383

   Date: March 31, 2005                 Date: _________________________

                                  Page 14 of 21
<PAGE>

UTEK CORPORATION

By: /s/ Clifford M. Gross
   ----------------------------
   Clifford M. Gross, Ph.D.
   Chief Executive Officer

   Address:
   202 South Wheeler Street
   Plant City, Florida 33563
   Fax: (813) 754-2383

   Date: _____________________

                                  Page 15 of 21
<PAGE>

                                    EXHIBIT A

                              BBS License Agreement

                                  Page 16 of 21
<PAGE>

                                    EXHIBIT B

                             Wurt Licence Agreement

                                  Page 17 of 21
<PAGE>

                                    EXHIBIT C

                              Consulting Agreement

                                  Page 18 of 21
<PAGE>

                                    EXHIBIT D

                                Option Agreement

                                  Page 19 of 21
<PAGE>

                                    EXHIBIT E

                 ADBSI Financial Statements as of March 30, 2005

                                  Page 20 of 21
<PAGE>

                                    EXHIBIT F

                           Swiss Medica, Incorporated

                                Current Form 10-K
                      For the Year Ending December 31, 2004
                         Including Financial Statements

                                  Page 21 of 21

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