Document:

ex101.htm

    
      EXHIBIT
10.1

      
         

         

        
          
             

            
              	 	 
	 	 
	City National
      Bank  	
                       CREDIT
      AGREEMENT

                    

            

          

           

              This Credit
Agreement (the "Agreement"), dated as of the 1st
day of May, 2008 ("Loan Date") is between City National Bank, a national
banking association ("CNB") and PRI MEDICAL TECHNOLOGIES, INC., a Nevada
corporation ("Borrower").

           

              1.             DEFINITIONS.
As used in this Agreement, these terms have the following meanings:

           

              1.1.
"Account" or "Accounts" has the meaning given in the Code, and includes, but is
not limited to, any right to payment for goods sold or leased or for services
rendered which is not evidenced by an instrument or chattel paper from any
Person, whether now existing or hereafter arising or acquired, whether or not it
has been earned by performance.

           

              1.2."Account
Debtor" means the Person obligated on an Account.

           

              1.3.
"Affiliate" means any Person directly or indirectly controlling, controlled by,
or under common control with Borrower, and includes any employee stock ownership
plan of Borrower or an Affiliate. "Control" (including with correlative meaning,
the terms "controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise.

           

              1.4.
"Borrower's Loan Account" means the statement of daily balances on the books of
CNB in which will be recorded Loans made by CNB to Borrower, payments made on
such loans, and other appropriate debits and credits as provided by this
Agreement. CNB will provide a statement of account for Borrower's Loan Account
at least once each month on a date established by CNB, which statement will be
accepted by and conclusively binding upon Borrower unless it notifies CNB in
writing to the contrary, within five (5) days of receipt of such statement, or
ten (10) days after sending of such statement if Borrower does not notify CNB of
its non-receipt of the statement. Statements regarding other credit extended to
Borrower will be provided separately.

           

              1.5. "Cash
Flow from Operations" will be determined on a consolidated basis for Borrower
and the Subsidiaries and mean the sum of (a) net income after taxes, after
deducting the amount of dividends declared to Borrower's shareholders earned
over the twelve-month period ending on the date of determination, plus (b)
amortization of intangible assets, plus (c) interest expense, plus (d)
depreciation expensed during the twelve-month period ending on the date of
determination, plus (e) the net change of minority interests as reflected on
Borrower's balance sheet from the date of determination to the date twelve
months earlier, less (f) deferred tax valuation allowance during the
twelve-month period ending on the date of determination.

           

              1.6. "Code"
means the Uniform Commercial Code of California, as currently in effect and as
amended and replaced from time to time, except where the Uniform Commercial Code
of another state governs the perfection of a security interest in Collateral
located in that state.

           

              1.7.  "Collateral"
means all property securing the Obligations, as described in Section
8.

           

          
            
              
              

            

            
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	City National
      Bank  	
                             CREDIT
      AGREEMENT

                          

                  

                

              

               

            

          

                                                                                                                                                                            

               1.8.
"Commitment" means CNB's commitment to make the Loans in the aggregate principal
amount outstanding at any one time of up to ONE MILLION AND NOMOOTHS DOLLARS
($1,000,000.00).

           

               1.9. "Debt"
means, at any date, the aggregate amount of, without duplication, (a) all
obligations of Borrower or any Subsidiary for borrowed money, (b) all
obligations of Borrower or any Subsidiary evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of Borrower or any Subsidiary
to pay the deferred purchase price of property or services, (d) all capitalized
lease obligations of Borrower or any Subsidiary, (e) all obligations or
liabilities of others secured by a lien on any asset of Borrower or any
Subsidiary, whether or not such obligation or liability is assumed, (f) all
obligations guaranteed by Borrower or any Subsidiary, (g) all obligations,
direct or indirect, for letters of credit, and (h) any other obligations or
liabilities which are required by GAAP to be shown as liabilities on the balance
sheet of Borrower or any Subsidiary.

           

              1.10. "Debt
Service" means (a) the aggregate amount of Current Maturity of Long Term Debt
plus (b) all interest incurred on borrowed money, determined by reference to the
most recently ended fiscal quarter and the immediately preceding three fiscal
quarters. "Current Maturity of Long Term Debt" means that portion of Borrower's
consolidated long term liabilities, determined in accordance with GAAP, which
shall, by the terms thereof, become due and payable within one (1) year
following the date of the balance sheet upon which such calculations are
based.

           

              1.11.                   "Demand
Deposit Account" means Borrower's demand deposit account no.
412-936027 maintained with CNB.

           

              1.12.                   "GAAP"
means generally accepted accounting principles, consistently
applied.

           

              1.13.                   "Guarantor"
is EMERGENT GROUP INC., a Nevada corporation.

           

              1.14.                   "Inventory"
means goods held for sale or lease in the ordinary course of business,
work in process and any and all raw materials used in connection with the
foregoing.

           

              1.15.                   "Loan"
or "Loans" means the loans extended by CNB to Borrower pursuant
to Section 2.

           

              1.16. "Loan Documents" means,
individually and collectively, this Agreement, any Note, guaranty, security or
pledge agreement, financing statement and all other contracts, instruments,
addenda and documents executed in connection with or related to extensions of
credit under this Agreement.

           

              1.17."Notes"
means the Note(s) referenced in Section 2.

           

              1.18.
"Obligations" means all present and future liabilities and obligations of
Borrower to CNB hereunder and all other liabilities and obligations of Borrower
to CNB of every kind, now existing or hereafter owing, matured or unmatured,
direct or indirect, absolute or contingent, joint or several, including any
extensions and renewals thereof and substitutions therefore.

           

              1.19."Person"
means any individual or entity.

          

          
            
              
              

            

            
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	City National
      Bank  	
                             CREDIT
      AGREEMENT

                          

                  

                

              
        

          

          1.20."Prime
Loan" means any Loan tied to the Prime Rate.

           

          1.21.
"Prime Rate" means the rate most recently announced by CNB at its principal
office in Beverly Hills, California as its "Prime Rate." Any change in the
interest rate resulting from a change in the Prime Rate will become effective on
the day on which each change in the Prime Rate is announced by CNB.

           

          1.22.
"Revolving Credit Commitment" means CNB's commitment to make the Revolving
Credit Loans in the aggregate principal amount at any one time of up to ONE
MILLION AND NO/100THS DOLLARS ($1,000,000.00).

           

          1.23.  "Subsidiary"
means any Person, the majority of whose voting interests are at any
time owned, directly or indirectly, by Borrower and/or by one or more
Subsidiaries.

           

          1.24.  "Tangible
Net Worth" means the total of all assets appearing on a balance sheet
prepared in accordance with GAAP for Borrower and the Subsidiaries on
a

          consolidated
basis, minus (a) all intangible assets, including, without limitation,
unamortized debt discount, Affiliate, employee, officer and stockholder
receivables or advances, goodwill, research and development costs, patents,
trademarks, the excess of purchase price over underlying values of acquired
companies, any covenants not to compete, deferred charges, copyrights,
franchises and appraisal surplus; minus (b) all obligations which are required
by GAAP to be classified as a liability on the consolidated balance sheet of
Borrower and the Subsidiaries; minus (c) the amount, if any, at which shares of
stock of a non-wholly owned Subsidiary appear on the asset side of Borrower's
consolidated balance sheet, as determined in accordance with GAAP; plus (d) with
the amount of minority interest as reflected on the balance sheet, minus (e)
deferred income and reserves not otherwise classified as a liability on the
consolidated balance sheet of Borrower and the Subsidiaries.

           

          1.25.
"Termination Date" means June 3, 2009. Notwithstanding the foregoing, CNB may,
at its option, terminate this Agreement pursuant to the Section entitled "CNB's
Remedies"; the date of any such termination will become the Termination Date as
that term is used in this Agreement.

           

          1.26.
"Total Senior Liabilities" means, as of any date of determination, the amount of
all liabilities that should be reflected as a liability on a consolidated
balance sheet of Borrower and the Subsidiaries prepared in accordance with GAAP,
less Subordinated Debt.

           

          2.THE
CREDIT.

           

          2.1.
Revolving
Credit Loan. Subject to the terms of this Agreement, CNB agrees to make
loans ("Revolving Credit Loans") to Borrower, from the date of this Agreement up
to and including the Termination Date, at such times as Borrower may request, up
to the amount of the Revolving Credit Commitment. The Revolving Credit Loans may
be repaid and reborrowed at any time up and including the Termination Date.
Borrower will have a period of not less than thirty (30) consecutive days during
the twelve month period ending with each anniversary date of this Agreement
during which time there will be no outstanding Revolving Credit
Loans.

          

          
            
              
              

            

            
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	City National
      Bank  	
                         CREDIT
      AGREEMENT

                      

              

            

          

           

              2.1.1.
Procedure for Revolving
Credit Loans. Each Revolving Credit Loan may be made by CNB at the oral
or written request of anyone who is authorized in writing by Borrower to request
Revolving Credit Loans until written notice of the revocation of such authority
is received by CNB.

           

              2.1.2.
Interest. The Revolving Credit Loans will bear interest from disbursement until
due (whether at stated maturity, by acceleration or otherwise) at a fluctuating
rate equal to the Prime Rate plus one-half of one percent (+.50%) per year.
Interest on the Revolving Credit Loans and other charges incurred under this
Agreement will be payable monthly in arrears on the third (3rd) day of each
month for the previous month, commencing on the first such date after the date
hereof, and on the Termination Date.

           

          2.2.
Default Interest Rate.
From and after written notice by CNB to Borrower of the occurrence of an
Event of Default (and without constituting a waiver of such Event of Default),
the Loans and any other amounts due CNB hereunder (and interest to the extent
permitted by law) will bear additional interest at a fluctuating rate equal to
five percent (5.0%) per year higher than the interest rate as determined in the
above Section(s) 2.1.2 until the Event of Default has been cured. All interest
provided for in this Section will be compounded monthly and payable on
demand.

           

          2.3.
Loans and Payments.
All payments will be in United States Dollars and in immediately
available funds. Interest will be computed on the basis of a 360 day year,
actual days elapsed. All payments of principal, interest, fees and other charges
on the Loans will be made by charging, and Borrower hereby authorizes CNB to
charge, the Borrower's Demand Deposit Account for the amount of each such
payment. Borrower must have sufficient collected balances in the Borrower's
Demand Deposit Account in order that each such payment will be available when
due. CNB is authorized to note the date, amount and interest rate of each Loan
and each payment of principal and interest on CNB's books and records, which
notations will constitute presumptive evidence of the accuracy of the
information noted. Any Loan will be conclusively presumed to have been made to
or for the benefit of Borrower when CNB, in its sole discretion, believes that
the request therefore has been made by authorized persons (whether in fact that
is the case), or when the Loan is deposited to the Borrower's Demand Deposit
Account, regardless of whether any Person other than Borrower may have authority
to draw against such account.

           

          2.4.
Late Charge.
Borrower shall pay a late charge of 5% or $10.00, whichever is greater,
of any payment not received by CNB on or before the 10th day after the payment
is due.

           

              3.TERM AND
TERMINATION.

           

          3.1.
Establishment
of Termination Date. The term of this Agreement will begin as of the date
hereof and continue until the Termination Date, unless the term is renewed for
an additional period by CNB giving Borrower prior written notice, in which event
the Termination Date will mean the renewed maturity date set forth in such
notice. Notwithstanding the foregoing, CNB may, at its option, terminate this
Agreement pursuant to Section 9.3; the date of any such termination will become
the Termination Date as that term is used in this Agreement.

          

          
            
              
              

            

            
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	City National
      Bank  	
                             CREDIT
      AGREEMENT

                          

                  

                

              
         

          

           

          3.2. Obligations Upon the
Termination Date. Borrower will, upon the Termination
Date:

           

          3.2.1.
Repay the amount of the balance due as set forth in Borrower's Loan Account plus
any accrued interest, fees and charges; and

           

          3.2.2.
Apart from those leases made by CNB unless the Termination Date occurs because
of the occurrence on an Event of Default, pay the amounts due on all other
Obligations owing to CNB, with the Termination Date becoming the maturity date
of such other Obligations.

           

          3.3.
Survival
of Rights.
Any termination of this Agreement will not affect the rights, liabilities
and obligations of the parties with respect to any Obligations outstanding on
the date of such termination. Until all Obligations, arising under this
Agreement but excluding leases between Borrower and CNB, have been fully repaid,
CNB will retain its security interest in all existing Collateral and Collateral
arising thereafter, and Borrower will continue to assign all Accounts to CNB and
to immediately turn over to CNB, in kind, all collections received on the
Accounts.

           

          4.CONDITIONS
PRECEDENT.

           

          4.1.
Extension of Credit.
The obligation of CNB to make any Loan or other extension of credit
hereunder is subject to CNB's receipt of each of the following, in form and
substance satisfactory to CNB, and duly executed as required by
CNB:

           

          4.1.1.
All Loan Documents required by CNB, including but not limited to this Agreement
and any guaranties required hereunder;

           

          4.1.2. A
copy of Borrower's organizational and governing documents and any public filings
made in connection therewith; and (b) such authorizations and resolutions
approving and authorizing the execution, delivery and performance of this
Agreement and any other documents required pursuant to this Agreement, as may be
required by CNB;

           

          4.1.3. A
copy of the organizational and governing documents of EMERGENT GROUP INC., a
Nevada corporation and any public filings made in connection therewith; and (b)
such authorizations and resolutions of EMERGENT GROUP INC., a Nevada corporation
approving and authorizing the execution, delivery and performance of its
continuing guaranty, as may be required by CNB;

           

                                          4.1.4.
Evidence that the insurance required by Section 6.5 hereof is in effect;
and

           

          4.1.5. A
complete list of claims made against Borrower, any Subsidiary or any Guarantor,
and evidence satisfactory to CNB, including, if requested, an opinion of
Borrower's counsel with respect to any such claim(s), that if such claim(s) is
adversely determined, it would not have a material adverse effect on the
business, operations or condition, financial or otherwise, of Borrower, any
Guarantor or any Subsidiary.

          

          
            
              
              

            

            
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	City National
      Bank  	
                         CREDIT
      AGREEMENT

                      

              

            

          

           

          
            
                  

            

          

          4.2.
Conditions to Each
Extension of Credit. The obligation of CNB to make any Loan or other
extension of credit hereunder will be subject to the fulfillment of each of the
following conditions to CNB's satisfaction:

           

          4.2.1.
The representations and warranties of Borrower set forth in Section 5 will be
true and correct on the date of the making of each Loan or other extension of
credit with the same effect as though such representations and warranties had
been made on and as of such date;

           

          4.2.2. No
Guarantor will have revoked his, her or its guaranty and no such guaranty will
have become otherwise unenforceable with respect to future
advances;

           

          4.2.3. No
holder of Subordinated Debt will be in violation of his, her or its
Subordination Agreement executed in favor of CNB, and such Subordination
Agreement is enforceable with respect to future advances;

           

          4.2.4.
There will be in full force and effect in favor of CNB a legal, valid and
enforceable first security interest in, and a valid and binding first lien on
the Collateral; and CNB will have received evidence, in form and substance
acceptable to CNB, that all filings, recordings and other actions that are
necessary or advisable, in the opinion of CNB, in order to establish, protect,
preserve and perfect CNB's security interests and liens as legal, valid and
enforceable first security interests and liens in the Collateral have been
effected;

           

          4.2.5.
There will have occurred no Event of Default, whether or not subject to cure;
and

           

          4.2.6.
All other documents and legal matters in connection with the transactions
described in this Agreement will be satisfactory in form and substance to
CNB.

           

          5. REPRESENTATIONS
AND WARRANTIES. Borrower represents and warrants (and each request for a
Loan or other extension of credit will be deemed a representation and warranty
made on the date of such request) that:

           

          5.1.
Existence,
Power and Authorization. Borrower and each Subsidiary is duly organized,
validly existing and in good standing under the laws of the state of its
organization, and is duly qualified to conduct business in each jurisdiction in
which its business is conducted. The execution, delivery and performance of all
Loan Documents executed by Borrower are within Borrower's powers and have been
duly authorized by the Borrower and do not require any consent or approval of
the owners of Borrower.

           

          5.2.  Binding Agreement.
The Loan Documents constitute the valid and legally binding
obligations of Borrower, enforceable against Borrower in accordance with their
terms.

           

          5.3.
Ancillary Documents.
To the extent that any security agreement, subordination agreement or
guaranty is required to be executed by a Subsidiary or Affiliate, the
representations and warranties set forth in Sections 5.1 and 5.2 are also true
and correct with respect to such Subsidiary and Affiliate and such
document.

           

          5.4. Other Agreements. The
execution and performance of the Loan Documents
will not violate any provision of law or regulation (including, without
limitation, Regulations
X and U of the Federal Reserve Board) or any order of any governmental
authority, court, or arbitration board or the organizational and governing
documents of Borrower, or result in the breach of, constitute a default under,
contravene any provisions of, or result in the creation of any security
interest, lien, charge or encumbrance upon any of the assets of Borrower
pursuant to any indenture or agreement to which Borrower or any of its
properties is bound, except liens and security interests in favor of
CNB.

           

          
            
              
              

            

            
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	City National
      Bank  	
                             CREDIT
      AGREEMENT

                          

                  

                

              

               

                      

            

          

           5.5.
Litigation.
There is no litigation, tax claim, investigation or proceeding pending,
threatened against or affecting Borrower, any Guarantor or Subsidiary, or any of
their respective properties which, if adversely determined, would have a
material adverse effect on the business, operation or condition, financial or
otherwise, of Borrower or any Guarantor or Subsidiary. (for the purposes of this
section "material adverse effect" shall mean the amount in controversy is at
least $50,000.00)

           

           5.6.
Financial Condition.
The most recent financial statements of Borrower and each Guarantor, if
any, copies of which have been delivered to CNB, have been prepared in
accordance with GAAP and are true, complete and correct and fairly present the
financial condition of Borrower, its Subsidiaries and each Guarantor, including
operating results, as of the accounting period referenced therein. There has
been no material adverse change in the financial condition or business of
Borrower or any Subsidiary or Guarantor since the date of such financial
statements. Neither Borrower nor any Subsidiary or Guarantor has any material
liabilities for taxes or long-term leases or commitments, except as disclosed in
the financial statements.

           

           5.7.
No Violations.
Borrower is not, nor is any Subsidiary, in violation of any law,
ordinance, rule or regulation to which it or any of its properties is subject to
the best of Borrower's knowledge.

           

           5.8.
Collateral.
Borrower owns and has possession of and has the right and power to grant
a security interest in the Collateral, and the Collateral is genuine and free
from liens, adverse claims, set-offs, defaults, prepayments, defenses and
encumbrances except those in favor of CNB, except for (i) such Collateral which
has been leased to an Affiliate and (ii) such Collateral which has been leased
from a third party lessor. No bills of lading, warehouse receipts or other
documents or instruments of title are outstanding with respect to the Collateral
or any portion of the Collateral, in favor of a Person other than Borrower. The
office where Borrower keeps its records concerning all Accounts and where it
keeps the bulk of its Inventory is 10939 Pendleton Street, Sun Valley, CA
91352.

           

          5.9. ERISA.
To the best of Borrower's knowledge, Borrower is in compliance
in all
material respects with all applicable provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"). No "Reportable Event" (as defined in
ERISA and the regulations issued thereunder) has occurred with respect to any
benefit plan of Borrower nor are there any unfunded vested liabilities under any
benefit plan of Borrower. Borrower has met its minimum funding requirements
under ERISA with respect to each of its plans and has not incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC") in connection
with any such plan.

           

           5.10.
Consents. No
consent, license, permit, or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority or
agency is required in connection with the execution, delivery and performance by
Borrower of this Agreement or the transactions contemplated hereby.

          

          
            
              
              

            

            
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	City National
      Bank  	
                       CREDIT
      AGREEMENT

                    

            

          

        

        
            

          5.11.
Use
of Proceeds.
The proceeds of the Revolving Credit Loan will be used by Borrower solely
for working capital, fund dividends and acquisition purposes in the normal
course of business.

           

          5.12.
Regulation U.
Borrower is not engaged principally, or as one of its principal
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations U or X of the Federal
Reserve Board). No part of the proceeds of the Loans will be used by Borrower to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying such margin stock.

           

          5.13.       
Environmental
Matters.

           

          5.13.1.
The operations of Borrower and each Subsidiary, to the best of Borrower's
knowledge, comply in all material respects with all applicable federal, state
and local environmental, health and safety statutes, regulations and ordinances
and fully comply with all terms of all required permits and
licenses.

           

          5.13.2.
Borrower and each Subsidiary have received no notices of threatened or pending
governmental or private civil, criminal or administrative proceeding regarding
any environmental or health and safety statute, regulation or ordinance and have
not been subject to any federal, state or local investigations, inspections or
orders regarding any environmental or health and safety statute, regulation or
ordinance.

           

          5.13.3.
Neither Borrower nor any Subsidiary knows of any facts or conditions which may
exist which may subject Borrower or any Subsidiary to liability or contingent
liability and neither Borrower nor any Subsidiary is presently liable or
contingently liable for any removal, remedial, response or other costs or
damages in connection with any release into the environment of toxic or
hazardous substances or waste included on any federal, state or local hazardous
chemical or substance lists under any federal, state or local statute,
regulation or ordinance.

           

          5.13.4.
Borrower will, at all times, defend and indemnify and hold CNB (which for
purposes of this Section includes CNB's parent company and subsidiaries and all
of their respective shareholders, directors, officers, employees, agents,
represent­atives, successors, attorneys and assigns) harmless from and
against any liabilities, claims, demands, causes of action, losses, damages,
expenses (including without limitation reasonable attorneys' fees, which
attorneys may be employees of CNB, or may be outside counsel), costs,
settlements, judgments or recoveries directly or indirectly arising out of or
attributable to the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal, or presence of a hazardous substance
on, under, or about Borrower's property or operations or property leased to or
used by Borrower. For these purposes, the term "hazardous substances" means any
substance which is or becomes designated as "hazardous" or "toxic" under any
Federal, state, or local law. Any obligation or liability of Borrower to CNB
under this Section will survive the expiration or termination of this Agreement
and the repayment of all Loans and the payment or performance of all other
Obligations of Borrower to CNB.

          

          
            
              
              

            

            
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	City National
      Bank  	
                         CREDIT
      AGREEMENT

                      

              

            

          

          
            
                    

            

          

          6.            AFFIRMATIVE
COVENANTS. Borrower agrees that until payment in full of all Obligations,
Borrower will comply with the following covenants:

           

          6.1.
Books and Records.
Borrower will maintain, in accord with sound accounting practices,
accurate records and books of account showing, among other things, all Inventory
and Accounts, the proceeds of the sale or other disposition thereof and the
collections therefrom. Borrower will not change the accounting method used to
determine Borrower's Inventory cost without notification to CNB. Borrower will
permit representative(s) of CNB, at any reasonable time, to inspect, audit,
examine and make extracts or copies from all books, records and other data
relating to the Collateral, to inspect any of Borrower's properties and to
confirm balances due on Accounts by direct inquiry to Account Debtors, and will
give CNB, promptly upon request, all information regarding the business or
finances of Borrower.

           

          6.2. Financial Statements of
Borrower. Borrower will furnish to CNB on acontinuing
basis:

           

          6.2.1.
Within sixty (60) days after the end of each quarterly accounting period of each
fiscal year, a financial statement, consolidated with Guarantor, consisting of
not less than a balance sheet and income statement, prepared in accordance with
GAAP and accompanied by the following: (a) upon request supporting schedules of
costs of goods sold, operating expenses and other income and expense items, and
(b) Borrower's certification as to whether any event has occurred which
constitutes an Event of Default, whether or not subject to cure, and if so,
stating the facts with respect thereto, which financial statement may be
internally prepared;

           

          6.2.2.
Within one hundred twenty (120) days after the close of Borrower's fiscal year,
a copy of the annual audit report for Borrower and Subsidiaries, including
therein, consolidated with Guarantor, a balance sheet, income statement,
reconciliation of net worth and statement of cash flows, with notes thereto, the
balance sheet, income statement and statement of cash flows to be audited by a
certified public accountant acceptable to CNB, certified by such accountant to
have been prepared in accordance with GAAP and accompanied by the following: (a)
supporting schedules of costs of goods sold, operating expenses and other income
and expense items, and (b) Borrower's certification as to whether any event has
occurred which constitutes an Event of Default, whether or not subject to cure,
and if so, stating the facts with respect thereto;

           

          6.2.3.
Within sixty (60) days after the end of each fiscal quarter, a listing and aging
of all accounts receivable and accounts payable together with, upon CNB's
request, a current list of the names and addresses of all Account Debtors;
and

           

          6.2.4.
Such additional information, reports and/or statements as CNB may, from time to
time, reasonably request.

           

          6.3. Account Balances.
Borrower will maintain its operating accounts at CNB at
all times.

           

          6.4.
Taxes
and Premiums.
Borrower will, and will cause each Subsidiary to, pay and discharge all
taxes, assessments, governmental charges and real and personal property taxes,
including, but not limited to, federal and state income taxes, employee
withholding taxes and payroll taxes, and all premiums for insurance required
under this Agreement,
prior to the date upon which penalties are attached thereto, except for such
items which are being contested in good faith in appropriate
proceeds.

           

          
            
              
              

            

            
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	City National
      Bank  	
                             CREDIT
      AGREEMENT

                          

                  

                
 

               

               

                 

            

          

          6.5.Insurance.

           

          6.5.1.
Borrower will, and will cause each Subsidiary to, provide and maintain the
insurance required under the Loan Documents;

           

          6.5.2. In
addition to the insurance required above, Borrower will, and will cause each
Subsidiary to, maintain insurance of the types and in amounts customarily
carried in its lines of business, including, but not limited to, fire, public
liability (with CNB named as additional insured), property damage, business
interruption and worker's compensation, such insurance to be carried with
companies and in amounts satisfactory to CNB, and will deliver to CNB from time
to time, upon CNB's request, schedules setting forth all insurance then in
effect; and

           

          6.5.3. If
Borrower fails to provide, maintain, or furnish to CNB the policies required by
this Section, CNB may immediately procure such insurance or other insurance
necessary to protect CNB's interest, and Borrower will pay all premiums thereon
promptly upon demand by CNB, together with interest, at the highest rate
provided for any of the Loans extended under Section 2 above, from the date of
expenditure, and if not paid within ten (10) days of CNB's demand therefore (and
without constituting a waiver of an Event of Default), at a rate five percent
(5%) per year higher than such interest rate until such amount (and interest
thereon, to the extent permitted by law), is paid in full.

           

           6.6.
Notice.
Borrower will promptly advise CNB in writing of (a) the opening of any
new, or the closing of any existing, places of business, each location at which
Inventory or equipment is or will be kept, and any change of Borrower's name,
trade name or other name under which it does business or of any such new or
additional name; (b) the occurrence of any Event of Default, whether or not
subject to cure; (c) any litigation pending or threatened against Borrower, any
Subsidiary or any Guarantor where the amount or amounts in controversy exceed
FIFTY THOUSAND AND NO/100THS DOLLARS ($50,000.00); (d) any unpaid taxes of
Borrower, any Subsidiary or any Guarantor, which are more than fifteen (15) days
delinquent; and (e) any other matter which might materially or adversely affect
Borrower's or any Subsidiary's or Guarantor's financial condition, property or
business.

           

           6.7.
Fair Labor Standards
Act. Borrower
will, and will cause each Subsidiary to, comply with the requirements of,
and all regulations promulgated under, the Fair Labor Standards Act of 1938 (29
U.S.C. Code Section 201 et seq.).

           

           6.8.
Corporate Existence.
Borrower
will, and will cause each Subsidiary to, maintain its corporate existence
and all of its rights, privileges and franchises necessary or desirable in the
normal course of its business.

           

           6.9.
Compliance with Law.
Borrower
will, and will cause each Subsidiary to, comply with all requirements of
all applicable laws, rules, regulations, orders of any governmental agency and
all material agreements to which they are a party.

          

          
            
              
              

            

            
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	City National
      Bank  	
                           CREDIT
      AGREEMENT

                        

                

              

            

            
                

                     

            

          

          6.10.Borrower's Financial Tests.
Borrower will maintain:

           

          6.10.1
Tangible Net Worth plus Subordinated Debt of not less than $2,500,000.00 at all
times;

           

          6.10.2. A
ratio of Total Senior Liabilities to Tangible Net Worth plus Subordinated Debt
of not more than 4.0 to 1 at all times;

           

          6.10.3. A
ratio of Cash Flow from Operations to Debt Service of not less than 1.2 to 1 at
all times; and

           

          6.10.4.
No two (2) consecutive quarterly losses.

           

          7. NEGATIVE COVENANTS.
Borrower agrees that until payment in full of all the Obligations,
Borrower will not, nor will it permit any Subsidiary to, do any of the
following, without CNB's prior written consent:

           

          7.1.
Borrowing.
Create, incur, assume or permit to exist any Debt except (a) Debt to
CNB,(b) trade Debt in the ordinary course of Borrower's business and (c)
purchase money Debt in an aggregate amount not to exceed $1,500,000.00 per
Borrower's fiscal year incurred in connection with the acquisition of capital
assets (including capitalized lease expenditures).

           

          7.2.
Sale of Assets.
Sell, lease or otherwise dispose of any of Borrower's or any Subsidiary's
assets, other than (i) in the ordinary course if business, (ii) disposal of
equipment and vehicles which are obsolete or no longer needed in the operation
of Borrower's business.

           

          7.3.
Loans. Make
loans or advances to any Person that exceeds in the aggregate of $500,000.00 at
any time, except credit extended to employees or to customers in the ordinary
course of business.

           

          7.4. Contingent
Liabilities.  Assume, guarantee, endorse, contingently
agree to purchase
or otherwise become liable for the obligation of any Person, including
Borrower,
a Subsidiary or Affiliate, except (a) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (b) such obligations in amounts not to exceed $500,000.00 in
the aggregate, and (c) contingent liabilities in favor of
CNB.

           

          7.5. Mortgages,
Liens, etc. Mortgage, pledge, hypothecate,
grant or contract to grant any security interest of any kind in any property or
assets, to anyone except CNB or third party equipment lessors.

           

          7.6.
Involuntary Liens. Permit
any involuntary liens to arise with respect to any property or assets including
but not limited to those arising from the levy of a writ of attachment or
execution, or the levy of any state or federal tax lien which lien will not be
removed within a period of thirty (30) days.

           

          7.7.
Sale and Leaseback.  Enter
into any sale-leaseback transaction.

          

          
            
              
              

            

            
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	City National
      Bank  	
                       CREDIT
      AGREEMENT

                    

            

          

        

         

        
                   

          7.8.
Event of Default.
Permit a default to occur under any document or instrument evidencing
Debt incurred under any indenture, agreement or other instrument under which
such Debt may be issued, or any event to occur under any of the foregoing which
would permit any holder of the Debt outstanding thereunder to declare the same
due and payable before its stated maturity, whether or not such acceleration
occurs or such default be waived.

           

          8.SECURITY
AGREEMENT.

           

          8.1.
Grant of
Security Interest. To secure
all Obligations hereunder as well as all other Obligations to CNB, Borrower
hereby grants and transfers to CNB a continuing security interest in the
following property whether now owned or hereafter acquired:

           

          8.1.1.
All of Borrower's Inventory; 8.1.2. All of Borrower's Accounts;

           

          8.1.3.
All of Borrower's general intangibles as that term is defined in the
Code;

           

                                         
8.1.4. All of Borrower's equipment, as that term is defined in the
Code;

           

          8.1.5.
All of Borrower's interest in any patents (now existing or pending), copyrights,
trade names, trademarks and service marks useful to the operation of Borrower's
business;

           

          8.1.6.
All notes, drafts, acceptances, instruments, documents of title, policies and
certificates of insurance, chattel paper, guaranties and securities now or
hereafter received by Borrower or in which Borrower has or acquires an
interest;

           

          8.1.7.
All cash and noncash proceeds of the foregoing property, including, without
limitation, proceeds of policies of fire, credit or other
insurance;

           

          8.1.8.
All of Borrower's books and records pertaining to any of the Collateral
described in this Section 8.1; and

           

          8.1.9.
Any other Collateral which CNB and Borrower may designate as additional security
from time to time by separate instruments.

           

          8.2.
Notification of
Account Debtors. CNB will have the right to notify any Account Debtor to
make payments directly to CNB, take control of the cash and noncash proceeds of
any Account, and settle any Account, which right CNB may exercise at any time
upon the occurrence of an Event of Default, whether or not subject to cure,
whether of not Borrower was theretofore making collections thereon.

           

          8.3.
Attorney-In-Fact.
Upon the occurrence of an Event of Default, whether or not subject to
cure, CNB or any of its officers is hereby irrevocably made the true and lawful
attorney for Borrower with full power of substitution to do the following: (a)
endorse the name of Borrower upon any and all checks, drafts, money orders and
other instruments for the payment of moneys which are payable to Borrower and
constitute collections on Accounts; (b) execute in the name of Borrower any
schedules, assignments,
instruments, documents and statements which Borrower is obligated to give CNB
hereunder; (c) receive, open and dispose of all mail addressed to Borrower; (d)
notify the Post Office authorities to change the address for delivery of mail
addressed to Borrower to such address as CNB will designate; and (e) do such
other acts in the name of Borrower which CNB may deem necessary or desirable to
enforce any Account or other Collateral. The powers granted CNB hereunder are
solely to protect its interests in the Collateral and will not impose any duty
upon CNB to exercise any such powers.

           

          
            
              
              

            

            
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	City National
      Bank  	
                         CREDIT
      AGREEMENT

                      

              

            
    

          
            
               

                

            

          

          9.            EVENTS OF
DEFAULT.

           

          9.1.            Events
of Default.
After expiration of any applicable cure period set forth

           

          in
Section 9.2, the following will constitute Events of Default under this
Agreement:

           

          9.1.1.
Borrower fails to pay when due any installment of principal or interest or any
other amount payable under this Agreement;

           

          9.1.2.
Any Person, or any Subsidiary of any Person, which is a party to any Loan
Document fails to perform or observe any of the terms, provisions, covenants,
conditions, agreements or obligations contained in the Loan
Documents;

           

          9.1.3.
The entry of an order for relief or the filing of an involuntary petition with
respect to Borrower, any Subsidiary or any Guarantor under the United States
Bankruptcy Code, the appointment of a receiver, trustee, custodian or liquidator
of or for any part of the assets or property of Borrower, any Subsidiary or any
Guarantor, or Borrower, any Subsidiary or any Guarantor makes a general
assignment for the benefit of creditors;

           

          9.1.4.
Any financial statement, representation or warranty made or furnished by
Borrower, any Subsidiary or any Guarantor in connection with the Loan Documents
proves to be in any material respect incorrect;

           

          9.1.5.
CNB's security interest in or lien on any portion of any Collateral becomes
impaired or otherwise unenforceable;

           

          9.1.6.
Any Person obtains an order or decree in any court of competent jurisdiction
enjoining or prohibiting Borrower or CNB or either of them from performing this
Agreement, and such proceedings are not dismissed or such decree is not vacated
within ten (10) days after the granting thereof;

           

          9.1.7.
Borrower or any Subsidiary neglects, fails or refuses to keep in full force and
effect any governmental permit or approval which is necessary to the operation
of its business;

           

          9.1.8.
All or substantially all of the property of Borrower, any Guarantor or any
Subsidiary is condemned, seized or otherwise appropriated;

           

          9.1.9.
The occurrence of (a) a Reportable Event as defined in ERISA which CNB
determines in good faith constitutes grounds for the institution of proceedings
to terminate any pension plan by the PBGC, (b) an appointment of a trustee to
administer any pension plan of Borrower, or (c) any other event or condition
which might constitute grounds under ERISA for the involuntary termination of
any pension plan of Borrower,
where such event set forth in (a), (b) or (c) results in a significant monetary
liability to Borrower;

           

          
            
              
              

            

            
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	City National
      Bank  	
                       CREDIT
      AGREEMENT

                    

            

          

        

         

        
               

          9.1.10.
Any obligee of Subordinated Debt fails to comply with the provisions of the
documents evidencing such Subordinated Debt or any Subordination
Agreement;

           

          9.1.11.
Any Guarantor dies, becomes incapacitated, or revokes his or its Guaranty, or
such Guaranty becomes otherwise unenforceable with respect to future advances;
or

           

          9.1.12.
The Termination Date is not extended.

           

          9.2.
Notice of Default and
Cure of Events of Default. Except with respect to the Events of Default
specified in Subsections 9.1, 9.1.3, or 9.1.5 above, and subject to the
provisions of the Section 9.4 below, entitled "Additional Remedies", CNB will
give Borrower at least ten (10) days' written notice of any event which
constitutes or, with the lapse of time would become an Event of Default, during
which time Borrower will be entitled to cure same.

           

          9.3.
CNB's
Remedies.
Upon the occurrence of an Event of Default, at the sole and exclusive
option of CNB, and upon written notice to Borrower, CNB may (a) declare the
principal of and accrued interest on the Loans, and all other Obligations
immediately due and payable in full, whereupon the same will immediately become
due and payable; (b) terminate this Agreement as to any future liability or
obligation of CNB, but without affecting CNB's rights and security interest in
the Collateral and without affecting the Obligations owing by Borrower to CNB;
and/or (c) exercise its rights and remedies under the Loan Documents and all
rights and remedies of a secured party under the Code and other applicable laws
with respect to all of the Collateral.

           

          9.4.
Additional Remedies.
Notwithstanding any other provision of this Agreement, upon the
occurrence of any event, action or inaction by Borrower, or if any action or
inaction is threatened which CNB reasonably believes will materially affect the
value of the Collateral, CNB may take such legal actions as it deems necessary
to protect the Collateral, including but not limited to, seeking injunctive
relief and the appointment of a receiver, whether or not an Event of Default,
whether or not subject to cure, has occurred under this Agreement.

           

          10.MISCELLANEOUS.

           

          10.1.
Reimbursement of Costs
and Expenses.
Borrower will reimburse CNB for all reasonable costs and expenses
relating to this Agreement including, but not limited to, filing, recording or
search fees, audit or verification fees, appraisals of the Collateral and other
out-of-pocket expenses, and reasonable attorneys' fees and expenses expended or
incurred by CNB (or allocable to CNB's in-house counsel) in documenting or
administering the Loan Documents or collecting any sum which becomes due CNB
under the Loan Documents, irrespective of whether suit is filed, or in the
protection, perfection, preservation or enforcement of any and all rights of CNB
in connection with the Loan Documents, including, without limitation, the fees
and costs incurred in any out­of-court work-out or a bankruptcy or
reorganization proceeding.

          

          
            
              
              

            

            
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	City National
      Bank  	
                             CREDIT
      AGREEMENT

                          

                  

                

              

               

                   

            

          

          10.2.
Dispute
Resolution.

           

          10.2.1.
Mandatory Arbitration. At the request of CNB or Borrower, any dispute, claim or
controversy of any kind (whether in contract or tort, statutory or common law,
legal or equitable) now existing or hereafter arising between CNB and Borrower
and in any way arising out of, pertaining to or in connection with: (a) this
Agreement, and/or any renewals, extensions, or amendments thereto; (b) any of
the Loan Documents; (c) any violation of this Agreement or the Loan Documents;
(d) all past, present and future loans; (e) any incidents, omissions, acts,
practices or occurrences arising out of or related to this Agreement or the Loan
Documents causing injury to either party whereby the other party or its agents,
employees or representatives may be liable, in whole or in part, or (f) any
aspect of the past, present or future relationships of the parties, will be
resolved through final and binding arbitration conducted at a location
determined by the arbitrator in Los Angeles, California, and administered by the
American Arbitration Association ("AAA") in accordance with the California
Arbitration Act (Title 9, California
Code of Civil Procedure Section 1280 et. seq) and the then existing
Commercial Rules of the AAA. Judgment upon any award rendered by the
arbitrator(s) may be entered in any state or federal courts having jurisdiction
thereof.

           

          10.2.2.
Real Property Collateral. Not withstanding the provisions of Section 10.2.1, no
controversy or claim will be submitted to arbitration without the consent of all
the parties if, at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation owed to CNB which is secured in
whole or in part by real property collateral. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy or
claim will be determined as provided in Subsection entitled judicial
reference.

           

          10.2.3.
Judicial Reference. At the request of any party, a controversy or claim which is
not submitted to arbitration as provided and limited in Sections 10.2.1 and
10.2.2 will be determined by a reference in accordance with California
Code of Civil Procedure
Section 638 et. seq. If such an election is made, the parties will
designate to the court a referee or referees selected under the auspices of the
AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings.
The presiding referee of the panel, or the referee if there is a single referee,
will be an active attorney or retired judge. Judgment upon the award rendered by
such referee or referees will be entered in the court in which such proceeding
was commenced in accordance with California
Code of
Civil Procedure Section 644 and Section 645.

           

          10.2.4.
Provisional Remedies, Self Help and Foreclosure. No provision of this Agreement
will limit the right of any party to: (a) foreclose against any real property
collateral by the exercise of a power of sale under a deed of trust, mortgage or
other security agreement or instrument, or applicable law, (b) exercise any
rights or remedies as a secured party against any personal property collateral
pursuant to the terms of a security agreement or pledge agreement, or applicable
law, (c) exercise self help remedies such as setoff, or (d) obtain provisional
or ancillary remedies such as injunctive relief or the appointment of a receiver
from a court having jurisdiction before, during or after the pendency of any
arbitration or referral. The institution and maintenance of an action for
judicial relief or pursuit of provisional or ancillary remedies, or exercise of
self help remedies will not constitute a waiver of the right of any party,
including the plaintiff, to submit any dispute to arbitration or judicial
reference.

          

          
            
              
              

            

            
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	City National
      Bank  	
                       CREDIT
      AGREEMENT

                    

            

          

        

         

        
                   

                          10.2.5.
Powers and Qualifications of Arbitrators. The arbitrator(s) will give effect to
statutes of limitation, waiver and estoppel and other affirmative defenses in
determining any claim. Any controversy concerning whether an issue is
arbitratable will be determined by the arbitrator(s). The laws of the State of
California will govern. The arbitration award may include equitable and
declaratory relief. All arbitrator(s) selected will be required to be a
practicing attorney or retired judge licensed to practice law in the State of
California and will be required to be experienced and knowledgeable in the
substantive laws applicable to the subject matter of the controversy or claim at
issue.

           

                         10.2.6.
Discovery. The provisions of California Code of Civil Procedure
Section 1283.05 or its successor section(s) are incorporated herein and
made a part of this Agreement. Depositions may be taken and discovery may be
obtained in any arbitration under this Agreement in accordance with said
section(s).

           

                          10.2.7.
Miscellaneous. The arbitrator(s) will determine which is the prevailing party
and will include in the award that party's reasonable attorneys' fees and costs
(including allocated costs of in-house legal counsel). Each party agrees to keep
all controversies and claims and the arbitration proceedings strictly
confidential, except for disclosures of information required in the ordinary
course of business of the parties or by applicable law or
regulation.

           

          10.3.
Cumulative Rights and
No Waiver.
All rights and remedies granted to CNB under the Loan Documents are
cumulative and no one such right or remedy is exclusive of any other. No failure
or delay on the part of CNB in exercising any power, right or remedy under any
Loan Document will operate as a waiver thereof, and no single or partial
exercise or waiver by CNB of any such power, right or remedy will preclude any
further exercise thereof or the exercise of any other power, right or
remedy.

           

                         
10.4. Applicable
Law.
This Agreement will be governed by California law.

           

          10.5.
Lien and Right of
Set-off. Borrower grants to CNB a continuing lien for all Obligations of
Borrower to CNB upon any and all moneys, securities and other property of
Borrower and the proceeds thereof, now or hereafter held or received by or in
transit to CNB from or for Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of Borrower with, and any and all claims of
Borrower against, CNB at any time existing. Upon the occurrence of any Event of
Default, CNB is hereby authorized at any time and from time to time, without
notice to Borrower or any other Person to setoff, appropriate and apply any or
all items hereinabove referred to against all Obligations of Borrower whether
under this Agreement or otherwise, and whether now existing or hereafter
arising.

          

          
            
              
              

            

            
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	City National
      Bank  	
                           CREDIT
      AGREEMENT

                        

                

              

            

             

            
                   

            

          

          10.6.
Notices. Any
notice required or permitted under any Loan Document will be given in writing
and will be deemed to have been given when personally delivered or when sent by
the U.S. mail, postage prepaid, certified, return receipt requested, properly
addressed. For the purposes hereof, the addresses of the parties will, until
further notice given as herein provided, be as follows:

           

          
            	 	CNB:	City National
      Bank	 
	 	 	15260 Ventura
      Boulevard, Sixteenth Floor 	 
	 	 	Sherman Oaks, CA
      91403	 
	 	 	Attn: George Hill,
      Senior Vice President	 
	 	 	 	 
	 	Copies To:
	City National Bank,
      Legal Department	 
	 	 	400 North Roxbury
      Drive	 
	 	 	Beverly Hills,
      California 90210-5021 	 
	 	 	Attn: Managing
      Counsel, Credit Unit	 
	 	 	 	 
	 	 	Bruce J.
      Haber, Chairman	 
	 	 	PRI Medical
      Technologies, Inc.	 
	 	 	145 Huguenot Street,
      Suite #405 	 
	 	 	New Rochelle, NY
      10801	 
	 	 	 	 
	 	Borrower: 	PRI Medical
      Technologies, Inc.	 
	 	 	10939 Pendleton
      Street	 
	 	 	Sun Valley, CA
      91352	 
	 	 	Attn: William M.
      McKay, CFO/Secretary	 

          

           

          10.7.
Assignments.
The provisions of this Agreement are hereby made applicable to and will
inure to the benefit of CNB's successors and assigns and Borrower's successors
and assigns; provided, however, that Borrower may not assign or transfer its
rights or obligations under this Agreement without the prior written consent of
CNB. CNB may assign this Agreement and its rights and duties hereunder. CNB
reserves the right to sell, assign, transfer, negotiate, or grant participations
in all or any part of, or any interest in CNB's rights and benefits hereunder.
In connection therewith, CNB may disclose all documents and information which
CNB now or hereafter may have relating to Borrower or Borrower's
business.

           

          10.8.
Indemnification.
Borrower will, at all times, defend and indemnify and hold CNB (which for
purposes of this Section includes CNB's parent company and subsidiaries and all
of their respective shareholders, directors, officers, employees, agents,
representatives, successors, attorneys, and assigns) harmless from and against
any and all liabilities, claims, demands, causes of action, losses, damages,
expenses (including without limitation reasonable attorneys' fees, [which
attorneys may be employees of CNB, or may be outside counsel]) costs,
settlements, judgments or recoveries arising out of or resulting from (a) any
breach of the representations, warranties, agreements or covenants made by
Borrower herein; (b) any suit or proceeding of any kind or nature whatsoever
against CNB arising from or connected with the transactions contemplated by the
Loan Documents or any of the rights and properties assigned to CNB hereunder;
and/or (c) any suit or proceeding that CNB may deem necessary or advisable to
institute, in the name of CNB, Borrower or both, against any other Person, for
any reason whatsoever to protect the rights of CNB hereunder or under any of the
documents, instruments or agreements executed or to be executed pursuant
hereto, including attorneys' fees and court costs and all other costs and
expenses incurred by CNB (or allocable to CNB's in-house counsel), all of which
will be charged to and paid by Borrower and will be secured by the Collateral.
Any obligation or liability of Borrower to CNB under this Section will survive
the expiration or termination of this Agreement and the repayment of all Loans
and the payment or performance of all other Obligations of Borrower to
CNB.

           

          
            
              
              

            

            
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	City National
      Bank  	
                             CREDIT
      AGREEMENT

                          

                  

                

              

               

               

            

          

          10.9.
Complete Aareement.
This Agreement, together with the other Loan Documents, constitutes the
entire agreement of the parties and supersedes any prior or contemporaneous oral
or written agreements or understandings, if any, which are merged into this
Agreement. The other Loan Documents are subject to the terms and conditions of
this Agreement, and, in the event of a conflict between the other Loan Documents
and this Agreement, the provisions of this Agreement shall control. This
Agreement may be amended only in a writing signed by Borrower and
CNB.

           

          10.10.
Headings.
Section headings in this Agreement are included for convenience of
reference only and do not constitute a part of the Agreement for any
purpose.

           

          10.11.
Accounting Terms.
Except as otherwise stated in this Agreement, all accounting terms and
financial covenants and information will be construed in conformity with, and
all financial data required to be submitted will be prepared in conformity with,
GAAP as in effect on the date hereof.

           

          10.12.
Severability. Any provision of
the Loan Documents which is prohibited or unenforceable in any jurisdiction,
will be, only as to such jurisdiction, ineffective to the extent of such
prohibition or unenforceability, but all the remaining provisions of the Loan
Documents will remain valid.

           

          10.13.
Counterparts.
This Agreement may be signed in any number of counterparts which, when
taken together, will constitute but one agreement.

           

          10.14.
Joint and
Several.
Should more than one Person sign this Agreement, the obligations of each
signer will be joint and several.

           

          This
Agreement is executed as of the date stated at the top of the first
page.

           

          
             

            
              
                	 	"BORROWER"	 
	 	PRI MEDICAL
      TECHNOLOGIES, INC., a Nevada corporation	 
	 	 	 	 
	
                         

                      	
                        By:
      

                      	/s/ 
      Bruce
      J.
      Haber	 
	 	 	
                        Bruce
      J.
      Haber

                      	 
	 	 	Chairman	 
	 	 	 	 

              

            

          

           

           

          
            
              	 	"CNB"	 
	 	City National Bank, a national
      banking association	 
	 	 	 	 
	
                       

                    	
                      By:
      

                    	/s/ George
      Hill	 
	 	 	
                      George
      Hill

                    	 
	 	 	Senior Vice
      President	 
	 	 	 	 

            

          

           

        

 

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

    
    

     

    
      	CITY NATONAL BANK 	LOAN
      FEE AND CHARGES
	
              The
      way up. 

            	 
	 	 
	 	 
	 	 
	 	 
	 	 
	Borrower: PRI
      Medical Technologies, Inc., 	Date: June 5,
      2008
	a Nevada
      corporation	 

    

     

    Branch
Name and No.: San Fernando Valley CBS # 048

    
    

     

    
      	Customer No.:
      716098	Note No.:
      00004

    

     

    In
connection with the above referenced loan, fees and charges, as estimated, are
as follows:

    
    

     

    
      	UCC Filing
      Fees 	$53.00	 	 
	[ 
       ]    Quick Search	 	 	 
	[X]    
      UCC-I	 	 	 
	[  
      ]    UCC-3	 	 	 
	[
        ]    UCC-II	 	 	 
	[ 
       ]    Certificate of Status/Articles	 	 	 
	Total Estimated
      Fees 	$53.00	 	 

    

                                                                                                      

     

    Actual
fees may be higher or lower than estimated fees. Any excess funds will be
deposited to Borrower's Checking Account or reimbursed by Cashier's Check. If
fees collected are insufficient to cover out of pocket costs, the Borrower will
be billed directly for the balance unless authorization to debit the account is
received.

     

    PRI Medical
Technologies, Inc., 

    a Nevada
corporation

     

    
      	
              By:
      /s Bruce J. Haber

            	 
	Bruce
      J. Haber, Chairman	 

    

     

     

      
        

      

    

     

    To: City
National Bank

     

    I hereby
authorize you to charge the aforementioned fees and charges to depository
account number_______________________.

     

    
      	 
      	 
      	 
      	 
      
	
              Date

            	 
      	 
      	
              Borrower

            

    

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

     

    COMMERCIAL
GUARANTY

     

    
      	 	 	 	 	 	 	 	 
	Principal	Loan Date	Matutity	Loan No	Call / Coll	Account	 Officer GH	Initials
	 	 	 	 	 	 	 	 
	References in the boxes above are
      for Lender's use only and do not limit the applicability of this document
      to any particular loan or
      item.
      

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

            

    

     

    
    

     

    
      	Borrower:	PRI
      MEDICAL TECHNOLOGIES, INC., A NEVADA	Lender:
      	City
      National Bank, a national banking association 
	 	CORPORATION	 	San
      Fernando Valley Commercial Banking Services 
	 	10939
      PENDLETON STREET	 	#048000
	 	SUN
      VALLEY, CA 91352	 	15260
      Ventura Boulevard, Suite 1600
	 	 	 	Sherman
      Oaks, CA 91403
	 	 	 	 
	 	 	 	 
	Guarantor:	EMERGENT
      GROUP, INC., A NEVADA	 	 
	 	CORPORATION	 	 
	 	10939
      PENDLETON STREET	 	 
	 	SUN
      VALLEY, CA 91352	 	 

    

    
      

      

    

     

    CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and
valuable consideration, Guarantor absolutely and unconditionally guarantees full
and punctual payment and satisfaction of Guarantor's Share of the Indebtedness
of Borrower to Lender, and the performance and discharge of all Borrower's
obligations under the Note and the Related Documents. This is a guaranty of
payment and performance and not of collection, so Lender can enforce this
Guaranty against Guarantor even when Lender has not exhausted Lender's remedies
against anyone else obligated to pay the Indebtedness or against any collateral
securing the Indebtedness, this Guaranty or any other guaranty of the
Indebtedness. Guarantor will make any payments to Lender or its order, on
demand, in legal tender of the United States of America, in, same-day funds,
without set-off or deduction or counterclaim, and will otherwise perform
Borrower's obligations under the Note and Related Documents. Under this
Guaranty, Guarantor's obligations are continuing.

     

    INDEBTEDNESS. The word "Indebtedness" as used
in this Guaranty means all of the principal amount outstanding from time to time
and at any one or more times, accrued unpaid interest thereon and all collection
costs and legal expenses related thereto permitted by law, attorneys' fees,
arising from any and all debts, liabilities and obligations of every nature or
form, now existing or hereafter arising or acquired, that Borrower individually
or collectively or interchangeably with others, owes or will owe Lender.
"Indebtedness" includes, without limitation, loans, advances, debts, overdraft
indebtedness, credit card indebtedness, lease obligations, liabilities and
obligations under any interest rate protection agreements or foreign currency
exchange agreements or commodity price protection agreements, other obligations,
and liabilities of Borrower, and any present or future judgments against
Borrower, future advances, loans or transactions that renew, extend, modify,
refinance, consolidate or substitute these debts, liabilities and obligations
whether: voluntarily or involuntarily incurred; due or to become due by their
terms or acceleration; absolute or contingent; liquidated or unliquidated;
determined or undetermined; direct or indirect; primary or secondary in nature
or arising from a guaranty or surety; secured or unsecured; joint or several or
joint and several; evidenced by a negotiable or non-negotiable instrument or
writing; originated by Lender or another or others; barred or unenforceable
against Borrower for any reason whatsoever; for any transactions that may be
voidable for any reason (such as infancy, insanity, ultra vires or otherwise);
and originated then reduced or extinguished and then afterwards increased or
reinstated.

     

    If Lender
presently holds one or more guaranties, or hereafter receives additional
guaranties from Guarantor, Lender's rights under all guaranties shall be
cumulative. This Guaranty shall not (unless specifically provided below to the
contrary) affect or invalidate any such other guaranties. Guarantor's liability
will be Guarantor's aggregate liability under the terms of this Guaranty and any
such other unterminated guaranties.

     

    GUARANTOR'S SHARE OF THE INDEBTEDNESS. The words
"Guarantor's Share of the Indebtedness" as used in this Guaranty mean 100.000%
of the principal amount, plus interest thereon to the extent not prohibited by
law, and all collection costs, expenses and attorneys' fees whether or not there
is a lawsuit, and if there is a lawsuit, any fees and costs for trial and
appeals, not to exceed One Million Five Hundred Thousand & 00/100 Dollars
($1,500,000.00).

     

    Lender
shall determine Guarantor's Share of the Indebtedness when Lender makes demand
on Guarantor. After a determination, Guarantor's Share of the Indebtedness will
only be reduced by sums actually paid by Guarantor under this Guaranty, but will
not be reduced by sums from any other source including, but not limited to, sums
realized from any collateral securing the Indebtedness or this Guaranty, or
payments by anyone other than Guarantor, or reductions by operation of law,
judicial order or equitable principles. Lender has the sole and absolute
discretion to determine how sums shall be applied among guaranties of the
Indebtedness.

     

    The above
limitation on liability is not a restriction on the amount of the Note of
Borrower to Lender either in the aggregate or at any one time.

     

    CONTINUING GUARANTY. THIS IS A
"CONTINUING GUARANTY" UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND
PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE GUARANTOR'S SHARE OF THE
INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR
ACQUIRED, ON A CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE
INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR'S OBLIGATIONS AND
LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN
WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME
TO TIME.

     

    DURATION OF GUARANTY. This Guaranty will
take effect when received by Lender without the necessity of any acceptance by
Lender, or any notice to Guarantor or to Borrower, and will continue in full
force until all the Indebtedness incurred or contracted before receipt by Lender
of any notice of revocation shall have been fully and finally paid and satisfied
and all of Guarantor's other obligations under this Guaranty shall have been
performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may
only do so in writing. Guarantor's written notice of revocation must be mailed
to Lender, by certified mail, at Lender's address listed above or such other
place as Lender may designate in writing. Written revocation of this Guaranty
will apply only to new Indebtedness created after actual receipt by Lender of
Guarantor's written revocation. For this purpose and without limitation, the
term "new Indebtedness" does not include the Indebtedness which at the time of
notice of revocation is contingent, unliquidated, undetermined or not due and
which later becomes absolute, liquidated, determined or due. For this purpose
and without limitation, "new Indebtedness" does not include all or part of the
Indebtedness that is: incurred by Borrower prior to revocation; incurred under a
commitment that became binding before revocation; any renewals, extensions,
substitutions, and modifications of the Indebtedness. This Guaranty shall bind
Guarantor's estate as to the Indebtedness created both before and after
Guarantor's death or incapacity, regardless of Lender's actual notice of
Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect.

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    
    

     

    
      	 	
              COMMERCIAL
      GUARANTY

            	 
	Loan No.
    00004	
              (Continued)

            	
              Page
    2

            

    

    
      

      

    

     

     

    Release
of any other guarantor or termination of any other guaranty of the Indebtedness
shall not affect the liability of Guarantor under this Guaranty. A revocation
Lender receives from any one or more Guarantors shall not affect the liability
of any remaining Guarantors under this Guaranty. It is anticipated that
fluctuations may occur in the aggregate amount of the Indebtedness covered by
this Guaranty, and Guarantor specifically acknowledges and agrees that
reductions in the amount of the Indebtedness, even to zero dollars 1$0.001,
shall not constitute a termination of this Guaranty. This Guaranty is binding
upon Guarantor and Guarantor's heirs, successors and assigns so long as any of
the Guarantor's Share of the Indebtedness remains unpaid and
even though
the Guarantor's Share of the Indebtedness may from
time to time
be zero dollars (S0.00).

     

    GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor
authorizes Lender, either before or after any revocation hereof, without notice
or demand and without lessening Guarantor's liability under this Guaranty, from
time to time: (A) prior to revocation as set forth above, to make one or more
additional secured or unsecured loans to Borrower, to lease equipment or other
goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to
alter, compromise, renew, extend, accelerate, or otherwise change one or more
times the time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (E) to determine how, when and what application
of payments and credits shall be made on the Indebtedness; (F) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(GI to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in
part.

     

    GUARANTOR'S REPRESENTATIONS AND
WARRANTIES. Guarantor represents and warrants to Lender that (A) no
representations or agreements of any kind have been made to Guarantor which
would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty
is executed at Borrower's request and not at the request of Lender; (C)
Guarantor has full power, right and authority to enter into this Guaranty; (D)
the provisions of this Guaranty do not conflict with or result in a default
under any agreement or other instrument binding upon Guarantor and do not result
in a violation of any law, regulation, court decree or order applicable to
Guarantor; (E) Guarantor has not and will not, without the prior written consent
of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise
dispose of all or substantially all of Guarantor's assets, or any interest
therein; (F) upon Lender's request, Guarantor will provide to Lender financial
and credit information in form acceptable to Lender, and all such financial
information which currently has been, and all future financial information which
will be provided to Lender is and will be true and correct in all material
respects and fairly present Guarantor's financial condition as of the dates the
financial information is provided; (G) no material adverse change has occurred
in Guarantor's financial condition since the date of the most recent financial
statements provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (H) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (J)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with
Borrower.

     

    GUARANTOR'S WAIVERS. Except as prohibited by
applicable law, Guarantor waives any right to require Lender to (A) make any
presentment, protest, demand, or notice of any kind, including notice of change
of any terms of repayment of the Indebtedness, default by Borrower or any other
guarantor or surety, any action or nonaction taken by Borrower, Lender, or any
other guarantor or surety of Borrower, or the creation of new or additional
Indebtedness; (B) proceed against any person, including Borrower, before
proceeding against Guarantor; (C) proceed against any collateral for the
Indebtedness, including Borrower's collateral, before proceeding against
Guarantor; (D) apply any payments or proceeds received against the Indebtedness
in any order; (El give notice of the terms, time, and place of any sale of the
collateral pursuant to the Uniform Commercial Code or any other law governing
such sale; (F) disclose any information about the Indebtedness, the Borrower,
the collateral, or any other guarantor or surety, or about any action or
nonaction of Lender; or (G) pursue any remedy or course of action in Lender's
power whatsoever.

     

    Guarantor
also waives any and all rights or defenses arising by reason of (HI any
disability or other defense of Borrower, any other guarantor or surety or any
other
person; (I) the cessation from any cause whatsoever, other than payment
in full, of the Indebtedness; (J) the application of proceeds of the
Indebtedness by Borrower for purposes other than the purposes understood and
intended oy Guarantor and Lender; (K) any act of omission or commission by
Lender which directly or indirectly results in or contributes to the discharge
of Borrower or any other guarantor or surety, or the Indebtedness, or the loss
or release of any collateral by operation of law or otherwise; (L) any statute
of limitations in any action under this Guaranty or on the Indebtedness; or (M)
any modification or change in terms of the Indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in the
time payment of the Indebtedness is due and any change in the interest rate, and
including any such modification or change in terms after revocation of this
Guaranty on the Indebtedness incurred prior to such revocation.

     

    Guarantor
waives all rights of subrogation, reimbursement, indemnification, and
contribution and any other rights and defenses that are or may become
available to Guarantor by reason of California Civil Code Sections 2787 to 2855,
inclusive,

     

    Guarantor
waives all rights and any defenses arising out of an election of remedies by
Lender even though that the election of remedies, such as a non-judicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Guarantor's rights of subrogation and reimbursement against Borrower by
operation of Section 580d of the California Code of Civil Procedure or
otherwise.

     

    Guarantor
waives all rights and defenses that Guarantor may have because Borrower's
obligation is secured by real property. This means among other things: (N)
Lender may collect from Guarantor without first foreclosing on any real or
personal property collateral pledged by Borrower. (0) If Lender forecloses on
any real property collateral pledged by Borrower: (1) the amount of Borrower's
obligation may be reduced only by the price for which the collateral is sold at
the foreclosure sale, even if the collateral is worth more than the sale price.
(21 Lender may collect from Guarantor even if Lender, by foreclosing on the real
property collateral, has destroyed any right Guarantor may have to collect from
Borrower. This is an unconditional and irrevocable waiver of any rights and
defenses Guarantor may have because Borrower's obligation is secured by
real property. These rights and defenses include, but are not limited to,
any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Code
of Civil Procedure.

     

    Guarantor
understands and agrees that the foregoing waivers are unconditional and
irrevocable waivers of substantive rights and defenses to which Guarantor might
otherwise be entitled under state and federal law. The rights and defenses
waived include, without limitation, those provided by California laws of
suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code.
Guarantor acknowledges that Guarantor has provided these waivers of rights and
defenses with the intention that they be fully relied upon by Lender. Guarantor
further understands and agrees that this Guaranty is a separate and independent
contract between Guarantor and Lender, given for full and ample consideration,
and is enforceable on its own terms. Until all of the Indebtedness is paid in
full, Guarantor waives any right to enforce any remedy
Guarantor may have against the Borrower or any other guarantor, surety, or other
person, and further, Guarantor waives any right to participate in any collateral
for the Indebtedness now or hereafter held by Lender.

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    
       

       

      
        	 	
                COMMERCIAL
      GUARANTY

              	 
	Loan No.
    00004	
                (Continued)

              	
                Page
    3

              

      

      
        

        

      

       

    

    Guarantor's Understanding With Respect To Waivers.
Guarantor warrants and agrees that each of the waivers set forth above is made
with Guarantor's full knowledge of its significance and consequences and that,
under the circumstances, the waivers are reasonable and not contrary to public
policy or law. If any such waiver is determined to be contrary to any applicable
law or public policy, such waiver shall be effective only to the extent
permitted by law or public policy.

     

    Subordination of Borrower's Debts to Guarantor.
Guarantor agrees that the Indebtedness, whether now existing or hereafter
created, shall be superior to any claim that Guarantor may now have or hereafter
acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor
hereby expressly subordinates any claim Guarantor may have against Borrower,
upon any account whatsoever, to any claim that Lender may now or hereafter have
against Borrower. In the event of insolvency and consequent liquidation of the
assets of Borrower, through bankruptcy, by an assignment for the benefit of
creditors, by voluntary liquidation, or otherwise, the assets of Borrower
applicable to the payment of the claims of both Lender and Guarantor shall be
paid to Lender and shall be first applied by Lender to the Indebtedness.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Burrower;
provided however, that such assignment
shall be effective only fur the purpose of assuring to
Lender full
payment
in legal
tender of the Indebtedness. If Lender so requests, any notes or credit
agreements now or hereafter evidencing any debts or obligations of Borrower to
Guarantor shall be marked with a legend that the same are subject to this
Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is
hereby authorized, in the name of Guarantor, from time to time to file financing
statements and continuation statements and to execute documents and to take such
other actions as Lender deems necessary or appropriate to perfect, preserve and
enforce its
rights under this
Guaranty.

     

    Miscellaneous Provisions. The following
miscellaneous provisions are a part of this Guaranty:

     

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

     

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

     

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

     

    GOVERNING LAW. This Guaranty
will be governed by federal law applicable to Lender and, to the extent not
preempted by federal law, the laws of the State of California without regard to
its conflicts of law provisions.

     

    CHOICE OF VENUE. If there is a
lawsuit, Guarantor agrees upon Lender's request to submit to the jurisdiction of
the courts of LOS ANGELES County, State of California.

     

    INTEGRATION. Guarantor further
agrees that Guarantor has read and fully understands the terms of this Guaranty;
Guarantor has had
the opportunity to
be advised by
Guarantor's attorney with respect to
this Guaranty; the Guaranty fully reflects Guarantor's intentions and parol
evidence is not required to interpret the terms of this Guaranty. Guarantor
hereby indemnifies and holds Lender harmless from all losses, claims, damages,
and costs (including Lender's attorneys' fees) suffered or incurred by Lender as
a result of any breach by Guarantor of the warranties, representations and
agreements of this paragraph.

     

    INTERPRETATION. In all cases
where there is more than one Borrower or Guarantor, then all words used in this
Guaranty in the singular shall be deemed to have been used
in the plural where the context and construction so require; and where there is
more than one Borrower named in this Guaranty or when this Guaranty is executed
by more than one Guarantor, the words "Borrower" and "Guarantor" respectively
shall mean all and any one or more of them. The words "Guarantor," "Borrower,"
and "Lender" include the heirs, successors, assigns, and transferees of each of
them. If a court finds that any provision of this Guaranty is not valid or
should not be enforced, that fact by itself will not mean that the rest of this
Guaranty will not be valid or enforced. Therefore, a court will enforce the rest
of the provisions of this Guaranty even if a provision of this Guaranty may be
found to be invalid or unenforceable. If any one or more of Borrower or
Guarantor are corporations, partnerships, limited liability companies, or
similar entities, it is not necessary for Lender to inquire into the powers of
Borrower or Guarantor or of the officers, directors, partners, managers, or
other agents acting or purporting to act on their behalf, and any
indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.

     

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

     

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

     

    SUCCESSORS AND ASSIGNS. Subject to
any limitations stated in this Guaranty on transfer of Guarantor's interest,
this Guaranty shall be binding upon and inure to the benefit of the parties,
their successors and assigns.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

     

    
       

      
        	 	
                COMMERCIAL
      GUARANTY

              	 
	Loan No.
    00004	
                (Continued)

              	
                Page
    4

              

      

      
        

      

    

     

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

     

    BORROWER. The word "Borrower"
means PRI MEDICAL TECHNOLOGIES, INC., A NEVADA CORPORATION and includes all
co-signers and co-makers signing the Note and all their successors and
assigns.

     

    GUARANTOR. The word
"Guarantor" means everyone
signing this Guaranty, including without limitation EMERGENT GROUP, INC.,
A NEVADA CORPORATION, and in each case, any signer's successors and
assigns.

     

    GUARANTOR'S SHARE OF THE
INDEBTEDNESS. The words "Guarantor's Share of the Indebtedness" mean
Guarantor's indebtedness to Lender as more particularly described in this
Guaranty.

     

    GUARANTY. The word "Guaranty"
means this guaranty from Guarantor to Lender.

     

    INDEBTEDNESS. The word
"Indebtedness" means Borrower's indebtedness to Lender as more particularly
described in this Guaranty. LENDER. The word "Lender"
means City National Bank, a national banking association, its successors and
assigns.

    NOTE. The word "Note" means
the promissory note dated June 5, 2008, in the
original principal amount of $1,000,000.00 from Borrower to Lender,
together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the promissory note or
agreement.

     

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

     

    EACH UNDERSIGNED GUARANTOR
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES
TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS
EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND
THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE
SECTION TITLED "DURATION OF GUARANTY". NO FORMAL ACCEPTANCE BY LENDER IS
NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JUNE 5,
2008.

     

    GUARANTOR:

     

    EMERGENT
GROUP, INC., A NEVADA
CORPORATION

     

    By: /s/
BRUCE J. HABER,

    
      

    

     BRUCE J. HABER,
Chairman of EMERGENT GROUP, 

     INC.,
A NEVADA CORPORATION

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    
      CORPORATE
RESOLUTION TO BORROW / GRANT COLLATERAL

    

    
      	
              Principal
      

              $1,000,000.00

            	
              Loan
       Date

              06-05-2008

            	
              Maturity

              06-03-2008

            	
              Loan
      No

              00004

            	
              Call /
      Coll

            	
              Account

              716098

            	
              Officer

              GH

            	
              Initials

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

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

            

    

    

    
       

      
        	Corporation:	PRI
      MEDICAL TECHNOLOGIES, INC., A NEVADA	Lender:
      	City
      National Bank, a national banking association 
	 	CORPORATION	 	San
      Fernando Valley Commercial Banking Services 
	 	10939
      PENDLETON STREET	 	#048000
	 	SUN
      VALLEY, CA 91352	 	15260
      Ventura Boulevard, Suite 1600
	 	 	 	Sherman
      Oaks, CA 91403
	 	 	 	 

      

      
        

      

    

    
       

    

    

    I,
THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

     

    THE CORPORATION'S EXISTENCE.
The complete and correct name of the Corporation is PRI MEDICAL
TECHNOLOGIES, INC., A NEVADA CORPORATION ("Corporation"). The Corporation is a
corporation for profit which is, and at all times shall be, duly organized,
validly existing, and in good standing under and by virtue of the laws of the
State of Nevada. The Corporation is duly authorized to transact business in the
State of California and all other states in which the Corporation is doing
business, having obtained all necessary filings, governmental licenses and
approvals for each
state in which
the Corporation is doing business. Specifically, the Corporation is, and
at all times shall be, duly qualified as a foreign corporation in all states in
which the failure to so qualify would have a material adverse effect on its
business or financial condition. The Corporation has the full power and
authority to own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. The Corporation maintains its
principal office at 10939 PENDLETON STREET, SUN VALLEY, CA 91352. Unless the
Corporation has designated otherwise in writing, this is the principal office at
which the Corporation keeps its books
and records. The Corporation will notify Lender prior to any change in
the location of the Corporation's state of organization or any change in the
Corporation's name. The Corporation shall do all things necessary to preserve
and to keep in full force and effect its existence, rights and privileges, and
shall comply with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental or quasi-governmental authority or court applicable
to the Corporation and the Corporation's business activities.

     

    RESOLUTIONS ADOPTED.
At a meeting of the Directors of the Corporation, or if the Corporation
is a close corporation having no Board of Directors then at a meeting of the
Corporation's shareholders, duly called and held on May 1, 2008, at which a
quorum was present and voting, or by other duly authorized action in lieu of a
meeting, the resolutions set forth in this Resolution were adopted.

     

    OFFICERS. The following named persons are
officers of PRI MEDICAL TECHNOLOGIES, INC., A NEVADA CORPORATION:

    
    

     

    
      	NAMES 	TITLES 	AUTHORIZED	ACTUAL SIGNATURES
	 	 	 	 
	BRUCE J. HABER	Chairman	Y 	X /s/ BRUCE J. HABER
	 	 	 	 
	WILLIAM
      McKAY	CFO/Secretary	Y 	X /s/ WILLIAM
  McKAY

    

     

     

    ACTIONS
AUTHORIZED. Any one (1)
of the authorized persons listed above may enter into any agreements of
any nature with Lender, and those agreements will bind the Corporation.
Specifically, but without limitation, any one (1) of such authorized persons are
authorized, empowered,
and directed to do the following for and on behalf of the
Corporation:

     

    Borrow
Money. To borrow, as a cosigner or otherwise, from time to time from Lender, on
such terms as may be agreed upon between the Corporation and Lender, such sum or
sums of money as in their judgment should be borrowed, without
limitation.

     

    Execute
Notes. To execute and deliver to Lender the promissory note or notes, or other
evidence of the Corporation's credit accommodations, on Lender's forms, at such
rates of interest and on such terms as may be agreed upon, evidencing the sums
of money so borrowed or any of the Corporation's indebtedness to Lender, and
also to execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, any
portion of the notes, or any other evidence of credit
accommodations.

     

    Grant
Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise
encumber and deliver to Lender any property now or hereafter belonging to the
Corporation or in which the Corporation now or hereafter may have an interest,
including without limitation all of the Corporation's real property and all of
the Corporation's personal property (tangible or intangible), as security for
the payment of any loans or credit accommodations so obtained, any promissory
notes so executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated
or encumbered.

     

    Execute
Security Documents. To execute and deliver to Lender the forms of mortgage, deed
of trust, pledge agreement, hypothecation agreement, and other
security agreements and financing statements which Lender may require and which
shall evidence the terms and conditions under and pursuant to which such liens
and encumbrances, or any of them, are given; and also to execute and deliver to
Lender any other written instruments, any chattel paper, or any other
collateral, of any kind or nature, which Lender may deem necessary or proper in
connection with or pertaining to the giving of the liens and encumbrances.
Notwithstanding the foregoing, any one of the above authorized persons may
execute, deliver, or record financing statements.

     

    Negotiate
Items. To draw, endorse, and discount with Lender all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the Corporation's account with Lender, or to cause such other disposition of
the proceeds derived therefrom as they may deem advisable.

     

    Further Acts. In the case of lines of credit,
to designate additional or alternate individuals as being
authorized to request advances under such lines, and in all cases, to do
and perform such other acts and things, to pay any and all fees and costs, and
to execute and deliver such other documents and agreements as the officers may
in their discretion deem reasonably necessary or proper in order to carry into
effect the provisions of this Resolution. The following person or persons are
authorized to request advances and authorize payments under the line of credit
until Lender receives from the Corporation, at Lender's address shown above,
written notice of revocation of such authority: BRUCE
J. HABER, Chairman of PRI MEDICAL TECHNOLOGIES, INC., A NEVADA
CORPORATION; and WILLIAM McKAY, CFO/Secretary of PRI MEDICAL TECHNOLOGIES, INC.,
A NEVADA CORPORATION.

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    
       

    

                                                                         

    
    

     

    
      	
                 CORPORATE RESOLUTION TO BORROW / GRANT
      COLLATERAL

            
	 	
              (Continued) 

            	 
	Loan No:
      00004 	 	
              Page
  

            

    

     

     

    ASSUMED
BUSINESS NAMES. The
Corporation has filed or recorded all documents or filings required by
Law relating to all assumed business names used by the Corporation. Excluding
the name of the Corporation, the
following is a complete list of all assumed business names under which the
Corporation does business: None.

     

    NOTICES
TO LENDER. The Corporation will promptly notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A} change in the Corporation's name; (13)
change in the Corporation's assumed business name(s); (C) change in the
management of the Corporation; (0) change in the authorized signer(s); (E)
change in the Corporation's principal office address; (F) change in the
Corporation's state of organization; (G) conversion of the Corporation to a new
or different type of business entity; or (H) change in any other
aspect of the Corporation that directly or indirectly relates to any agreements
between the Corporation and Lender. No change in the Corporation's name or state
of organization will take effect until after Lender has received
notice.

     

    CERTIFICATION
CONCERNING OFFICERS AND RESOLUTIONS. The officers named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Corporation, is in full force and
effect, and has not been modified or revoked in any manner
whatsoever.

     

    NO
CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no
seal is affixed to this Resolution.

    CONTINUING
VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender's address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.

     

    IN
TESTIMONY WHEREOF, I
have hereunto set my hand and attest that the signatures set opposite the
names listed above are their genuine signatures.

     

    I have read all the provisions of this
Resolution, and I personally and on behalf of the Corporation
certify that all statements and representations made in this Resolution
are
true and correct. This
Corporate Resolution to Borrow / Grant Collateral is dated June 5,
2008.

     

    
      
        	 	CERTIFIED TO AND ATTESTED
      BY:	 
	 	 	 	 
	
                 

              	
                X

              	/s/ WILLIAM McKAY	 
	 	 	WILLIAM McKAY, CFO/Secretary of
      PRI MEDICAL 	 
	 	 	TECHNOLOGIES, INC., A NEVADA
      CORPORATION	 
	 	 	 	 

      

    

     

     

     

     

     

     

    NOTE: if
the officers signing this Resolution are designated by the foregoing document as
one of the officers authorized to act on the Corporation's behalf, it is
advisable to have this Resolution signed by at least one non-authorized officer
of the Corporation.

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

     

    
      
        CORPORATE
RESOLUTION TO GRANT COLLATERAL/  GUARANTEE

      

       

                                                                                                                       

      
        	
                Principal
      

                $1,000,000.00

              	
                Loan
       Date

                06-05-2008

              	
                Maturity

                06-03-2008

              	
                Loan
      No

                00004

              	
                Call /
      Coll

              	
                Account

                716098

              	
                Officer

                GH

              	
                Initials

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

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

              

      

       

      
         

         

        
          

        

         

         

      

      
        
           

          
            	Borrower:	PRI
      MEDICAL TECHNOLOGIES, INC., A NEVADA	Lender:
      	City
      National Bank, a national banking association 
	 	CORPORATION	 	San
      Fernando Valley Commercial Banking Services 
	 	10939
      PENDLETON STREET	 	#048000
	 	SUN
      VALLEY, CA 91352	 	15260
      Ventura Boulevard, Suite 1600
	 	 	 	Sherman
      Oaks, CA 91403
	 	 	 	 
	 	 	 	 
	Corporation:	EMERGENT
      GROUP, INC., A NEVADA	 	 
	 	CORPORATION	 	 
	 	10939
      PENDLETON STREET	 	 
	 	SUN
      VALLEY, CA 91352	 	 

          

          
            

          

        

        
           

        

      

       

       

    

    I, THE
UNDERSIGNED, DO HEREBY CERTIFY THAT:

     

    THE
CORPORATION'S EXISTENCE. The complete and correct name of the Corporation is
EMERGENT GROUP, INC., A NEVADA CORPORATION ("Corporation"). The Corporation is a
corporation for profit which is,
and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Nevada. The Corporation
is duly authorized to transact business in the State of California and all other
states in which the Corporation is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which the
Corporation is doing business. Specifically, the Corporation is,
and at all times shall be, duly qualified as a foreign corporation in all
states in which the failure to so qualify would have a material adverse effect
on its business or financial condition. The Corporation has the full power and
authority to own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. The Corporation maintains its
principal office at 10939 PENDLE TON STREET, SUN VALLEY, CA 91352. Unless the
Corporation has designated otherwise in writing, this is the principal office at
which the Corporation keeps its books and records. The Corporation will notify
Lender prior to any change in the location of the Corporation's state of
organization or any change in the Corporation's name. The Corporation shall do
all things necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply
with all regulations, rules, ordinances, statutes, orders and decrees of
any governmental or quasi-governmental authority or court applicable
to the Corporation and the Corporation's business activities.

     

    RESOLUTIONS ADOPTED. At a meeting of the
Directors of the Corporation, or if the Corporation is a close corporation
having no Board of Directors then at a meeting of the Corporation's
shareholders, duly called and held on May 1, 2008, at which a quorum was
present and voting, or by other duly authorized action in lieu of a meeting, the
resolutions set forth in this Resolution were adopted.

     

    OFFICERS. The following named persons are
officers of EMERGENT
GROUP, INC., A NEVADA CORPORATION: 

    
       

       

        	NAMES 	TITLES 	AUTHORIZED	ACTUAL SIGNATURES
	 	 	 	 
	BRUCE J. HABER	Chairman	Y 	X /s/ BRUCE J. HABER
	 	 	 	 
	WILLIAM
      McKAY	CFO/Secretary	Y 	X /s/ WILLIAM
  McKAY

      

       

    

     

    ACTIONS AUTHORIZED. Any one (1) of the
authorized persons listed above may enter into any agreements of any nature with
Lender, and those agreements will bind the Corporation. Specifically, but
without limitation, any one (1) of such authorized persons are authorized,
empowered, and directed to do the following for and on behalf of the
Corporation:

     

    Guaranty.
To guarantee or act as surety for loans or other financial accommodations to
Borrower from Lender on such guarantee or surety terms as may be agreed upon
between the officers of the Corporation and Lender and in such sum or sums of
money as in their judgment should be guaranteed or assured, (the
"Guaranty".

     

    Grant
Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise
encumber and deliver to Lender any property now or hereafter belonging to the
Corporation or in which the Corporation now or hereafter may have an interest,
including without limitation all of the Corporation's real property and all of
the Corporation's personal property (tangible or intangible), as security for
the Guaranty, and as a security for the payment of any loans, any promissory
notes, or any other or further indebtedness of PRI MEDICAL TECHNOLOGIES, INC., A
NEVADA CORPORATION to Lender at any time owing, however the same may be
evidenced. Such property may be mortgaged, pledged, transferred, endorsed,
hypothecated or encumbered at the time such loans are obtained or such
indebtedness is incurred, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, pledged,
transferred, endorsed, hypothecated or encumbered. The provisions of this
Resolution authorizing or relating to the pledge, mortgage, transfer,
endorsement, hypothecation, granting of a security interest in, or in any way
encumbering, the assets of the Corporation shall include, without limitation,
doing so in order to lend collateral security for the indebtedness, now or
hereafter existing, and of any nature whatsoever, of PRI MEDICAL TECHNOLOGIES,
INC., A NEVADA CORPORATION to Lender. The Corporation has considered the value
to itself of lending collateral in support of such indebtedness, and the
Corporation represents to Lender that the Corporation is benefited by doing
so.

     

    Execute Security Documents. To execute and
deliver to Lender the forms of mortgage, deed of trust, pledge agreement,
hypothecation agreement, and other security agreements and financing statements
which Lender may require and which shall evidence the terms and conditions under
and pursuant to which such liens and encumbrances, or any of them, are given;
and also to execute and deliver to Lender any other written instruments, any
chattel paper, or any other collateral, of any kind or nature, which Lender may
deem necessary or proper in connection with or pertaining to the giving of the
liens and encumbrances. Notwithstanding the foregoing, any one of the above
authorized persons may execute, deliver, or record financing
statements.

     

    Further Acts. To do and perform such
other acts and things and to execute and deliver such other documents and
agreements as the officers may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of this
Resolution.

     

    ASSUMED BUSINESS NAMES. The
Corporation has filed or recorded all documents or filings required by law
relating to all assumed business names used by the Corporation. Excluding the
name of the Corporation, the following is a complete list of all assumed
business names under which the Corporation does business: None.

     

    NOTICES
TO LENDER. The Corporation will promptly notify Lender in writing at Lender's
address shown above for such other addresses as Lender may designate from time
to time) prior to any (A) change in the Corporation's name; (B) change in the
Corporation's assumed business name(s); (C) change in the management of the
Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation's principal
office address; IF) change in the Corporation's state of organization; (G)
conversion of the Corporation to a new or different type of business entity; or
(HI change in any other aspect of the Corporation that directly or indirectly
relates to any agreements between the Corporation and Lender. No change in the
Corporation's name or state of organization will take effect until after Lender
has received notice.

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

     

    
                                                                           

      
      

       

      
        	
                CORPORATE RESOLUTION TO GRANT COLLATERAL /
      GUARANTEE  
    

              
	 	
                (Continued) 

              	 
	Loan No:
      00004 	 	
                Page
    2 

              

      

       

    

     

    CERTIFICATION
CONCERNING OFFICERS AND RESOLUTIONS. The officers named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set opposite their respective names. This Resolution
now stands of record on the books of the Corporation, is in full force and
effect, and has not been modified or revoked in any manner
whatsoever.

     

    NO
CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is
affixed to this Resolution.

     

    CONTINUING
VALIDITY. Any and all acts authorized pursuant to this Resolution and performed
prior to the passage of this Resolution are hereby ratified and approved. This
Resolution shall be continuing, shall remain in full force and effect and Lender
may rely on it until written notice of its revocation shall have been delivered
to and received by Lender at Lender's address shown above (or such addresses as
Lender may designate from time to time). Any such notice shall not affect any of
the Corporation's agreements or commitments in effect at the time notice is
given.

     

    IN
TESTIMONY WHEREOF, I have hereunto set my hand and attest that the
signatures set opposite the names listed above are their genuine
signatures.

     

    I have
read all the provisions of this Resolution, and I personally and on behalf of
the Corporation certify that all statements and representations made in this
Resolution are true and correct. This Corporate Resolution to Grant Collateral /
Guarantee is dated June 5, 2008.

     

    
      
        	 	CERTIFIED
      TO
      AND ATTESTED BY:	 
	 	 	 	 
	
                 

              	
                X

              	/s/ WILLIAM
      M. MCKAY	 
	 	 	WILLIAM
      M. MCKAY, CFO / Secretary of EMERGENT GROUP, INC.,	 
	 	 	A
      NEVADA CORPORATION	 
	 	 	 	 

      

    

     

     

    NOTE: If
the officers signing this Resolution are designated by the foregoing document as
one of the officers authorized to act on the Corporation's behalf, it
is advisable to have this Resolution signed by at least one
non-authorized officer of the
Corporation.

     

     

     

    
      
        
        

      

      
        27Facility agreement

            Dated 20 June 2008

            Between

            
                	
                            (1)

                        	
                            Caspian Services Inc., a company incorporated under the laws of the state of Nevada with corporation number C16552-1998 (the Company); and

                        

            

            
                	
                            (2)

                        	
                            Altima Central Asia (Master) Fund Ltd. a company incorporated under the laws of the Cayman Islands with registered number MC168526 as lender (the Lender).

                        

            

            It is agreed:

            
                	
                            1

                        	
                            Definitions and interpretation

                        

            

            
                	
                            1.1

                        	
                            In this Agreement:

                        

            

            Articles means the constitutional documents of the Company.

            Authorisation means an authorisation, consent, permission, approval, resolution, licence, exemption, filing, notarisation or registration.

            Availability Period means the period from and including the date of this Agreement to and including the date falling 30 days after the date of this Agreement.

            Bank Debt means, with respect to any person, without duplication,

            
                	
                             

                        	
                            (a)

                        	
                            its liabilities for borrowed money;

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            its Capital Lease obligations; and

                        

            

            
                	
                             

                        	
                            (c)

                        	
                            all liabilities for borrowed money secured by any Security with respect to any property owned by such person (whether or not it has assumed or otherwise become liable for such liabilities).

                        

            

            Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London and New York City.

            Capitalised Amount means, as of the date of the relevant Conversion Notice, the amount of interest (if any) that has been capitalised in respect of the Principal Amount in accordance with Clause 5.5 (Interest).

            Capital Lease means at any time, a lease which is required to be capitalised for financial reporting purposes in accordance with GAAP.

            Cash and Cash Equivalents means:

            
                	
                             

                        	
                            (a)

                        	
                            cash in hand or on deposit with any bank deemed acceptable by the Lender in its sole discretion;

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            certificates of deposit, maturing within one year after the relevant date of calculation, issued by a bank deemed acceptable by the Lender in its sole discretion;

                        

            

            
                	
                             

                        	
                            (c)

                        	
                            any investment in marketable obligations:

                        

            

             

             

            
                

            

            
                	
                             

                        	
                            (i)

                        	
                            issued or guaranteed by the government of the United States of America, or any investment in marketable obligations issued or guaranteed by any agency or department of any of those governments which has an equivalent credit rating;

                        

            

            
                	
                             

                        	
                            (ii)

                        	
                            issued or guaranteed by a government other than as set out in (c)(i) where those marketable obligations are rated AAA by Standard & Poor's or FitchIBCA or Aaa by Moody's Investor Services or any investment in marketable obligations issued or guaranteed by any agency or department of any of those governments which has an equivalent credit
                            rating;

                        

            

            
                	
                             

                        	
                            (d)

                        	
                            open market commercial paper:

                        

            

            
                	
                             

                        	
                            (i)

                        	
                            for which a recognised trading market exists;

                        

            

            
                	
                             

                        	
                            (ii)

                        	
                            which is issued in the United States of America, the United Kingdom, The Netherlands, France or Germany;

                        

            

            
                	
                             

                        	
                            (iii)

                        	
                            which matures within one year after the relevant date of calculation; and

                        

            

            
                	
                             

                        	
                            (iv)

                        	
                            which has a credit rating of either A-1 from Standard & Poor's or FitchIBCA or P-1 by Moody's Investor Services, or, if no rating is available in respect of the commercial paper, the issuer of which has, in respect of its long-term debt obligations, an equivalent rating; or

                        

            

            
                	
                             

                        	
                            (e)

                        	
                            any other instrument, security or investment approved by the Lender,

                        

            

            in each case, to which the Company is beneficially entitled at that time and which, or the proceeds of which, is capable of being applied against the Facility.

            Change of Control means any person or group of persons who are connected or acting in concert gaining direct or indirect control of the Company. In this definition:

            
                	
                             

                        	
                            (a)

                        	
                            control of the Company means:

                        

            

            
                	
                             

                        	
                            (i)

                        	
                            the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

                        

            

            
                	
                             

                        	
                            (aa)

                        	
                            cast, or control the casting of, more than 40 per cent of the maximum number of votes that might be cast at a general meeting of the Company;

                        

            

            
                	
                             

                        	
                            (bb)

                        	
                            appoint or remove all, or the majority, of the directors or other equivalent officers of the Company; or

                        

            

            
                	
                             

                        	
                            (cc)

                        	
                            give directions with respect to the operating and financial policies of the Company with which the directors or other equivalent officers of the company are obliged to comply; and/or

                        

            

            
                	
                             

                        	
                            (ii)

                        	
                            the holding beneficially of more than 40 per cent of the issued share capital of the Company (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital);

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            acting in concert means, a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition directly or indirectly of shares in the Company by any of them, either directly or indirectly, to obtain or consolidate control of the Company; and

                        

            

             

             

            
                

            

            
                	
                             

                        	
                            (c)

                        	
                            connected has the meaning given to it in section 839 Income and Corporation Taxes Act 1988.

                        

            

            Commitment means the amount set out in Clause 2 (The Facility) to the extent not cancelled or reduced under this Agreement.

            Consolidated Cash Available For Debt Service means:

            
                	
                             

                        	
                            (a)

                        	
                               the Net Cash of the Group; minus

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            all liabilities of any Group Company (other than in relation to Bank Debt and Consolidated Interest Expense),

                        

            

            (in each case taken as a cumulative whole) for such period.

            Consolidated Interest Expense means, in relation to any period, the sum (without double counting but in each case, eliminating all offsetting debits and credits between the Group and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Group in accordance with GAAP) of all interest in
            respect of Bank Debt of the Group (including imputed interest on Capital Lease obligations) deducted in determining Net Income for such period, together with all interest capitalised or deferred during such period and not deducted in determining Net Income for such period.

            Conversion Amount means the aggregate of the Initial Principal Amount, the Capitalised Amount and the Interest Amount.

            Conversion Notice shall have the meaning given to such term in Clause 9.5 (Undertakings).

            Conversion Right shall have the meaning given to such term in Clause 9.4(Undertakings).

            Conversion Shares means any Shares to be issued and allotted by the Company following the receipt of a Conversion Notice.

            Debt means, with respect to any person, without duplication,

            
                	
                             

                        	
                            (a)

                        	
                            all Bank Debt; and

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            its liabilities for the deferred purchase price of property acquired by such person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property).

                        

            

            In this definition, Debt of any person shall include all obligations of such person of the character described in paragraphs (a) and (b) above to the extent such person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.

            Debt Service Amount means, in relation to any period:

            
                	
                             

                        	
                            (a)

                        	
                            principal payments in respect of the Bank Debt of the Group; plus

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            the Consolidated Interest Expense of the Group,

                        

            

            (in each case taken as a cumulative whole) for such period.

            Default means an Event of Default or any event or circumstance specified in Clause 10 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination or the satisfaction of any condition under this Agreement or any combination of any of the
            foregoing) be an Event of Default.

             

             

            
                

            

            Dollars and US$ means the lawful currency of the United States of America for the time being.

            EBITDA means Net Income for a measurement period, adjusted by:

            
                	
                             

                        	
                            (a)

                        	
                            adding back Net Financing Expense for such period;

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            excluding any exceptional or extraordinary item;

                        

            

            
                	
                             

                        	
                            (c)

                        	
                            deducting any amount attributable to minority interests; and

                        

            

            
                	
                             

                        	
                            (d)

                        	
                            adding back taxes, depreciation and amortisation,

                        

            

            in each case determined in accordance with GAAP.

            EBRD Agreements means

            (a)           the loan agreement dated 21 December 2006 (as amended on 28 June 2007); and

            
                	
                             

                        	
                            (b)

                        	
                            the investment agreement dated 28 June 2007,

                        

            

            each made between The European Bank for Reconstruction and Development and Balykshi LLP and each as in force as at the date of this Agreement.

            Event of Default means any event or circumstance specified as such in Clause 10 (Events of Default).

            Exchange Act means the United States Securities and Exchange Act of 1934.

            Exchange Price means US$2.30.

            Facility means the facility made available under this Agreement and described in Clause 2 (The Facility).

            Final Repayment Date means the date falling 36 Months from the date of this Agreement.

            Finance Lease means any lease, hire agreement, credit sale agreement, purchase agreement, conditional sale agreement or instalment sale and purchase agreement which should be treated as a finance lease (or in the same way as a finance lease) in accordance with GAAP.

            Financial Indebtedness means any indebtedness for or in respect of:

            
                	
                             

                        	
                            (a)

                        	
                            moneys borrowed;

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

                        

            

            
                	
                             

                        	
                            (c)

                        	
                            any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

                        

            

            
                	
                             

                        	
                            (d)

                        	
                            the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP, be treated as a finance or capital lease;

                        

            

            
                	
                             

                        	
                            (e)

                        	
                            receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

                        

            

            
                	
                             

                        	
                            (f)

                        	
                            any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

                        

            

             

             

            
                

            

            
                	
                             

                        	
                            (g)

                        	
                            any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

                        

            

            
                	
                             

                        	
                            (h)

                        	
                            the supply of any goods or services which is more than 30 days past the original due date for payment having the commercial effect of a borrowing;

                        

            

            
                	
                             

                        	
                            (i)

                        	
                            any counter-indemnity obligation in respect of the guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution;

                        

            

            
                	
                             

                        	
                            (j)

                        	
                            any shares which are expressed to be redeemable before the Final Repayment Date; and

                        

            

            
                	
                             

                        	
                            (k)

                        	
                            the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (j) (inclusive) above.

                        

            

            GAAP means generally accepted accounting principles as in effect from time to time in the United States of America, consistently applied.

            Group means the Company and its Subsidiaries for the time being and Group Company means any of them.

            Holding Company means, in relation to a company or corporation, any other company or corporation of which it is a Subsidiary.

            Initial Principal Amount means, the Dollar amount delivered to the Company by the Lender pursuant to a duly completed Utilisation Request excluding any Capitalised Amount or Interest Amount.

            Interest Amount means, as of the date of the relevant Conversion Notice, the amount of interest that has accrued from the last Interest Period on the aggregate of the Principal Amount and any Capitalised Amount as at the end of that Interest Period in accordance with Clause 5.1 (Interest).

            Interest Period means each period determined in accordance with Clause 5 (Interest).

            Joint Venture means any joint venture entity, whether a company, unincorporated firm, undertaking, joint venture or partnership or any other entity.

            Loan means the loan made or to be made under the Facility or the principal amount outstanding for the time being of the loan.

            Month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

            
                	
                             

                        	
                            (a)

                        	
                            (subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one or, if there is not, on the immediately preceding Business Day;

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

                        

            

            
                	
                             

                        	
                            (c)

                        	
                            if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.

                        

            

            The above rules (a) to (c) will only apply to the last Month of any period.

             

            
                
                    

                

                Net Cash means, in respect of the Group, and any period the aggregate Cash and Cash Equivalents held by the Group, as shown in the consolidated balance sheet of the Company's most recently delivered financial statements under Clauses 9.1(b) and 9.1(c).

                Net Debt means at any time (without double counting) the aggregate amount of all obligations of the Group for or in respect of Debt but:

                
                    	
                                 

                            	
                                (a)

                            	
                                including, in the case of Finance Leases, only the capitalised value therefor; and

                            

                

                
                    	
                                 

                            	
                                (b)

                            	
                                deducting the aggregate amount of Cash and Cash Equivalents held by the Group at such time.

                            

                

                Net Financing Expense means net financing expense for the Group calculated in accordance with GAAP.

                Net Income means, in relation to any period, the net income (or loss) of the Group for such period (taken as a cumulative whole), as determined in accordance with GAAP.

                Nevada Business Combination Law means Nevada Revised Statues 78.411 to 78.444.

                Nevada Control Share Law means Nevada Revised Statutes 78.378 to 78.3793.

                Parties means the parties to this Agreement and Party means either of them.

                Principal Amount has the meaning given to such term in Clause 9.5 (Undertakings).

                SEC means the United States Securities and Exchange Commission and any successor thereto.

                Security means a mortgage, charge, pledge, lien, assignment by way of security, retention of title provision, trust or flawed asset arrangement (for the purpose of, or which has the effect of, granting security) or other security interest securing any obligation of any person or any other agreement or arrangement in any jurisdiction having a
                similar effect.

                Securities Act means the Securities Act of 1933.

                Shares means any shares from time to time in the capital of the Company.

                Subsidiary means a subsidiary undertaking within the meaning of section 258 Companies Act 1985.

                Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

                Tax Deduction means a deduction or withholding for or on account of Tax from a payment under this Agreement.

                Total Liabilities means, in relation to any period, the total liabilities of the Group for such period (taken on a consolidated basis) as determined in accordance with GAAP.

                Total Shareholders' Equity means, in relation to any period, the total shareholders equity of the Group (taken on a consolidated basis) as determined in accordance with GAAP.

                Utilisation means a utilisation of the Facility.

                Utilisation Date means the date of a Utilisation, being the date on which the Loan is to be made.

                 

                
                     

                    
                        

                    

                    Utilisation Request means the notice substantially in the form set out in Schedule 2 (Utilisation Request).

                    
                        	
                                    1.2

                                	
                                    Unless a contrary indication appears, any reference in this Agreement to:

                                

                    

                    
                        	
                                     

                                	
                                    (a)

                                	
                                    assets includes revenues, property and rights of every kind, present, future, actual and contingent and whether tangible or intangible (including uncalled share capital);

                                

                    

                    
                        	
                                     

                                	
                                    (b)

                                	
                                    Clauses and Schedule are to be construed as references to the clauses of, and schedule to, this Agreement;

                                

                    

                    
                        	
                                     

                                	
                                    (c)

                                	
                                    debt or indebtedness includes any obligation, whether incurred as principal or as surety, for the payment or repayment of money, whether present or future, actual or contingent and whether owed jointly or severally or in any other capacity;

                                

                    

                    
                        	
                                     

                                	
                                    (d)

                                	
                                    the words include(s), including and in particular shall be construed as being by way of illustration or emphasis only and shall not be construed as, nor shall they take effect as, limiting the
                                    generality of any preceding words;

                                

                    

                    
                        	
                                     

                                	
                                    (e)

                                	
                                    liabilities includes any obligation whether incurred as principal or as surety, whether or not in respect of indebtedness, whether present or future, actual or contingent and whether owed jointly or severally or in any other capacity;

                                

                    

                    
                        	
                                     

                                	
                                    (f)

                                	
                                    the words other and otherwise shall not be construed ejusdem generis with any preceding words where a wider construction is possible;

                                

                    

                    
                        	
                                     

                                	
                                    (g)

                                	
                                    any person includes one or more of that person's assigns, transferees, successors in title, delegates, sub-delegates and appointees (in the case of a Party, in so far as such assigns, transferees, successors in title, delegates, sub-delegates and appointees are permitted) and any person, firm,
                                    company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality);

                                

                    

                    
                        	
                                     

                                	
                                    (h)

                                	
                                    a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

                                

                    

                    
                        	
                                     

                                	
                                    (i)

                                	
                                    any statute or statutory provision includes any statute or statutory provision which amends, extends, consolidates or replaces it, or which has been amended, extended, consolidated or replaced by it, and any orders, regulations, instruments or
                                    other subordinate legislation made under it; and

                                

                    

                    
                        	
                                     

                                	
                                    (j)

                                	
                                    a time of day is a reference to London time.

                                

                    

                    
                        	
                                    1.3

                                	
                                    Clause and schedule headings are for ease of reference only.

                                

                    

                    
                        	
                                    1.4

                                	
                                    A Default (other than an Event of Default) is continuing if it has not been remedied or waived in writing and an Event of Default is continuing if it has not been waived in writing.

                                

                    

                    
                        	
                                    2

                                	
                                    The Facility

                                

                    

                    
                        	
                                    2.1

                                	
                                    Subject to the terms of this Agreement, the Lender makes available to the Company a term loan facility in a maximum principal amount of US$15,000,000.

                                

                    

                    
                        	
                                    2.2

                                	
                                    The Company shall apply all amounts borrowed by it under the Facility towards the Bautino port project and the Company's general corporate purposes.

                                

                    

                     

                    
                         

                        
                            

                        

                        
                            	
                                        3

                                    	
                                        Utilisation

                                    

                        

                        
                            	
                                        3.1

                                    	
                                        The Company may draw down the Facility by delivery to the Lender of a duly completed Utilisation Request, which must be received by the Lender not less than two Business Days before the proposed Utilisation Date (or such shorter period as the Lender may agree).

                                    

                        

                        
                            	
                                        3.2

                                    	
                                        The Lender will only be obliged to comply with Clause 3.6 if on the date of the Utilisation Request and on the proposed Utilisation Date no Default is continuing or would result from the proposed Loan.

                                    

                        

                        
                            	
                                        3.3

                                    	
                                        The Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

                                    

                        

                        
                            	
                                         

                                    	
                                        (a)

                                    	
                                        the proposed Utilisation Date is a Business Day within the Availability Period;

                                    

                        

                        
                            	
                                         

                                    	
                                        (b)

                                    	
                                        the currency and amount of the Utilisation comply with Clause 3.4; and

                                    

                        

                        
                            	
                                         

                                    	
                                        (c)

                                    	
                                        the Lender has received the documents and other evidence set out in Schedule 1 (Conditions precedent) in form and substance satisfactory to it.

                                    

                        

                        
                            	
                                        3.4

                                    	
                                        The currency specified in the Utilisation Request must be Dollars and, unless the Lender otherwise agrees, the amount of the proposed Loan must be the full amount of the Commitment.

                                    

                        

                        
                            	
                                        3.5

                                    	
                                        If the Loan is not drawn down by the Company in the full amount of the Commitment (or such amount as the Lender otherwise agrees) by the end of the Availability Period, the Company will pay the Lender a fee of US$1,000,000 on the Business Day next following the end of the Availability Period.

                                    

                        

                        
                            	
                                        3.6

                                    	
                                        If the conditions set out in this Agreement have been met, the Lender shall make the Loan available by the Utilisation Date.

                                    

                        

                        
                            	
                                        4

                                    	
                                        Repayment

                                    

                        

                        
                            	
                                        4.1

                                    	
                                        The Company shall repay the Loan and accrued interest on it on the Final Repayment Date.

                                    

                        

                        
                            	
                                        4.2

                                    	
                                        The Company may not re-borrow any part of the Facility which is repaid.

                                    

                        

                        
                            	
                                        4.3

                                    	
                                        The Company may not prepay the whole or any part of the Facility without the Lender's prior written consent.

                                    

                        

                        
                            	
                                        5

                                    	
                                        Interest

                                    

                        

                        
                            	
                                        5.1

                                    	
                                        The rate of interest on the Loan for each successive Interest Period is 13.0 per cent per annum.

                                    

                        

                        
                            	
                                        5.2

                                    	
                                        Each Interest Period will be 12 Months unless otherwise agreed by the Parties in writing.

                                    

                        

                        
                            	
                                        5.3

                                    	
                                        An Interest Period shall not extend beyond the Final Repayment Date.

                                    

                        

                        
                            	
                                        5.4

                                    	
                                        The first Interest Period shall start on the Utilisation Date and each subsequent Interest Period will start on the last day of the preceding Interest Period.

                                    

                        

                        
                            	
                                        5.5

                                    	
                                        Accrued interest on the Loan shall be capitalised on the last day of each Interest Period to form part of the Principal Amount of the Loan and shall thereafter bear interest with the rest of the Loan in accordance with this Clause 5 (Interest).

                                    

                        

                         

                        
                             

                            
                                

                            

                            
                                	
                                            6

                                        	
                                            Tax gross-up

                                        

                            

                            
                                	
                                            6.1

                                        	
                                            The Company shall make all payments to be made by it under this Agreement without any Tax Deduction, unless a Tax Deduction is required by law.

                                        

                            

                            
                                	
                                            6.2

                                        	
                                            The Company shall promptly upon becoming aware that it has had or will have to make a Tax Deduction (or that there has been or will be any change in the rate at which or the basis on which any Tax Deduction has to be made) notify the Lender accordingly. Similarly, the Lender shall notify the Company on becoming so aware in respect of a
                                            payment payable to the Lender.

                                        

                            

                            
                                	
                                            6.3

                                        	
                                            If a Tax Deduction is required by law to be made by the Company, the amount of the payment in respect of which the Tax Deduction is required to be made shall be increased to the amount which (after the Tax Deduction) will leave an amount equal to the payment which would have been due if no Tax Deduction had been required.

                                        

                            

                            
                                	
                                            7

                                        	
                                            Indemnities

                                        

                            

                            
                                	
                                            7.1

                                        	
                                            The Company shall, within three Business Days of demand, indemnify the Lender against any cost, loss or liability incurred by it as a result of the occurrence of any Event of Default.

                                        

                            

                            
                                	
                                            7.2

                                        	
                                            The Company shall promptly indemnify the Lender against any cost, loss or liability incurred by the Lender (acting reasonably) as a result of:

                                        

                            

                            
                                	
                                             

                                        	
                                            (a)

                                        	
                                            investigating any event which it reasonably believes is a Default; or

                                        

                            

                            
                                	
                                             

                                        	
                                            (b)

                                        	
                                            acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.

                                        

                            

                            
                                	
                                            8

                                        	
                                            Representations and warranties

                                        

                            

                            
                                	
                                            8.1

                                        	
                                            The Lender has entered into this Agreement in reliance on the representations of the Company set out in this Clause 8, and the Company warrants to the Lender on the date of this Agreement, on the date of each Utilisation Request and on each Utilisation Date as set out in this Clause 8.

                                        

                            

                            
                                	
                                            8.2

                                        	
                                            It is a corporation, duly incorporated and validly existing under the laws of the State of Nevada.

                                        

                            

                            
                                	
                                            8.3

                                        	
                                            It has the power to sue and be sued in its own name and to own its assets and carry on its business as that business is being and will be conducted.

                                        

                            

                            
                                	
                                            8.4

                                        	
                                            The obligations expressed to be assumed by it in this Agreement are legal, valid, binding and enforceable obligations.

                                        

                            

                            
                                	
                                            8.5

                                        	
                                            The entry into and performance by it of, and the transactions contemplated by, this Agreement do not and will not conflict with or constitute a breach, or a default or event of default under or result in the acceleration or vesting of any rights under:

                                        

                            

                            
                                	
                                             

                                        	
                                            (a)

                                        	
                                            any law or regulation applicable to it or binding on its assets;

                                        

                            

                            
                                	
                                             

                                        	
                                            (b)

                                        	
                                            its constitutional documents; or

                                        

                            

                            
                                	
                                             

                                        	
                                            (c)

                                        	
                                            any agreement or instrument binding upon it or any of its assets,

                                        

                            

                            which has or is reasonably likely to have a material adverse effect on the business or financial condition of the Company. The entry into and performance by the Company of, and the

                             

                            
                                 

                                
                                    

                                

                                transactions contemplated by this Agreement, do not and will not constitute a 'change of control' under any employment agreement of the Company.

                                
                                    	
                                                8.6

                                            	
                                                It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, this Agreement and the transactions contemplated by it.

                                            

                                

                                
                                    	
                                                8.7

                                            	
                                                All Authorisations:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                required

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (i)

                                            	
                                                to enable it lawfully to enter into, exercise its rights and comply with its obligations in this Agreement;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (ii)

                                            	
                                                to make the this Agreement admissible in evidence in its jurisdiction of incorporation or any jurisdiction where it conducts its business,

                                            

                                

                                have been obtained or effected and are in full force and effect; and

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                required to enable it to carry on its business, trade and ordinary activities have been obtained or effected and are in full force and effect if failure to obtain or effect those Authorisations has or is reasonably likely to have a material adverse effect on the business or financial condition of the Company.

                                            

                                

                                
                                    	
                                                8.8

                                            	
                                                The choice of English law as the governing law of this Agreement, and any judgment obtained in England in relation to this Agreement, will be recognised and enforced in the State of Nevada and in any jurisdiction where it conducts its business.

                                            

                                

                                
                                    	
                                                8.9

                                            	
                                                No Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.

                                            

                                

                                
                                    	
                                                8.10

                                            	
                                                No other event or circumstance is outstanding which constitutes (or would do so with the expiry of a grace period, the giving of notice, the making of any determination, the satisfaction of any other condition or any combination of any of the foregoing) a default or termination event (howsoever described) under any other agreement or
                                                instrument which is binding on it or to which its assets are subject which has or is reasonably likely to have a material adverse effect on the business or financial condition of the Company.

                                            

                                

                                
                                    	
                                                8.11

                                            	
                                                No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which could reasonably be expected to be adversely determined and, if adversely determined, could reasonably be expected to have a material adverse effect on the business or financial condition of the Company have (to the best of
                                                its knowledge and belief) been started or threatened against it, nor is there subsisting any unsatisfied judgment or award given against any of them by any court, arbitrator or other body.

                                            

                                

                                
                                    	
                                                8.12

                                            	
                                                It has not taken any action nor (to the best of its knowledge and belief) have any steps been taken or legal proceedings been started or threatened against it for its winding-up, dissolution or re-organisation, for the enforcement of any Security over its assets or for the appointment of a liquidator, supervisor, receiver,
                                                administrator, administrative receiver, compulsory manager, trustee or other similar officer of it or in respect of any of its assets.

                                            

                                

                                
                                    	
                                                8.13

                                            	
                                                The Company's authorized capital stock consists of one hundred fifty million (150,000,000) shares of common stock, US$0.001 par value per share, of which, on the date hereof fifty one million one hundred and ninety five thousand six hundred and fifty two (51,195,652) shares are issued and outstanding. All such issued and outstanding
                                                shares have been validly authorised and issued and are fully paid and nonassessable. The Company has on the date of this Agreement outstanding options, warrants, conversion rights and other rights to purchase or acquire not more than seven million three hundred and eighteen thousand two hundred and ninety (7,318,290) shares of its common stock. Except for the foregoing, there are on the date of this Agreement no (i) options, warrants or other
                                                rights to purchase from the Company any

                                            

                                

                                 

                                 

                                
                                    

                                

                                capital stock of the Company, (ii) securities convertible into or exchangeable for shares of such stock; (iii) other accrued or matured commitments of any kind for the issuance of additional shares of capital stock or options, warrants or other securities of the Company; or (iv) pre-emptive or other rights of security holders to subscribe for shares of the
                                capital stock of the Company.

                                
                                    	
                                                8.14

                                            	
                                                Subject to the Lender's compliance with Clause 9.5, the offer and sale of the Loan and the Shares issuable upon exercise of the Conversion Right are not subject to and/or exempt from the registration requirements of the United States Securities Act of 1933, (as amended) and from qualification or registration under any state
                                                securities law. The Company is not an issuer described in paragraph (i) of Rule 144 under the United States Securities Act of 1933.

                                            

                                

                                
                                    	
                                                8.15

                                            	
                                                Each document filed by the Company pursuant to Section 13 of the Exchange Act complied when so filed with the Exchange Act and the rules and regulations thereunder and did not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not
                                                misleading.

                                            

                                

                                
                                    	
                                                8.16

                                            	
                                                The Company is not subject to, and neither the entering into of this Agreement nor the acquisition of the Conversion Shares by the Lender will be subject to, the provisions of the Nevada Control Share Law.

                                            

                                

                                
                                    	
                                                9

                                            	
                                                Undertakings

                                            

                                

                                Except as provided herein, the undertakings in this Clause 9 remain in force from the date of this Agreement until the first to occur of (i) the date on which the Lender is satisfied that all liabilities of the Company under this Agreement are irrevocably discharged in full and that the Lender has no liability in accordance with this Agreement and (ii) the date
                                on which all of the Loan (together with any capitalised interest thereon) has been converted into Shares in accordance with this Agreement.

                                
                                    	
                                                9.1

                                            	
                                                The Company shall:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                comply in all respects with all laws and regulations to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under this Agreement;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                supply to the Lender as soon as they are available (and in any extent within 52 days of the end of each of the Company’s first, second and third financial quarters in each of the Company’s financial years), its unaudited consolidated financial statements for that financial quarter;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (c)

                                            	
                                                supply to the Lender as soon as they are available (and in any extent within 107 days of the last financial quarter in each of the Company’s financial years), its audited consolidated financial statements for that financial year;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (d)

                                            	
                                                ensure that at all times any unsecured and unsubordinated claims of the Lender against it under this Agreement rank at least pari passu with the claims of all the other unsecured and unsubordinated creditors of each Group Company, other than Financial Indebtedness under the EBRD Agreements not exceeding a principal aggregate amount
                                                of US$32,000,000 (or its equivalent in other currencies), except those whose claims are mandatorily preferred by laws of general application to companies;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (e)

                                            	
                                                notify the Lender of a Default promptly upon becoming aware of its occurrence and as soon as practically possible after a Default and in any event no later than four Business Days of becoming aware of the occurrence of a Default file with the United States Securities and Exchange Commission a current report on Form 8-K disclosing the
                                                Default;

                                            

                                

                                 

                                 

                                
                                    

                                

                                
                                    	
                                                 

                                            	
                                                (f)

                                            	
                                                maintain its eligibility to permit its Shares to be traded on the United States over the counter bulletin board or a registered exchange.

                                            

                                

                                
                                    	
                                                9.2

                                            	
                                                The Company undertakes that:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                the ratio of Net Debt to EBITDA shall not exceed 4.0:1;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                the Total Liabilities of the Group will not exceed 65 per cent of the Total Shareholders' Equity; and

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (c)

                                            	
                                                the ratio of Consolidated Cash Available for Debt Service to Debt Service Amount will not be less than 1.2:1.

                                            

                                

                                
                                    	
                                                9.3

                                            	
                                                The Company shall (and shall procure that each Group Company shall):

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                not create or permit to subsist any Security over any of its assets or the assets of any Group Company other than:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (i)

                                            	
                                                any netting or set-off arrangement entered into by a Group Company in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (ii)

                                            	
                                                any lien arising by operation of law and in the ordinary course of its day-to-day trading activities in respect of any obligation which is less than 30 days overdue or which is being contested in good faith and by appropriate means;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (iii)

                                            	
                                                Security over or affecting any asset acquired by any Group Company after the date of this Agreement, where the Security is created before the date of the acquisition of that asset by the relevant Group Company if:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (aa)

                                            	
                                                the Security was not created in contemplation of the acquisition of that asset;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (bb)

                                            	
                                                the principal amount secured has not been increased in contemplation of, or since the acquisition of that asset by the relevant Group Company; and

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (cc)

                                            	
                                                the Security is removed or discharged within 14 days of the date of acquisition of such asset;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (iv)

                                            	
                                                Security securing indebtedness under the EBRD Agreements in an aggregate principal amount not exceeding US$32,000,000 (or its equivalent in other currencies); and

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (v)

                                            	
                                                any Security securing indebtedness the principal amount of which (when aggregated with the principal amount of any other indebtedness which has the benefit of Security given by any Group Company other than any permitted under paragraphs (a) (i) to (iv) (inclusive)) does not exceed US$500,000 (or its equivalent in another
                                                currency or currencies); and

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                not:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (i)

                                            	
                                                sell, transfer or otherwise dispose of any of its assets or the assets of any of its Subsidiaries on terms whereby they are or may be leased to or re-acquired by any Group Company;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (ii)

                                            	
                                                sell, transfer or otherwise dispose of any of its receivables or the receivables of any Group Company on recourse terms;

                                            

                                

                                 

                                 

                                
                                    

                                

                                
                                    	
                                                 

                                            	
                                                (iii)

                                            	
                                                enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (iv)

                                            	
                                                enter into any other preferential arrangement having a similar effect,

                                            

                                

                                in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset; and

                                
                                    	
                                                 

                                            	
                                                (c)

                                            	
                                                not take any action that directly or indirectly subjects the Company to the provisions of the Nevada Control Share Law. Until such time as the Lender is no longer the holder of any Conversion Shares, the Company shall include and maintain in its Bylaws a provision to the effect that the Nevada Control Share Law does not apply to the
                                                Company or to the acquisition of a controlling interest by existing or future stockholders of the Company.

                                            

                                

                                
                                    	
                                                9.4

                                            	
                                                Subject to the terms and conditions of this Agreement, the Lender may, until the date on which the Company has irrevocably paid all amounts due to be paid to the Lender under this Agreement, convert all or part of the Loan (including any amount of capitalised interest) into Shares by requiring the Company to issue and allot to it the
                                                number of Conversion Shares equal to the quotient of the Conversion Amount and the Exchange Price (the Conversion Right).

                                            

                                

                                
                                    	
                                                9.5

                                            	
                                                If the Lender wishes to exercise the Conversion Right it must complete and deliver to the Company (at the address set out in Clause 14.4) a notice (the Conversion Notice) specifying:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                the proportion of the Initial Principal Amount in respect of which the Conversion Right is being exercised (the Principal Amount);

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                the Capitalised Amount;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (c)

                                            	
                                                the Interest Amount;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (d)

                                            	
                                                the Conversion Amount;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (e)

                                            	
                                                the investment letter substantially in the form set out at Schedule 3 (Investment Letter); and

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (f)

                                            	
                                                the Lender's securities account which is to be credited with the Conversion Shares,

                                            

                                

                                and once delivered to the Company, a Conversion Notice will be irrevocable.

                                
                                    	
                                                9.6

                                            	
                                                The Company shall within ten Business Days of the receipt of the Conversion Notice take all necessary steps to issue and allot to the Lender the Conversion Shares. Such issue and allotment shall be in exchange for and in satisfaction of the Principal Amount, Capitalised Amount and Interest Amount payable in respect of the Loan so
                                                converted, as indicated in the Conversion Notice.

                                            

                                

                                
                                    	
                                                9.7

                                            	
                                                No fraction of a Share shall be issued pursuant to Clause 9.6 and any such fraction shall be rounded up to the next whole Share.

                                            

                                

                                
                                    	
                                                9.8

                                            	
                                                Until the date on which the Company has irrevocably paid all amounts due to be paid to the Lender under this Agreement or the date on which the Loan (together with all capitalised interest thereon) has been converted into Shares in accordance with this Agreement, the following shall apply:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                all Shares issued pursuant to a Conversion Notice shall:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (i)

                                            	
                                                be fully paid and non-assessable;

                                            

                                

                                 

                                 

                                
                                    

                                

                                
                                    	
                                                 

                                            	
                                                (ii)

                                            	
                                                participate in full in all dividends or other distributions paid, made or declared on Shares in respect of profits of the financial year during which the relevant Conversion Notice is served, but not in respect of preceding years; and

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (iii)

                                            	
                                                rank pari passu in all respects with the fully-paid Shares in issue on the date the relevant Conversion Notice is served;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                the Company undertakes that:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (i)

                                            	
                                                save in accordance with the terms of this Agreement or with the consent of the Lender (not to be unreasonably withheld) the Company will not:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (aa)

                                            	
                                                modify or amend its Articles or the rights attached to any Shares;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (bb)

                                            	
                                                create or issue new classes or series of Shares in the Company;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (cc)

                                            	
                                                other than grants of Shares to employees pursuant to employment agreements between the Company and its employees or pursuant to shareholder approved equity incentive plans, sell or issue any Shares at a price below the Exchange Price;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (dd)

                                            	
                                                grant options, warrants or rights to subscribe for Shares or other Company securities convertible into Shares or issue Shares pursuant to any option, warrant, right to subscribe for Shares or Company securities convertible, exercisable or exchangeable into Shares in each case pursuant to any employment agreement between the Company
                                                and its employees and/or officers, managers or directors or pursuant to shareholder approved equity incentive plans for employees and/or officers, managers or directors which in aggregate would amount to more than ten per cent of the issued and outstanding Shares of the Company on a fully diluted basis;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (ee)

                                            	
                                                grant options, warrants or rights to subscribe for Shares or other Company securities convertible into Shares or issue Shares pursuant to any option, warrant, right to subscribe for Shares or Company securities convertible, exercisable or exchangeable into Shares of the Company which in aggregate would amount to more than 25 per cent
                                                of the issued and outstanding Shares of the Company on a fully diluted basis;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (ii)

                                            	
                                                it shall not sub-divide or consolidate its share capital (including by stock split, reverse stock split, stock dividend or amendment to its Articles) nor capitalise its profits or other reserves either by the issue of any additional shares or by the increase in the nominal value of any of its shares;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (iii)

                                            	
                                                at all times it will maintain sufficient authorised but unissued share capital and all requisite shareholder or other authorities necessary to enable the issue of Shares pursuant to the service of Conversion Notices and the issuance of such Shares shall comply with all applicable US federal and state securities laws; and

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (iv)

                                            	
                                                it shall pay all taxes, stamp and other duties and charges in respect of the issue of Conversion Shares on the service of any Conversion Notice.

                                            

                                

                                
                                    	
                                                9.9

                                            	
                                                The Company shall not terminate the registration of its common shares under Section 12 of the Exchange Act and shall file all reports under Section 13 of the Exchange Act.

                                            

                                

                                 

                                 

                                
                                    

                                

                                

                                
                                    	
                                                10

                                            	
                                                Events of Default

                                            

                                

                                Each of the events or circumstances set out in this Clause 10 is an Event of Default.

                                
                                    	
                                                10.1

                                            	
                                                The Company does not pay on the due date any amount payable pursuant to this Agreement at the place at and in the currency in which it is expressed to be payable unless its failure to pay is caused by an administrative or technical error which is not its fault and payment is made within three Business Days of its due date.

                                            

                                

                                
                                    	
                                                10.2

                                            	
                                                The Company does not comply with any provision of this Agreement (other than those referred to in Clause 10.1) unless the failure to comply is, in the opinion of the Lender, capable of remedy and is remedied within five Business Days of the earlier of the Lender giving notice to the Company and the Company becoming aware of the
                                                failure to comply.

                                            

                                

                                
                                    	
                                                10.3

                                            	
                                                Any representation, warranty or statement made or given or deemed to be made or given by the Company in this Agreement is or proves to have been incorrect or misleading in any material respect when made or deemed to be made. Any event, matter or circumstance occurring which would make any representation, warranty or statement made or
                                                given by the Company under Clause 8 (Representations and Warranties) (other than Clause 8.13) incorrect or misleading in any material respect if that representation, warranty or statement were made or deemed to be made at the date of that event, matter or circumstance.

                                            

                                

                                
                                    	
                                                10.4

                                            	
                                                Any:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                Financial Indebtedness of the Company is not paid when due nor within any originally applicable grace period;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                Financial Indebtedness of the Company is declared to be or otherwise becomes due and payable before its specified maturity as a result of an event of default (howsoever described);

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (c)

                                            	
                                                commitment for any Financial Indebtedness of the Company is cancelled or suspended by a creditor of the Company as a result of an event of default (however described); or

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (d)

                                            	
                                                creditor of the Company becomes entitled to declare any Financial Indebtedness of the Company due and payable before its specified maturity as a result of an event of default (however described),

                                            

                                

                                unless the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (d) above is less than US$500,000 (or its equivalent in any other currency or currencies).

                                
                                    	
                                                10.5

                                            	
                                                The Company is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

                                            

                                

                                
                                    	
                                                10.6

                                            	
                                                The value of the assets of the Company is less than its liabilities (taking into account contingent and prospective liabilities).

                                            

                                

                                
                                    	
                                                10.7

                                            	
                                                A moratorium or other protection from its creditors is declared or imposed in respect of any indebtedness of the Company.

                                            

                                

                                
                                    	
                                                10.8

                                            	
                                                Any corporate action, legal proceedings or other procedure or step is taken (including the making of an application, the presentation of a petition, the filing or service of a notice or the passing of a resolution) in relation to:

                                            

                                

                                 

                                 

                                
                                    

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of the Company;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                a composition, compromise, assignment or arrangement with any creditor of the Company;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (c)

                                            	
                                                the appointment of a liquidator supervisor, receiver, administrative receiver, administrator, compulsory manager, trustee or other similar officer in respect of the Company or any of its assets; or

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (d)

                                            	
                                                enforcement of any Security over any assets of the Company,

                                            

                                

                                or any analogous procedure or step is taken in any jurisdiction.

                                
                                    	
                                                10.9

                                            	
                                                Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Company.

                                            

                                

                                
                                    	
                                                10.10

                                            	
                                                It is or becomes unlawful for the Company to perform any of its obligations under this Agreement.

                                            

                                

                                
                                    	
                                                10.11

                                            	
                                                The occurrence of:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                a Change of Control; or

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                the sale of all or substantially all of the assets of the Group whether in a single transaction or a series of related transactions.

                                            

                                

                                
                                    	
                                                11

                                            	
                                                Acceleration

                                            

                                

                                On and at any time after the occurrence of an Event of Default which is continuing (and without the prejudice to the rights of the Lender under Clause 9.4 (Undertakings)) the Lender may, by notice to the Company:

                                
                                    	
                                                 

                                            	
                                                (a)

                                            	
                                                cancel the Commitment whereupon it shall immediately be cancelled;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (b)

                                            	
                                                declare that the Loan then outstanding, together with accrued interest, and all other amounts accrued or outstanding under this Agreement be immediately due and payable, whereupon they shall become immediately due and payable; and/or

                                            

                                

                                
                                    	
                                                 

                                            	
                                                (c)

                                            	
                                                declare that all or part of the Loan then outstanding be payable on demand, whereupon they shall immediately become payable on demand by the Lender.

                                            

                                

                                
                                    	
                                                12

                                            	
                                                Assignment

                                            

                                

                                The Company may not assign any of its rights or transfer any of its liabilities under this Agreement. The Lender may, without the Company's consent, assign or otherwise transfer any of its rights and delegate or otherwise transfer any of its duties or liabilities under this Agreement to any direct or indirect Subsidiary of the Lender.

                                
                                    	
                                                13

                                            	
                                                Set-off

                                            

                                

                                
                                    	
                                                13.1

                                            	
                                                The Lender may set off any matured obligation due from the Company under this Agreement (to the extent beneficially owned by the Lender) against any matured obligation owed by the Lender to the Company, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies,
                                                the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

                                            

                                

                                 

                                
                                    
                                        

                                    

                                    
                                        	
                                                    13.2

                                                	
                                                    All payments to be made by the Company under this Agreement shall be calculated and be made without (and free and clear of any deduction for) any tax, set-off or counterclaim.

                                                

                                    

                                    
                                        	
                                                    14

                                                	
                                                    Notices

                                                

                                    

                                    
                                        	
                                                    14.1

                                                	
                                                    Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter.

                                                

                                    

                                    
                                        	
                                                    14.2

                                                	
                                                    Any communication or document to be made or delivered to a Party will be effective only when actually received by that Party.

                                                

                                    

                                    
                                        	
                                                    14.3

                                                	
                                                    The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with this Agreement, is that identified with its name below or any substitute address in the United Kingdom or
                                                    United States of America, fax number or department or officer as either Party may notify to the other by not less than five Business Days' notice.

                                                

                                    

                                    
                                        	
                                                    14.4

                                                	
                                                    The addresses referred to in Clause 14.3 are as follows:

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    (a)

                                                	
                                                    The Company:

                                                

                                    

                                    Caspian Services, Inc.

                                    9th Floor, 29/6 Satpaev Ave,

                                    Rakhat Palace Hotel

                                    Almaty 050040

                                    Republic of Kazakhstan

                                     

                                    
                                        	
                                                     

                                                	
                                                    Attention:

                                                	
                                                    Laird Garrard

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    Fax:

                                                	
                                                    +7 727 250 8479

                                                

                                    

                                     

                                     

                                    
                                        	
                                                     

                                                	
                                                    cc:

                                                	
                                                    Caspian Services, Inc.

                                                

                                    

                                    C/o Gateway Enterprises, Inc.

                                    3230 East Flamingo Road, Suite 156

                                    Las Vegas, Nevada 89121

                                     

                                    
                                        	
                                                     

                                                	
                                                    Attention:

                                                	
                                                    Shirrell Hughes

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    Fax:

                                                	
                                                    +1 (801) 272-9370

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    (b)

                                                	
                                                    The Lender:

                                                

                                    

                                    C/o Altima Partners LLP

                                    4th Floor, Stirling Square

                                    7 Carlton Gardens

                                    London SW1Y 5AD

                                     

                                    
                                        	
                                                     

                                                	
                                                    Attention:

                                                	
                                                    Edmund Limerick

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    Fax:

                                                	
                                                    + 44 (0) 20 7968 6401

                                                

                                    

                                     

                                    
                                        	
                                                    14.5

                                                	
                                                    Any communication between the Parties under this Agreement may be made by electronic mail or other electronic means if the Parties:

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    (a)

                                                	
                                                    agree that (unless and until notified to the contrary) this is to be an accepted form of communication;

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    (b)

                                                	
                                                    notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

                                                

                                    

                                     

                                    
                                        
                                            

                                        

                                        
                                            	
                                                         

                                                    	
                                                        (c)

                                                    	
                                                        notify each other of any change to their address or any other such information supplied by them,

                                                    

                                        

                                        and any electronic communication made between the Parties will be effective only when actually received in readable form.

                                        
                                            	
                                                        15

                                                    	
                                                        Partial invalidity

                                                    

                                        

                                        If, at any time, any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected
                                        or impaired.

                                        
                                            	
                                                        16

                                                    	
                                                        Remedies and waivers

                                                    

                                        

                                        No failure to exercise, nor any delay in exercising, on the part of the Lender, any right or remedy under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are
                                        cumulative and not exclusive of any rights or remedies provided by law.

                                        
                                            	
                                                        17

                                                    	
                                                        Miscellaneous

                                                    

                                        

                                        
                                            	
                                                        17.1

                                                    	
                                                        This Agreement is made in the English language.

                                                    

                                        

                                        
                                            	
                                                        17.2

                                                    	
                                                        This Agreement may only be altered, varied, amended or changed with the prior written consent of the Parties, and upon the signature of duly authorised representatives of the Parties otherwise such alterations, variations, amendments or changes shall be null and void. Once so altered, varied, amended, changed or modified, the
                                                        same shall form an integral part of this Agreement.

                                                    

                                        

                                        
                                            	
                                                        17.3

                                                    	
                                                        This Agreement may be executed in any number of counterparts, each of which when signed and faxed or signed and sent by e-mail in a "pdf format" shall constitute the original of this Agreement, but all the counterparts shall constitute the same Agreement.

                                                    

                                        

                                        
                                            	
                                                        18

                                                    	
                                                        Governing law and Venue

                                                    

                                        

                                        
                                            	
                                                        18.1

                                                    	
                                                        This Agreement is governed by English law and the courts of England have exclusive jurisdiction (and the Company hereby submits to the exclusive jurisdiction of the courts of England and acknowledges that such courts are the proper venue for any such proceedings) to settle any dispute arising out of or in connection with this
                                                        Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a Dispute).

                                                    

                                        

                                        
                                            	
                                                        18.2

                                                    	
                                                        This Clause 18 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

                                                    

                                        

                                        This Agreement has been entered into on the date stated at the beginning of this Agreement.

                                         

                                        
                                            
                                                

                                            

                                            The Company

                                            
                                                	
                                                            SIGNED by

                                                             

                                                            for and on behalf of

                                                            Caspian Services Inc.

                                                        	
                                                            )

                                                            )

                                                            )

                                                            )

                                                             

                                                        

                                            

                                             

                                            The Lender

                                            
                                                	
                                                            SIGNED by

                                                             

                                                            for and on behalf of

                                                            Altima Central Asia (Master) Fund Ltd.

                                                        	
                                                            )

                                                            )

                                                            )

                                                            )

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