Document:

Exhibit 10.8 Security Agreement

Exhibit 10.8

SECURITY AGREEMENT

This Security Agreement (this “Agreement”) is made and entered into effective as of December 1, 2011, by HEALTH ENHANCEMENT PRODUCTS, INC., a Nevada corporation (“Borrower”) in favor of HEP INVESTMENTS LLC, a Michigan limited liability company (“Secured Party”). 

Recitals:

A.

Borrower has delivered to Secured Party a certain Senior Secured Convertible Promissory Note, dated as of the date of this Agreement, in the original principal amount of Two Million Dollars ($2,000,000.00) (as amended, restated or otherwise modified from time to time, the “Note”).

B.

As security for the payment and performance of the indebtedness, and all other obligations of Borrower, under the Note (collectively, the “Obligations”), the Secured Party has required that Borrower execute and deliver this Agreement.

C.

Borrower has agreed to secure the Obligations by granting Secured Party a security interest in the Collateral (as defined below).

Agreements:

NOW, THEREFORE, in consideration of the Recitals and the covenants and agreements contained in this Agreement, Borrower hereby agree as follows:

1.

Security Interest.  To secure payment of the Obligations, Borrower hereby grants to Secured Party a continuing security interest in and to all of Borrower’s rights, title and interest in and to all of its property of any kind or description, tangible and intangible personal property, assets and rights, wherever located, whether now existing or owned or hereafter arising or acquired and the proceeds and products therefrom, including, without limitation, the following (collectively, the “Collateral”):

(a)

All Accounts, including, without limitation, accounts receivable, insurance receivables and prepaid premiums, if any, and all Goods whose sale, lease or other disposition has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, Borrower, or rejected or refused by an Account Debtor; 

(b)

All Chattel Paper, including, without limitation, Electronic Chattel Paper and liens and lien rights on customer property; Documents; Instruments, including, without limitation, Promissory Notes; Letter of Credit Rights and proceeds of letters of credit; Supporting Obligations; Liabilities secured by real estate; Commercial Tort Claims and General Intangibles, including, without limitation, Payment Intangibles and Software; 

(c)

All Inventory, including, without limitation, raw materials, work in process, materials and finished goods leased by Borrower as lessor or held for sale or lease or furnished or to be furnished under contracts of service or used or consumed in a business; 

(d)

All Goods and all Equipment; 

(e)

All Securities, Investment Property and Deposit Accounts;

(f)

All products of, additions and accessions to, and substitutions, betterments and replacements for the foregoing property; 

(g)

All sums at any time credited by or due from Secured Party to Borrower; 

(h)

All property in which Borrower has an interest now or at any time hereafter coming into the possession or under the control of Secured Party or in transit by mail or carrier to or from Secured Party or in possession of or under the control of any third party acting on Secured Party’s behalf without regard to whether Secured Party received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether Secured Party has conditionally released the same (excluding, nevertheless, any of the foregoing property of Borrower which now or any time hereafter is in possession or control of Secured Party under any written trust agreement wherein Secured Party is trustee and Borrower is trustor); and 

(i)

All Proceeds (whether Cash Proceeds or Noncash Proceeds) of the foregoing property, including, without limitation, proceeds of insurance payable by reason of loss or damage to the foregoing property and of eminent domain or condemnation awards.

Terms used and not otherwise defined in this Agreement shall have the meaning given such terms in the Michigan Uniform Commercial Code (the “UCC”).  In the event the meaning of any term defined in the UCC is amended after the date of this Agreement, the meaning of such term as used in this Agreement shall be that of the more encompassing of: (i) the definition contained in the UCC prior to the amendment, and (ii) the definition contained in the UCC after the amendment.

2.

Perfection of Security Interest.  Borrower hereby irrevocably authorizes Secured Party to file financing statement(s) and notices describing the Collateral in all public offices deemed necessary by Secured Party (including the United States Patent and Trademark Office), and to take any and all actions, including, without limitation, filing all financing statements, continuation financing statements and all other documents that Secured Party may reasonably determine to be necessary to perfect and maintain Secured Party’s security interests in the Collateral. Borrower shall have possession of the Collateral, except where expressly otherwise provided in this Agreement or where Secured Party chooses to perfect its security interest by possession, whether or not in addition to the filing of a financing statement.  Where Collateral is in the possession of a third party, Borrower will join with Secured Party in notifying the third party of the Secured Party’s security interest and obtaining an acknowledgement from the third party that it is holding the Collateral for the benefit of Secured Party.  Borrower shall pay the cost of filing or recording all financing statement(s) and other documents.  Borrower agrees to promptly execute and deliver to Secured Party all financing statements, continuation financing statements, assignments and all other documents that Secured Party may reasonably request in form satisfactory to Secured Party to perfect and maintain Secured Party’s security interests in the Collateral. In order to fully consummate all of the transactions contemplated under this Agreement, Borrower shall make appropriate entries on its books and records disclosing Secured Party’s security interests in the Collateral.

3.

Warranties and Representations.  Borrower represents and warrants that: (a) Borrower has rights in or the power to transfer the Collateral and its title to the Collateral is free and clear of all liens, claims or security interests; (b)  the Collateral, wherever located, is covered by this Agreement; (c) there are no actions or proceedings which are threatened or pending against Borrower which could reasonably be expected to result in any material adverse change in Borrower’s financial condition or which could reasonably be expected to materially affect any of the Collateral; (d) the Borrower’s exact legal name is as set forth in the first paragraph of this Agreement; (e) Borrower has duly filed all federal, state, and other governmental tax returns which Borrower is required by law to file, and will continue to file same during such time as any of the Obligations remain owing to Secured Party, and all such taxes required to be paid have been paid, in full; (f) the execution and delivery of this Agreement and any instruments evidencing Obligations will neither violate nor constitute a breach of any agreement or restriction of any type to which Borrower is a party or is subject; and (g) Borrower is or will become the owner of the Collateral free from any liens, encumbrances or security interests, except for this security interest and existing liens disclosed to and accepted by the Secured Party in writing, and will defend the Collateral against all claims and demands of all persons at any time claiming any interest in it.  

4.

Covenants.  Borrower covenants and agrees that while any of the Obligations remain unperformed and unpaid it will: (a) preserve its legal existence and not, in one transaction or a series of related transactions, merge into or consolidate with any other entity, or sell all or substantially all of its assets; (b) not change the state in which it is organized; (c) neither change its name, form of business entity nor address of its chief executive office without giving written notice to Secured Party at least thirty (30) days prior to the effective date of such change, and Borrower agrees that all documents, instruments, and agreements demanded by Secured Party in response to such change shall be prepared, filed, and recorded at Borrower’s expense prior to the effective date of such change; (d) not use the Collateral, nor permit the Collateral to be used, for any unlawful purpose; (e) maintain the Collateral in working condition and repair; and (f) indemnify and hold Secured Party harmless against claims of any persons or entities not a party to this Agreement concerning disputes arising over the Collateral.

5.

Insurance, Taxes, Etc.  Borrower has the risk of loss of the Collateral. Borrower shall: (a) pay promptly all taxes, levies, assessments, judgments, and charges of any kind upon or relating to the Collateral, to Borrower’s business, and to Borrower’s ownership or use of any of its assets, income, or gross receipts, except to the extent contested in good faith; and (b) at its own expense, keep and maintain all of the Collateral fully insured against loss or damage by fire, theft, explosion and other risks, and shall furnish Secured Party with such policies and evidence of payment of premiums upon request. If Borrower fails to obtain or maintain any of the policies required above or pay any premium in whole or in part, or shall fail to pay any such tax, assessment, levy, or charge or to discharge any such lien, claim, or encumbrance, then Secured Party, without waiving or releasing any obligation or default of Borrower hereunder, may at any time thereafter (but shall be under no obligation to do so) make such payment or obtain such discharge or obtain and maintain such policies of insurance and pay such premiums, and take such action as Secured Party deems reasonably advisable. All sums so disbursed by Secured Party, including reasonable attorney fees, court costs, expenses, and other charges, shall be part of the Obligations, covered by this Agreement, and payable upon demand together with interest at the highest rate payable in connection with any of the Obligations from the date when advanced until paid.

6.

Care, Custody, and Dealings with Collateral.  Secured Party shall have no liability to Borrower with respect to Secured Party’s care and custody of any Collateral in Secured Party’s possession and shall have no duty to sell, surrender, collect or protect the same or to preserve rights against prior parties or to take any action with respect to them beyond the custody of them, exercising that reasonable custodial care which it would exercise in holding similar interests for its own account. Secured Party shall only be liable for its acts of gross negligence. Secured Party is hereby authorized and empowered to take the following steps, subsequent to a default: (a) to deal directly with issuers, entities, owners, transfer agents and custodians to effect changes in the registered name of any such Collateral, to effect substitutions and replacements necessitated by any reason (including by reason of recapitalization, merger, acquisition, debt restructuring or otherwise), to execute and deliver receipts and to take possession of them; (b) to communicate and deal directly with payors of instruments (including securities, promissory notes, letters of credit, certificates of deposits and other instruments), which may be payable to or for the benefit of Borrower at any time, with respect to the terms of payment of them; (c) in the Borrower’s name, to agree to any extension of payment, any substitution of Collateral or any other action or event with respect to the Collateral; (d) to notify parties who have an obligation to pay or deliver anything of value (including money or securities) with respect to the Collateral to pay or deliver the same directly to Secured Party on behalf of Borrower and to receive and receipt for any such payment or delivery in Borrower’s name as an addition to the Collateral; (e) to surrender renewable certificates or any other instruments or securities forming a portion of the Collateral which may permit or require reissuance, renewal or substitution at any time and to immediately take possession of and receive directly from the issuer, maker or other obligor, the substituted instrument or securities; (f) to exercise any right which Borrower may have with respect to any portion of the Collateral, including rights to seek and receive information with respect thereto; and (g) to do or perform any other act and to enjoy all other benefits with respect to the Collateral as Borrower could in its own name.

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7.

Information.  Borrower shall permit Secured Party or its agents, upon reasonable request, to have access to, and to inspect, all the Collateral.

8.

Events of Default.  The Borrower, without notice or demand of any kind, shall be in default under this Agreement upon the occurrence and during the continuance of any “Event of Default” as defined in the Note (an “Event of Default”).

9.

Remedies Upon Default.  

(a)

Upon the occurrence of any Event of Default, Secured Party may exercise from time to time any rights and remedies including the right to immediate possession of the Collateral available to it under applicable law. Secured Party may directly contact third parties and enforce against them all rights which arise with respect to the Collateral and to which Borrower or Secured Party would be entitled. 

(b)

Borrower waives any right it may have to require Secured Party to pursue any third person for any of the Obligations. Borrower agrees, upon the occurrence of an Event of Default, to assemble at its expense all the Collateral and make it available to Secured Party at a convenient place acceptable to Secured Party. Borrower agrees to pay all costs of Secured Party of collection of the Obligations, and enforcement of rights under this Agreement, including reasonable attorney fees and legal expenses, including participation in Secured bankruptcy proceedings, and expense of locating the Collateral and expenses of any repairs to any realty or other property to which any of the Collateral may be affixed or be a part. If any notification of intended disposition of any of the Collateral is required by law, such notification, if mailed, shall be deemed reasonably and properly given if sent at least ten (10) days before such disposition, postage pre-paid, addressed to the Borrower at the address of the Borrower appearing on the Note or records of Secured Party. 

(c)

Any sale shall conform to commercially reasonable standards as provided in the UCC.  Borrower acknowledges that Secured Party may be unable to effect a public sale of all or any portion of the Collateral because of certain legal and/or practical restrictions and provisions which may be applicable to the Collateral and, therefore, may be compelled to resort to one or more private sales to a restricted group of offerees and purchasers.  Secured Party shall have no obligation to clean up or otherwise prepare the Collateral for sale. Secured Party may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Secured Party may specifically disclaim any warranties as to the Collateral. If the Secured Party resorts to one or more private sales, Secured Party shall give Borrower notice and the right to match bids.  If Secured Party sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Secured Party and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Secured Party may resell the Collateral and the Borrower shall be credited with the proceeds of sale. Secured Party shall have no obligation to marshal any assets in favor of the Borrower. BORROWER WAIVES THE RIGHT TO JURY TRIAL IN ANY PROCEEDING INSTITUTED WITH RESPECT TO THE COLLATERAL. Out of the net proceeds from sale or disposition of the Collateral, Secured Party shall retain all the Obligations then owing to it and the actual cost of collection (including reasonable attorney fees) and shall tender any excess to Borrower or its successors or assigns. If the Collateral shall be insufficient to pay the entire Obligations, Borrower shall pay to Secured Party the resulting deficiency upon demand.

(d)

Except as otherwise provided in this Agreement, Borrower expressly waives any and all claims of any nature, kind or description which it has or may have against Secured Party or its representatives, by reason of taking, selling or collecting any portion of the Collateral. Borrower consents to releases of the Collateral and to sales of the Collateral in groups, parcels or portions, or as an entirety, as Secured Party shall deem appropriate. Borrower expressly absolves Secured Party from any loss or decline in market value of any Collateral by reason of delay in the enforcement or assertion or nonenforcement of any rights or remedies under this Agreement. Borrower agrees that Secured Party shall, upon the occurrence of an Event of Default, have the right to peacefully retake any of the Collateral. Borrower waives any right it may have in such instance to a judicial hearing prior to such retaking.

(e)

Secured Party may exercise all rights and remedies provided by the UCC as it exists on the date of this Agreement or as it may be amended. 

10.

General.  

(a)

Time shall be deemed of the very essence of this Agreement. 

(b)

Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if it takes such action for that purpose as Borrower requests in writing, but failure of Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care, and failure of Secured Party to preserve or protect any rights with respect to such Collateral against any prior parties or to do any act with respect to the preservation of such Collateral not so requested by Borrower shall not be deemed a failure to exercise reasonable care in the custody and preservation of such Collateral. 

(c)

This Agreement has been delivered in Michigan and shall be construed in accordance with the laws of the State of Michigan. 

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(d)

Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 

(e)

The rights and privileges of Secured Party under this Agreement shall inure to the benefit of its successors and assigns, and this Agreement shall be binding on all assigns and successors of Borrower and all persons who become bound as a debtor to this Agreement. 

(f)

Borrower hereby expressly authorizes and appoints Secured Party to act as its attorney-in-fact for the sole purpose of executing any and all financing statements or other documents deemed necessary to perfect the security interest herein contemplated.

(g)

Any delay on the part of Secured Party in exercising any power, privilege or right under this Agreement, or under any other instrument executed by Borrower to Secured Party in connection with this Agreement, shall not operate as a waiver, and no single or partial exercise, or the exercise of any other power, privilege or right shall preclude other or further exercise, or the exercise of any other power, privilege or right. The waiver of Secured Party of any default by Borrower shall not constitute a waiver of any subsequent defaults, but shall be restricted to the specific default waived. All rights, remedies and powers of Secured Party under this Agreement are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all rights, remedies, and powers given under this Agreement or in or by any other instruments, or by the UCC or any laws now existing or enacted after the date of this Agreement.

(h)

This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.  Facsimile or photostatic copies of signatures to this Agreement shall be deemed to be originals and may be relied on to the same extent as the originals.

[Signatures on the following page]

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IN WITNESS WHEREOF, the undersigned has caused this Security Agreement to be fully executed as of the day and year first written above.

BORROWER:

HEALTH ENHANCEMENT PRODUCTS, INC.

/s/ Philip M. Rice                

By: Philip M. Rice, II, CFO

[Signature Page to Security Agreement]Exhibit 10.9 IP Security Agreement

Exhibit 10.9

PATENT, COPYRIGHT, LICENSE AND TRADEMARK SECURITY AGREEMENT

THIS PATENT, COPYRIGHT, LICENSE AND TRADEMARK SECURITY AGREEMENT (this “Agreement”) is made as of December 2, 2011, by and among HEALTH ENHANCEMENT PRODUCTS, INC., a Nevada corporation (“Borrower”), HEALTH ENHANCEMENT CORPORATION, a Nevada corporation (“HEC”), and HEPI PHARMACEUTICALS, INC., a Delaware corporation (“HEPI,” and together with Borrower and HEC, the “Obligors”), in favor of HEP INVESTMENTS LLC, a Michigan limited liability company (“Secured Party”).

Recitals:

A.

Borrower and Secured Party have entered into that certain Loan Agreement, dated as of the date of this Agreement (as amended, modified or supplemented from time to time, the “Loan Agreement”), pursuant to which Borrower has delivered to Secured Party a certain Senior Secured Convertible Promissory Note, dated as of the date of this Agreement, in the original principal amount of Two Million Dollars ($2,000,000.00), as is may be amended or restated and including all renewals and extensions thereof (the “Note”).

B.

In connection with the Loan Agreement, HEC and HEPI have delivered to Secured Party a certain Guaranty (the “Guaranty”) dated as of the date of this Agreement, guarantying repayment of all obligations under the Note. 

C.

As security for the payment and performance of the indebtedness, and all other obligations of Borrower, under the Note, and to secure the Guaranty and any and all other sums and obligations that may be due and owing from HEC and HEPI to Secured Party from time to time pursuant to the Guaranty (collectively, the “Liabilities”), the Secured Party has required that the Obligors execute and deliver this Agreement.

Agreements:

NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Obligor agrees as follows:

1. 

Incorporation of Loan Agreement.  The Loan Agreement and the terms and provisions thereof are hereby incorporated herein in their entirety by this reference thereto.  Terms used in this Agreement which are not defined in this Agreement but are defined in the Loan Agreement or that certain Security Agreement, executed by Borrower in connection with the Loan Agreement, shall have the meanings ascribed to them therein.

2. 

Grant of Security Interest, Etc.  To secure the complete and timely satisfaction of all of each Obligor’s Liabilities, each Obligor hereby grants to Secured Party a security interest in and to all of such Obligor’s right, title and interest in, to and under all of the following, whether now existing or hereafter arising:

(i)

patents and patent applications, including, without limitation, the inventions and improvements described and claimed therein, and those patents and patent applications listed on Schedule A attached hereto and made a part hereof, and (a) the reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof, and (d) all rights corresponding thereto throughout the world (all of the foregoing patents and applications, together with the items described in clauses (a) through (d), inclusive, in which such Obligor now or hereafter has any right, title or interest are sometimes hereinafter individually and/or collectively referred to as the “Patents”);

(ii)

all copyrights, copyright registrations and copyright applications including, without limitation, the copyrights and applications listed on Schedule B attached hereto and made a part hereof, and (a) renewals thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof, and (d) all rights corresponding thereto throughout the world (all of the foregoing copyrights, copyright registrations and copyright applications, together with the items described in clauses (a) through (d), inclusive, in which such Obligor now or hereafter has any right, title or interest are sometimes hereinafter individually and/or collectively referred to as the “Copyrights”);

(iii)

all such Obligor’s rights and obligations pursuant to its license agreements with any other person or persons with respect to any Patents and Copyrights, whether such Obligor is a licensor or licensee under any such license agreements, including, without limitation, the licenses listed on Schedule C attached hereto and made a part hereof, and, subject to the terms of such licenses, the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter owned by such Obligor and now or hereafter covered by such licenses (all of the foregoing is hereinafter referred to collectively as the “Patent and Copyright Licenses”);

(iv)

all service marks, trademarks, trademark or service mark registrations, trademark or service mark applications, domain names and trade names including, without limitation, the trademarks and service marks listed on Schedule D attached hereto and made a part hereof, and (a) renewals thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof, and (d) all rights corresponding thereto throughout the world (all the foregoing service marks, trademarks, registrations, applications and trade names, together with the items described in clauses (a) through (d), inclusive, with respect thereto in which such Obligor now or hereafter has any right, title or interest are sometimes hereinafter and/or collectively referred to as the “Marks”);

(v)

all such Obligor’s rights and obligations pursuant to its license agreements with any other person or persons with respect to any Marks, whether such Obligor is a licensor or licensee under any such license agreements, including, without limitation, the licenses listed on Schedule E attached hereto and made a part hereof, and, subject to the terms of such licenses, the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter owned by such Obligor and now or hereafter covered by such licenses (all of the foregoing is hererinafter referred to as “Trademark Licenses”; Patent and Copyright Licenses and Trademark Licenses are hereinafter referred to collectively as “Licenses”); and

(vi)

the goodwill of such Obligor’s business connected with and symbolized by the Marks;

provided, however, that there shall be excluded from the foregoing grant of security interest any of the existing Licenses to which any Obligor is a licensee (and any Patents, Marks and Copyrights currently licensed by others to any Obligor pursuant to such Licenses) in each case to the extent (but only to the extent) that the applicable License lawfully prohibits such grant; provided further, however, that, upon Secured Party’s request, each Obligor will use its good faith reasonable efforts to obtain any consent needed to subject any such property to this grant of security interest.

3.

Restrictions on Future Agreements.  Each Obligor agrees and covenants that until the Liabilities shall have been satisfied in full and the Loan Agreement shall have been terminated, such Obligor will not, without Secured Party’s prior written consent, take any action or enter into any agreement, including, without limitation entering into any license agreement, which is inconsistent with such Obligor’s obligations under this Agreement, and each Obligor further agrees and covenants that without Secured Party’s prior written consent it will not take any action, or permit any action to be taken by others subject to its control, including its licensees, or fail to take any action which would affect the validity or enforcement or nature of the rights transferred to Secured Party under this Agreement.  Each Obligor agrees and covenants not to sell or assign its interest in, or grant any license under, the Patents, Marks, Copyrights or Licenses, without receiving the prior written consent of Secured Party thereto.

4.

Certain Covenants, Representations and Warranties of each Obligor.  Each Obligor covenants, represents and warrants that: (i) the Patents, Marks, Copyrights and Licenses are subsisting, have not been adjudged invalid or unenforceable in whole or in part, and are not currently being challenged in any way; (ii) none of the Patents, Marks, Copyrights and Licenses have lapsed or expired or have been abandoned, whether due to any failure to pay any maintenance or other fees or make any filing or otherwise; (iii) such Obligor owns the entire right, title and interest in and to each of the Patents, Marks and Copyrights (other than those being licensed to such Obligor pursuant to the Licenses) free and clear of any liens, claims, encumbrances and security interests of every kind and nature, and the Licenses are valid and subsisting licenses with respect to the Patents, Marks, Copyrights described therein, free and clear of any liens, claims, encumbrances and security interests of every kind and nature arising by, through or under such Obligor, in each case except for (A) rights granted by such Obligor pursuant to the applicable licenses listed on Schedules C and E, and (B) liens, claims, encumbrances and security interests in favor of Secured Party pursuant to this Agreement or any other agreements executed in connection with the Loan Agreement; (iv) the Patents, Marks and Copyrights and Licenses listed on Schedules A, B, C, D and E constitute all such items in which such Obligor has any right, title or interest; (v) such Obligor has the unqualified right to enter into this Agreement and perform its terms; and (vi) such Obligor will use standards of quality in its manufacture of products sold under the Marks consistent with those currently employed by it.

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5.

New Patents, Marks, Copyrights and Licenses.  If, before the Liabilities shall have been satisfied in full and the Loan Agreement shall have been terminated, any Obligor shall (i) obtain rights to any new patentable inventions, trademarks, service marks, trademark or service mark registrations, copyrights, copyright registrations, trade names or licenses, or (ii) become entitled to the benefit of any patent, trademark or service mark application, trademark, service mark, trademark or service mark registration, copyrights, copyright registrations, license or license renewal, or patent for any reissue, division, continuation, renewal, extension, or continuation-in-part of any Patent or any improvement on any Patent, the provisions of Section 2 above shall automatically apply thereto and such Obligor shall give to Secured Party prompt written notice thereof.  Each Obligor hereby authorizes Secured Party to modify this Agreement by noting any future acquired Patents, Marks, Copyrights on Schedule A, B or D and any Licenses and licensed Patents, Marks or Copyrights on Schedules C or E, as applicable; provided, however, that the failure of Secured Party to make any such notation shall not limit or affect the obligations of any Obligor or rights of Secured Party hereunder.

6.

Royalties; Terms.  Each Obligor hereby agrees that the security interest of Secured Party in all Patents, Marks, Copyrights and Licenses as described above shall be worldwide (or in the case of the Patents, Marks and Copyrights licensed to an Obligor such smaller geographic location if any is specified for such Obligor’s use in the applicable License) and, without any liability for royalties or other related charges from Secured Party to such Obligor.  The term of the security interest granted herein shall extend until the earlier of (i) the expiration of each of the respective Patents, Marks, Copyrights and Licenses assigned hereunder, or (ii) satisfaction in full of the Liabilities and termination of the Loan Agreement.

7.

Inspection.  From and after the occurrence and during the continuance of an Event of Default and notice by Secured Party to each Obligor of Secured Party’s intention to enforce its rights and claims against any of the Patents, Marks, Copyrights and Licenses, each Obligor agrees that Secured Party, or a conservator appointed by Secured Party, shall have the right to establish such additional product quality controls as Secured Party or said conservator, in its sole judgment, may deem necessary to assure maintenance of the quality of products sold by such Obligor under the Marks consistent with the quality of products now manufactured by such Obligor.

8.

Termination of Each Obligor’s Interest.   This Agreement is made for collateral purposes only.  Upon satisfaction in full of the Liabilities and termination of the Loan Agreement, subject to any disposition thereof which may have been made by Secured Party pursuant hereto or pursuant to any of the other agreements executed in connection with the Loan Agreement, the security interest granted hereunder shall automatically be extinguished.  Secured Party shall, at the request of any Obligor and at each Obligor’s reasonable expense, execute and deliver to such Obligor, all termination statements and other instruments as may be necessary or proper to evidence the termination of Secured Party’s security interest granted to Secured Party pursuant to this Agreement, subject to any disposition thereof which may have been made by Secured Party pursuant hereto or pursuant to any of the other agreements executed in connection with the Loan Agreement.  Any such termination statements and instruments shall be without recourse upon or warranty by Secured Party.

9.

Duties of the Obligors.  Except to the extent the same is no longer material to such Obligor’s business, each Obligor shall have the duty (i) to prosecute diligently any application with respect to Patents, Marks and Copyrights, in each case pending as of the date hereof or hereafter, (ii) to make application on unpatented but patentable inventions and on registerable but unregistered trademarks, service marks and copyrights, and (iii) use all commercially reasonable efforts to preserve, maintain and enforce against infringement all rights in patent applications and patents constituting the Patents, in trademark or service mark applications, trademarks, service marks, and trademark or service mark registrations constituting the Marks, and in copyright applications, copyrights and copyright registrations constituting the Copyrights.  Any expenses incurred in connection with the foregoing (including, but not limited to, maintenance or renewal fees) shall be borne by the Obligors.  Except to the extent the same is no longer material to such Obligor’s business, each Obligor shall not abandon any pending patent application, trademark application, copyright application, service mark application, patent, trademark, service mark or copyright without the written consent of Secured Party.

10.

Secured Party’s Right to Sue.  From and after the occurrence and during the continuance of an Event of Default, Secured Party shall have the right, but shall in no way be obligated, to bring suit in its own name to enforce the Patents, the Marks, the Copyrights and the Licenses, and any licenses thereunder, and, if Secured Party shall commence any such suit, each Obligor shall, at the request of Secured Party, do any and all lawful acts and execute any and all proper documents reasonably required by Secured Party in aid of such enforcement, and each Obligor shall promptly, upon demand, reimburse and indemnify Secured Party for all reasonable costs and expenses incurred by Secured Party in the exercise of its rights under this Section 10.

11.

Waivers.  No course of dealing between any Obligor and Secured Party, nor any failure to exercise, nor any delay in exercising, on the part of Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

-3-

12.

Severability.  The provisions of this Agreement are severable, and if any clause or provision shall be held invalid and unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.

13.

Modification.  This Agreement cannot be altered, amended or modified in any way, except as specifically provided in Section 5 hereof or by a writing signed by the parties hereto.

14.

Further Assurances.  Each Obligor shall execute and deliver to Secured Party, at any time or times hereafter at the request of Secured Party, all papers (including, without limitation, any as may be deemed desirable by Secured Party for filing or recording with any Patent and Trademark Office, and any successor thereto) and take all such actions (including, without limitation, paying the cost of filing or recording any of the foregoing in all public offices reasonably deemed desirable by Secured Party), as Secured Party may reasonably request, to evidence Secured Party’s interest in the Patents, Marks, Copyrights and Licenses and the goodwill associated therewith and enforce Secured Party’s rights under this Agreement.

15.

Cumulative Remedies; Power of Attorney; Effect on Ancillary Agreements.  All of Secured Party’s rights and remedies with respect to the Patents, Marks, Copyrights and Licenses, whether established hereby, by any of the agreements executed in connection with the Loan Agreement, or otherwise, or by any other agreements or by law shall be cumulative and may be exercised singularly or concurrently.  Each Obligor hereby constitutes and appoints Secured Party as such Obligor’s true and lawful attorney-in-fact, with full power of substitution in the premises, with power at any time after the occurrence and during the continuance of an Event of Default, to (i) endorse such Obligor’s name on all applications, documents, papers and instruments determined by Secured Party as necessary or desirable for Secured Party in the use of the Patents, Marks, Copyrights and Licenses, (ii) take any other actions with respect to the Patents, Marks, Copyrights and Licenses as Secured Party deems in good faith to be in the best interest of Secured Party, (iii) grant or issue any exclusive or non-exclusive license under the Patents, Marks or Copyrights to any person, or (iv) assign, pledge, convey or otherwise transfer title in or dispose of the Patents, Marks, Copyrights or Licenses to any person.  Each Obligor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.  This power of attorney shall be irrevocable until the Liabilities shall have been satisfied in full and the Loan Agreement shall have been terminated.  Each Obligor acknowledges and agrees that this Agreement is not intended to limit or restrict in any way the rights and remedies of Secured Party under the Loan Agreement or any of the agreements executed in connection with the Loan Agreement but rather is intended to facilitate the exercise of such rights and remedies.  Secured Party shall have, in addition to all other rights and remedies given it by the terms of this Agreement, all rights and remedies allowed by law and the rights and remedies of a secured party under the Uniform Commercial Code as enacted in any jurisdiction in which the Patents, Marks, Copyrights or Licenses may be enforced. Each Obligor hereby releases the Secured Party from any and all claims, causes of action and demands at any time arising out of or with respect to any actions taken or omitted to be taken by the Secured Party under the powers of attorney granted herein.

16.

Binding Effect; Benefits.  This Agreement shall be binding upon each Obligor and its respective successors and assigns and shall inure to the benefit of Secured Party and its respective successors, assigns and nominees. 

17.

Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE CONFLICT OF LAW PROVISIONS, OF THE STATE OF MICHIGAN, AND ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE CONFLICT OF LAW PROVISIONS, OF THE STATE OF MICHIGAN.

18.

Counterparts.  This Agreement may by executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  The delivery of an executed counterpart of a signature page or acceptance to this Agreement by telecopier or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement. 

[signature page follows]

-4-

IN WITNESS WHEREOF, the parties hereto have entered into this Patent, Copyright, License and Trademark Security Agreement as of the date first above written.

OBLIGORS:

HEALTH ENHANCEMENT PRODUCTS, INC.

/s/ Andrew Dahl                   

By: Andrew Dahl, Duly Authorized

HEALTH ENHANCEMENT CORPORATION 

/s/ Andrew Dahl                   

By: Andrew Dahl, Duly Authorized

HEPI PHARMACEUTICALS, INC. 

/s/ Andrew Dahl                   

By: Andrew Dahl, Duly Authorized

The undersigned accepts and agrees to the

foregoing Patent, Copyright, License and

Trademark Security Agreement as of the

date first written above 

HEP INVESTMENTS LLC 

/s/ Laith Yaldoo                   

By: Laith Yaldoo, Manager

[Signature Page to Patent, Copyright, License and Trademark Security Agreement]

STATE OF ___________

)

)  SS.

COUNTY OF __________

)

I, the undersigned, a Notary Public in and for said State and County, do hereby certify that ____________________, personally known to me to be the ____________________ of Health Enhancement Products, Inc., a Nevada corporation (the “Company”), and personally known to me to be the same person whose name is subscribed to the foregoing Patent, Copyright, License and Trademark Security Agreement, appeared before me this day and acknowledged that he/she signed and delivered said agreement as an officer of the Company pursuant to authority given by the board of directors, managers or similar governing body of the Company, as his/her free and voluntary act and as the free and voluntary act and deed of the Company, for the uses and purposes therein set forth.

GIVEN under my hand and official seal as of the ___ day of December, 2011.

(NOTARIAL SEAL)

__________________________________________

Notary Public

My Commission Expires:  ________________________

6

STATE OF ___________

)

)  SS.

COUNTY OF __________

)

I, the undersigned, a Notary Public in and for said State and County, do hereby certify that ____________________, personally known to me to be the ____________________ of Health Enhancement Products, Inc., a Nevada corporation (the “Company”), and personally known to me to be the same person whose name is subscribed to the foregoing Patent, Copyright, License and Trademark Security Agreement, appeared before me this day and acknowledged that he/she signed and delivered said agreement as an officer of the Company pursuant to authority given by the board of directors, managers or similar governing body of the Company, as his/her free and voluntary act and as the free and voluntary act and deed of the Company, for the uses and purposes therein set forth.

GIVEN under my hand and official seal as of the ___ day of December, 2011.

(NOTARIAL SEAL)

__________________________________________

Notary Public

My Commission Expires:  ________________________

7

STATE OF ___________

)

)  SS.

COUNTY OF __________

)

I, the undersigned, a Notary Public in and for said State and County, do hereby certify that ____________________, personally known to me to be the ____________________ of Health Enhancement Products, Inc., a Nevada corporation (the “Company”), and personally known to me to be the same person whose name is subscribed to the foregoing Patent, Copyright, License and Trademark Security Agreement, appeared before me this day and acknowledged that he/she signed and delivered said agreement as an officer of the Company pursuant to authority given by the board of directors, managers or similar governing body of the Company, as his/her free and voluntary act and as the free and voluntary act and deed of the Company, for the uses and purposes therein set forth.

GIVEN under my hand and official seal as of the ___ day of December, 2011.

(NOTARIAL SEAL)

__________________________________________

Notary Public

My Commission Expires:  ________________________

8

STATE OF ___________

)

)  SS.

COUNTY OF __________

)

I, the undersigned, a Notary Public in and for said State and County, do hereby certify that ____________________, personally known to me to be the ____________________ of Health Enhancement Products, Inc., a Nevada corporation (the “Company”), and personally known to me to be the same person whose name is subscribed to the foregoing Patent, Copyright, License and Trademark Security Agreement, appeared before me this day and acknowledged that he/she signed and delivered said agreement as an officer of the Company pursuant to authority given by the board of directors, managers or similar governing body of the Company, as his/her free and voluntary act and as the free and voluntary act and deed of the Company, for the uses and purposes therein set forth.

GIVEN under my hand and official seal as of the ___ day of December, 2011.

(NOTARIAL SEAL)

__________________________________________

Notary Public

My Commission Expires:  ________________________

9

SCHEDULE A

PATENTS AND PATENT APPLICATIONS

					
	APPL. NO.

	PATENT NO. and DATE OF REGISTRATION

	TITLE  

	ABSTRACT

	INVENTORS/ OWNERS AND COUNTRY

	11/606,676

Filed 11/30/2006

	7,807,622

10/5/2010 

	COMPOSITION AND USE OF PHYTO-PERCOLATE FOR TREATMENT OF DISEASE

	This invention relates generally to a method of preparation of a phyto-percolate that is derived from fresh water mixture including algae. The phyto-percolate is believed to contain an enzyme having proteolytic activity. The invention further relates to the use of the phyto-percolate in a variety of disease states. 

	Inventors: Thomas; Tiffany (Phoenix, AZ), Tempesta; Michael (El Granada, CA)

Assignee: Health Enhancement Products, Inc. 

Country: U.S.

	PCT/US11/25713

Filed 2/22/2011

	Not applicable

	AGENTS AND MECHANISMS FOR TREATING HYPERCHOLESTEROLEMIA

	This invention relates to the use of isolated or refined phyto-percolates that regulate hypercholesterolemia through signal transduction at the genetic level. These compounds affect the regulation of APOA1 and CETP specifically to raise HDL cholesterol levels and lower LDL cholesterol levels.

	Inventor:

Thomas; Tiffany; (Scottsdale, AZ) ; Sarkar; Fazlul; (Plymouth, MI) ; Callewaert; Denis M.; (Metamora, MI) ; Dahl; Andrew; (Bloomfield Hills, MI); Smiti Gupta; (Rochester Hills, MI); Martinez; Enrique; (Clinton Township, MI)

Assignee: Health Enhancement Products, Inc. on

11/17/10

Country: U.S.

Country: U.S.

10

					
	APPL. NO.

	PATENT NO. and DATE OF REGISTRATION

	TITLE  

	ABSTRACT

	INVENTORS/ OWNERS AND COUNTRY

	12/067,735

Filed 10/3/08 

	Not applicable

	COMPOSITION AND USE OF PHYTO-PERCOLATE FOR TREATMENT OF DISEASE

	This invention relates generally to a method of preparation of a phyto-percolate that is derived from fresh water mixture including algae. The invention further relates to the use of the phyto-percolate in a variety of disease states. The phyto-percolate is believed to contain an activity that induces the reduction of soluble and insoluble fibrin. Further, the phyto-percolate is believed to reduce oxidative stress in the body. 

	Inventor: 

Thomas; Tiffany; (Phoenix, AZ)

Assignee: Health Enhancement Products, Inc. on 3/24/10.

Country: U.S.

	12/897,574

Filed 10/4/10

	Not applicable

	COMPOSITION AND USE OF PHYTO-PERCOLATE FOR TREATMENT OF DISEASE

	This invention relates generally to a method of preparation of a phyto-percolate that is derived from fresh water mixture including algae. The phyto-percolate is believed to contain an enzyme having proteolytic activity. The invention further relates to the use of the phyto-percolate in a variety of disease state. 

	Inventors: Thomas; Tiffany; (Scottsdale, AZ) ; Tempesta; Michael; (El Granada, CA)

Assignee: Health Enhancement Products, Inc.

On 12/20/10

Country: U.S.

	2006320264

	 
	COMPOSITION AND USE OF PHYTO-PERCOLATE FOR TREATMENT OF DISEASE

	 
	

Country: Australia

	 
	2,631,773

	COMPOSITION AND USE OF PHYTO-PERCOLATE FOR TREATMENT OF DISEASE

	 
	

Country: Canada

	6758513.3

	 
	COMPOSITION AND USE OF PHYTO-PERCOLATE FOR TREATMENT OF DISEASE

	 
	Country: European Union

11

					
	APPL. NO.

	PATENT NO. and DATE OF REGISTRATION

	TITLE  

	ABSTRACT

	INVENTORS/ OWNERS AND COUNTRY

	2008-543545

	 
	Composition and Use of Phyto-percolate For Treatment of Disease

	 
	Country: Japan

	PCT/US10/56862

Filed: 11/16/10

	Not applicable

	Composition and Method For Affecting Cytokines and NF-κB

	Cannot confirm

	Cannot confirm

Country: U.S.

PCT

	12/947,684

Filed 11/16/10

	Not applicable

	COMPOSITION AND METHOD FOR AFFECTING CYTOKINES AND NF-kB

	The present invention discloses a composition and method for effecting various cytokines and NF-kappa B by administering an effective amount of a phyto-percolate composition to an individual. In various exemplary embodiments, the composition is claimed to be useful for the effective treatment of inflammation, cancer, and/or various infections including HIV by regulation of various interleukins, such as IL-10 and IL-2, and of transcription factors including NF-kappa B. 

	Inventors: Thomas; Tiffany; (Scottsdale, AZ) ; Sarkar; Fazlul; (Plymouth, MI) ; Callewaert; Denis M.; (Metamora, MI) ; Dahl; Andrew; (Bloomfield Hills, MI) ; Martinez; Enrique; (Clinton Township, MI)

Assignee: Health Enhancement Products, Inc. on

11/17/10

Country: U.S.

12

SCHEDULE B

COPYRIGHTS

None.

13

SCHEDULE C

PATENT AND COPYRIGHT LICENSES

License Agreement to Zus/Ceptazyme

14

SCHEDULE D

TRADEMARKS, SERVICE MARKS 

					
	SERIAL NO.

	REG. NO

	MARK

	APPLICATION OR REGISTRATION DATE

	NEXT DEADLINE

	78908973

	3229753

	

	REGISTRATION DATE:  4/17/07

	Section 8/15 due: 4/17/12 – 4/17/13

Domain Name:  www.heponline.com

15

SCHEDULE E

TRADEMARK LICENSES

None.

16

SPECIAL POWER OF ATTORNEY

(Patent, Trademark, Copyright and License)

STATE OF 

)

)  SS.

COUNTY OF 

)

KNOW ALL MEN BY THESE PRESENTS, that HEALTH ENHANCEMENT PRODUCTS, INC., a Nevada corporation (“Borrower”), HEALTH ENHANCEMENT CORPORATION, a [Nevada] corporation (“HEC”), and  HEPI PHARMACEUTICALS, INC. (“HEPI”; Borrower, HEC and HEPI are referred to herein, collectively, as “Obligors” and, individually, as an “Obligor”), pursuant to that certain Patent, Copyright, License and Trademark Security Agreement, dated December ___, 2011 (the “Collateral Agreement”) among Obligors and HEP INVESTMENTS LLC, a Michigan limited liability company (the “Company”), each hereby appoints and constitutes the Company its true and lawful attorney, with full power of substitution, and with full power and authority to perform the following acts on behalf of such Obligor at and during the time periods specified in the Collateral Agreement:

1.

Assigning, selling or otherwise disposing of all right, title and interest of such Obligor in and to the patents, copyrights, licenses and trademarks listed on Schedules A, B, C, D and E of the Collateral Agreement, and including those patents copyrights and licenses which are added to the same subsequent hereto, and all registrations and recordings thereof, and all pending applications therefor, and for the purpose of the recording, registering and filing of, or accomplishing any other formality with respect to, the foregoing, and to execute and deliver any and all agreements, documents, instruments of assignment or other writings necessary or advisable to effect such purpose; and

2.

To execute any and all documents, statements, certificates or other writings necessary or advisable in order to effect the purposes described above as the Company may in its sole discretion determine.

17

This power of attorney is made pursuant to that certain Loan and Security Agreement, dated as of December __, 2011, among the Obligors and the Company and may not be revoked until the payment in full of all liabilities and obligations of the Obligors under such Loan and Security Agreement.

HEALTH ENHANCEMENT PRODUCTS, INC.

By: _________________________________________________

Name: _______________________________________________

Title: ________________________________________________

HEALTH ENHANCEMENT CORPORATION 

By: _________________________________________________

Name: _______________________________________________

Title: ________________________________________________

HEPI PHARMACEUTICALS, INC. 

By: _________________________________________________

Name: _______________________________________________

Title: ________________________________________________

18

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