8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

April 30, 2009

Date of Report (Date of earliest event reported)

NationsHealth, Inc.

(Exact name of Registrant as specified in its Charter)

Delaware	000-50348	06-1688360
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

13630 N.W. 8th Street, Suite 210
Sunrise, Florida 33325

(Address of Principal Executive Offices)

(954) 903-5000

Registrant’s telephone number, including area code

(Former Address of Principal Executive Offices)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

x Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

This 8-K/A amends and restates the Company’s Form 8-K filed on May 6, 2009 (file no. 000-50348; film no. 09802608) and includes revised Exhibits 4.20, 4.21, 4.22 and 4.28 and additional Exhibits 10.82, 10.83, 10.84, 10.85 and 10.86.

The following summaries of the Merger Agreement and the transactions contemplated thereby do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Merger Agreement (as defined below) and Transaction Documents (as defined in the Company’s Current Report on Form 8-K filed on May 5, 2009 (file no. 000-50348; film no. 09795409) and incorporated herein by reference (the “Prior 8-K Filing”), each of which has been previously filed by NationsHealth, Inc. (the “Company”) with the U.S. Securities and Exchange Commission (the “SEC”) in the Company’s Prior 8-K Filing and are incorporated herein by reference. The Merger Agreement and the Transaction Documents have been attached as exhibits to the Company’s Prior 8-K Filing to provide investors with information regarding their respective terms. The Merger Agreement and the Transaction Documents are not intended to be a source of factual, business or operational information about the Company. Moreover, certain representations and warranties in the Merger Agreement and the Transaction Documents are qualified by information contained in confidential disclosure schedules that the parties exchanged in connection with signing the Merger Agreement and the Transaction Documents. While we do not believe that they contain information securities laws require us to publicly disclose, other than information that has already been so disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement and the Transaction Documents, as the case may be. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since they are modified in important part by the underlying disclosure schedules.

Merger Agreement

On April 30, 2009, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ComVest NationsHealth Holdings, LLC (“Parent”), a wholly owned subsidiary of ComVest Investment Partners III, L.P. (“ComVest”), and NationsHealth Acquisition Corp., a wholly owned subsidiary of Parent (“Merger Sub”), which provides, among other things, for the merger of Merger Sub with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger (the “Surviving Corporation”).

Upon the closing of the transactions contemplated by the Merger (the “Effective Time”), (a) all of the issued and outstanding common stock of the Company (including outstanding shares of restricted stock, all of which shall vest at the Effective Time) not held by certain members of the Company’s management, certain stockholders, and certain members of the Company’s Board of Directors (the “Unaffiliated Stockholders”) will be converted into the right to receive a cash amount equal to $0.12 per share (the “Aggregate Merger Consideration”) and (b) all of the outstanding options to purchase shares of the Company’s common stock will be converted into the right to receive a cash amount equal to the difference between $0.12 per share and the exercise price (if less than $0.12 per share) of each option (all of such the options are “out-of-the-money” and shall be terminated on or before the Effective Time with no consideration payable to any option holder). Prior to the Effective Time, the Company shall use its commercially reasonable efforts to cancel each outstanding warrant to purchase the Company’s common stock (other than the Bridge Loan Warrants (as defined below), which will automatically expire at the Effective Time).

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If the Merger Agreement is terminated under certain circumstances, including, among other reasons, due to a non-willful breach by the Company, the outstanding obligations under the Bridge Loan (as defined below) shall be paid on or before the Maturity Date (as defined below). During the 30-day period after the Maturity Date and in the event all of the outstanding obligations under the Bridge Loan have not been paid in full (the “Thirty Day Post-Maturity Period”), the Company and/or the MHR Holders (as defined below) shall have the right to pay or purchase all of such obligations. In the event that all of the outstanding obligations under the Bridge Loan have not been paid or purchased in full before the expiration of the Thirty Day Post-Maturity Period, then, for the 180-day period thereafter (the “Parent’s Post-Maturity Election Period”), Parent shall have the option, in its sole and absolute discretion, to either (a) acquire any of the obligations owed by the Company to CapitalSource Finance, LLC (“CapitalSource”) (the “Senior Indebtedness Purchase”) or (b) convert the outstanding obligations under the Bridge Loan into shares of the Company’s Series A-1 Convertible Preferred Stock, par value $0.01 per share (the “Series A-1 Preferred Stock”) at a conversion price equal to $0.05 per share (subject to adjustments) (the “Bridge Loan Conversion”); provided, that if the Merger Agreement is terminated by Parent under certain circumstances, Parent’s option and ability to exercise the Bridge Loan Conversion shall be immediately terminated. In the event that Parent does not consummate the Senior Indebtedness Purchase or exercise the Bridge Loan Conversion during the Parent’s Post-Maturity Election Period, all of Parent’s rights with respect to the Senior Indebtedness Purchase and the Bridge Loan Conversion shall immediately terminate and Parent shall have the right to exercise any and all of its remaining rights and remedies under the Bridge Loan (subject to terms and conditions set forth in the Merger Agreement and/or any agreement, document or instrument between CapitalSource, Parent, and/or the MHR Holders, as the case may be). In the event Parent (x) consummates a Senior Indebtedness Purchase before the expiration of the Thirty Day Post-Maturity Period, (y) sells any of the outstanding obligations under the Bridge Loan to any person (the “Bridge Loan Indebtedness Transfer”) before the expiration of Thirty Day Post-Maturity Period, or (z) consummates a Bridge Loan Indebtedness Transfer (other than to the MHR Holders) following the Thirty Day Post-Maturity Period, the right to exercise the Bridge Loan Conversion shall be immediately terminated.

If the Merger Agreement is terminated under certain circumstances, including, among other reasons, due to a willful breach by the Company, (a) the Bridge Loan Warrants (as defined below) shall be exercisable within fifteen (15) days of such termination date, and (b) the outstanding obligations under the Bridge Loan shall be paid on or before the Maturity Date. During the 30-day period after such termination and in the event all of the outstanding obligations under the Bridge Loan have not been paid in full (the “Thirty Day Post-Termination Period”), the Company and/or the MHR Holders shall have the right to pay or purchase all of such obligations. In the event that all of the outstanding obligations owed by the Company to Parent under the Bridge Loan have not been paid or purchased in full prior to expiration of the Thirty Day Post-Termination Period, then, for the 180-day period thereafter (the “Parent’s Post-Termination Election Period”), Parent shall have the option, in its sole and absolute discretion, to either (v) consummate the Senior Indebtedness Purchase or (w) exercise the Bridge Loan Conversion. In the event that Parent does not consummate the Senior Indebtedness Purchase or exercise the Bridge Loan Conversion during the Parent’s Post-Termination Election Period, all of Parent’s rights with respect to the Senior Indebtedness Purchase and the Bridge Loan Conversion shall immediately terminate and Parent shall have the right to exercise any and all of its remaining rights and remedies under the Bridge Loan (subject to terms and conditions set forth in the Merger Agreement and/or any agreement, document or instrument between CapitalSource, Parent, and/or the MHR Holders, as the case may be). In the event Parent (x) consummates a Senior Indebtedness Purchase before the expiration of the Thirty Day Post-Termination Period, (y) consummates a Bridge Loan Indebtedness Transfer before the expiration of Thirty Day Post-Termination Period, or (z) consummates a Bridge Loan Indebtedness Transfer (other than to the MHR Holders) following the Thirty Day Post-Termination Period, the right to exercise the Bridge Loan Conversion shall be immediately terminated.

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In the event the Company enters into a definitive agreement contemplated by a takeover proposal from an alternative purchaser and terminates the Merger Agreement, (a) a termination fee in the amount of $1.0 million (comprised of a $700,000 break-up fee and a $300,000 expense reimbursement), which shall be the maximum aggregate liability of the Company in such circumstance, among others, and (b) the outstanding obligations under the Bridge Loan shall be paid to Parent as a condition to and concurrently with such termination. In the event Parent terminates the Merger Agreement due to a willful breach by the Company, the Bridge Loan shall be due within 30 days of such termination and the Company shall pay Parent $3.0 million (inclusive of the $1.0 million termination fee), which shall be the maximum aggregate liability of the Company in such circumstance, among others. In the event the Company terminates the Merger Agreement due to a willful breach by Parent, any and all obligations under the Bridge Loan shall be forgiven, which shall be the maximum aggregate liability of Parent in such circumstance. If the Company, one the one hand, or Parent and/or Merger Sub, on the other hand, successfully enforces their respective specific performance rights and remedies under the Merger Agreement, such party shall not be entitled to any of the foregoing damages (forgiveness of the Bridge Loan, liquidated damages or the termination fee, as the case may be) and such party’s sole and exclusive remedy shall be specific performance.

The Company’s Board of Directors, acting upon the recommendation of a special committee comprised of independent members of the Company’s Board of Directors, has approved the adoption of the Merger Agreement and consummation of the Merger and recommended adoption of the Merger Agreement and consummation of the Merger by the Company’s stockholders. The closing of the transactions contemplated under the Merger Agreement is subject to, among other things, the approval of the adoption of the Merger Agreement and the Merger by the Company’s stockholders.

The transactions contemplated under the Merger Agreement are expected to close by the third quarter of 2009.

Preferred Stock Investment and Preferred Stock Investment Option

At the Effective Time, Parent shall make a $5.0 million investment in the Company in exchange for shares of the Surviving Corporation’s Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) at $0.12 per share (the “Preferred Stock Investment”), the proceeds of which shall be used to fund the Aggregate Merger Consideration pursuant to the Merger Agreement and to pay the remaining transaction fees and for the Company’s general business purposes, working capital, growth capital and capital expenditures. During the period commencing at the Effective Time and ending on the first anniversary thereof, Parent shall have the right to invest up to an additional $2.0 million in the Company in exchange for shares of the Surviving Corporation’s Series A Convertible Preferred Stock at $0.12 per share and on the same terms and conditions as the Preferred Stock Investment (the “Preferred Stock Investment Option”).

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Limited Guaranty

Concurrently with the execution of the Merger Agreement, ComVest and the Company entered into a Limited Guaranty, dated April 30, 2009, pursuant to which ComVest has agreed to guaranty the amount and funding of the Bridge Loan, the Preferred Stock Investment and the Preferred Stock Investment Option (if exercised).

Voting Agreement — Merger Agreement

In connection with the Merger Agreement, certain stockholders of the Company (including certain members of the Company’s management and certain member of the Company’s Board of Directors) representing over 50% of the issued and outstanding shares of the Company’s common stock entered into a Voting Agreement, dated April 30, 2009, with Parent and Merger Sub whereby such stockholders agreed to vote the shares of common stock owned and/or controlled by such stockholder in favor of the adoption of the Merger Agreement and the consummation of the Merger.

Exchange and Rollover Agreement

Contemporaneously with the execution of the Merger Agreement, Glenn Parker, Lewis Stone and Timothy Fairbanks (the “Senior Managers”), the MHR Holders entered into an Exchange and Rollover Agreement, dated April 30, 2009 (the “Exchange and Rollover Agreement”), whereby immediately before the Effective Time, each of the Senior Managers and the MHR Holders will exchange their respective shares of the Company’s common stock for the same number of shares of non-voting common stock of Merger Sub in accordance with the Exchange and Rollover Agreement. At the Effective Time and immediately after such exchange, each share of voting common stock of Merger Sub (held solely by Parent) and non-voting common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation). The Exchange and Rollover Agreement will become effective only upon the occurrence of the Effective Time and will be null and void and have no force or effect in the event the Merger Agreement is terminated in accordance with its terms.

Third Amended and Restated Certificate of Incorporation

Immediately prior to the Effective Time, the Company shall file the Company’s Third Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”) with the Secretary of State of the State of Delaware, which shall provide for the rights, preferences and privileges of the holders of the Surviving Corporation’s Series A Preferred Stock and common stock, the composition of the Surviving Corporation’s board of directors, voting rights of certain stockholders of the Surviving Corporation, and the indemnification of the Surviving Corporation’s officers and directors. The Amended and Restated Certificate of Incorporation will become effective only upon the Effective Time and will be null and void and have no force or effect in the event the Merger Agreement is terminated in accordance with its terms.

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Amended and Restated Bylaws

At the Effective Time the Company’s Amended and Restated Bylaws shall become bylaws of the Surviving Corporation and shall provide for the powers, duties and responsibilities of the Surviving Corporation’s officers and directors. The Amended and Restated Bylaws will become effective only upon the Effective Time and will be null and void and have no force or effect in the event the Merger Agreement is terminated in accordance with its terms.

Bridge Loan and Bridge Note

Concurrently with the execution of the Merger Agreement, Parent and the Company and certain of its subsidiaries, NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC (collectively, the “Borrowers” or the “Issuers”), entered into a Bridge Loan and Security Agreement, dated April 30, 2009 (the “Bridge Loan”), pursuant to which the Borrowers issued to Parent a 10% Secured Convertible Subordinated Promissory Note, dated April 30, 2009, in the aggregate principal amount of $3.0 million (the “Bridge Note”). Up to $200,000 of the aggregate principal amount of Bridge Loan and Bridge Note can assigned by Parent to Mark Lama. Subject to the terms and conditions of the Bridge Loan and the Bridge Note, the Bridge Loan and the Bridge Note shall (a) be subordinated to the Borrower’s obligations to its credit facility lender, CapitalSource, and be senior to the Borrower’s obligations to its subordinated note holders, MHR Capital Partners Master Account, LP (“Master Account”), MHR Capital Partners (100) LP (“Capital Partners (100)”), and OTQ LLC (“OTQ”, and together with Master Account, Capital Partners (100) and their respective affiliates, the “MHR Holders”), (b) have a monthly cash interest payment based on an interest rate of ten percent (10%) per annum (which interest rate shall be increased by 2% at the end of the each three month period (not to exceed the lesser of 18% per annum and the maximum interest rate allowed by law) commencing on the termination date of the Merger Agreement), (c) have a term of six (6) months (the “Maturity Date”); provided that upon termination of the Merger Agreement by Parent due to a willful breach by the Company, the Bridge Loan will be due within 30 days of such termination, and (d) be used to pay a portion of the transaction fees and for the Company’s general business purposes, working capital, growth capital and capital expenditures. The Bridge Loan may not be prepaid without the consent of Parent. In connection with the Bridge Loan, the Company issued warrants to Parent to acquire 1,000,000 shares of the Company’s common stock (the “Bridge Loan Warrants”).

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At the Effective Time, the outstanding principal amount of the Bridge Loan will automatically be converted into shares of the Surviving Corporation’s Series A Preferred Stock at $0.12 per share in accordance with the terms and conditions set forth in the Merger Agreement, the Bridge Loan and the Bridge Note. In the event that the Merger Agreement is terminated under certain circumstances and in the event all of the outstanding obligations under the Bridge Loan have not been paid or purchased in full on or before the Thirty Day Post-Maturity Period or the Thirty Day Post-Termination Period, as the case may be, Parent will, so long as it has not consummated a Senior Indebtedness Purchase as set forth in the Merger Agreement, have the option during Parent’s Post-Maturity Date Election Period or Parent’s Post-Termination Election Period, as the case may be, to exercise the Bridge Loan Conversion into 30 million shares of the Company’s Series A-1 Preferred Stock, which shares of Series A-1 Convertible Preferred Stock will be convertible into 60 million shares of the Company’s common stock (subject to anti-dilution adjustments to ensure that the shares issued upon conversion of the Company’s Series A-1 Convertible Preferred Stock represents approximately 60% of the Company’s outstanding common stock), all in accordance with the terms and conditions set forth in the Merger Agreement, the Bridge Loan, the Bridge Note, and the Company’s Series A-1 Convertible Preferred Stock Certificate of Designation (the “Certificate of Designation”).

Bridge Loan Warrants

The Bridge Loan Warrants will become exercisable at an exercise price of $0.01 per share (subject to adjustments), in the event the Merger Agreement is terminated by Parent due to a willful breach by the Company, or if the approval of the adoption of the Merger Agreement and the Merger by the Company’s stockholders shall not have been obtained, or if a Company Adverse Recommendation Change (as defined in the Merger Agreement) shall have occurred, or if the Company enters into a definitive agreement contemplated by a takeover proposal from an alternative purchaser, and will remain exercisable until 5:00 p.m. Eastern time on the 10th anniversary of the date on which the Bridge Loan Warrants become exercisable. At the Effective Time, the Bridge Loan Warrants will be null and void and have no force or effect in such event.

Certificate of Designation

On April 30, 2009, the Company filed the Company’s Certificate of Designation with the Secretary of State of the State of Delaware, which provides for the rights, preferences and privileges of the holders of the Company’s Series A-1 Preferred Stock, including certain anti-dilution adjustments to ensure that the shares issued upon conversion of the Company’s Series A-1 Convertible Preferred Stock represents approximately 60% of the Company’s outstanding common stock. At the Effective Time, the Certificate of Designation will be replaced by the Company’s Amended and Restated Certificate of Incorporation and will be null and void and have no force or effect in such event.

Management Agreement

Concurrently with the execution of the Merger Agreement, ComVest and the Company entered into a Management Agreement, dated April 30, 2009, pursuant to which ComVest after the Effective Time shall provide management and advisory services to the Company. Under the terms of the Management Agreement, ComVest shall be paid by the Company a management fee equal to $25,000 per month and under certain circumstances upon consummation of an acquisition, a fee equal to 2% of the aggregate enterprise value of such acquisition. The Management Agreement becomes effective only upon the Effective Time and will be null and void and have no force or effect in the event the Merger Agreement is terminated in accordance with its terms.

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Waivers and Consents

In connection with the transactions contemplated by the Merger Agreement, the Bridge Loan and the Bridge Note, the Company requested and CapitalSource and the MHR Holders agreed, subject to the satisfaction or waiver of certain conditions, to provide and enter into (a) the Consent, Waiver, Joinder and Eighth Amendment to Third Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated April 30, 2009, by and among the Borrowers and CapitalSource (the “CapitalSource Waiver and Consent”), (b) the Limited Waiver and Consent to Convertible Secured Notes, dated April 30, 2009, by and among the Issuers and the MHR Holders (the “MHR Waiver and Consent”), (c) the Fourth Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated April 30, 2009, between the Borrowers and CapitalSource, individually and as agent (the “Fourth Amended and Restated Credit Agreement”), and (d) the First Amended and Restated 7-3/4% Convertible Secured Notes, dated April 30, 2009, in favor of the MHR Holders in an aggregate principal amount of $15,000,000 (collectively, the “Notes”), and (e) the Second Amended and Restated Notes (as defined below), pursuant to which CapitalSource’s and MHR Holders’ respective loans will remain in existence on substantially similar terms and conditions following the Effective Time.

The CapitalSource Waiver and Consent and the Fourth Amended and Restated Credit Agreement provide, among other things, (a) a waiver of certain events of default and cross-defaults that would occur under the Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of April 11, 2007, between the Borrowers and CapitalSource, as a result of the execution of the Merger Agreement, (b) consent to the Borrower’s obligations under the Bridge Loan and Bridge Note, and (c) subject to the satisfaction of the conditions precedent in the Fourth Amended and Restated Credit Agreement, a waiver of a change of control that would result from the Merger or the Bridge Loan Conversion as of the Effective Time.

The MHR Waiver and Consent and the Notes provide, subject to the satisfaction of certain conditions precedent, (a) a waiver of certain events of default and cross-defaults that would occur under each of the 7-3/4% Convertible Secured Notes, dated February 28, 2005, February 28, 2005 and February 5, 2007, respectively, issued in favor of the MHR Holders (collectively, the “Prior Notes”) as a result of the execution of the Merger Agreement, (b) consent to enter into a subordination agreement for the subordination of the security interests and repayment obligations of the Notes to the security interests and repayment obligations of the Issuers to Parent under the Bridge Loan and Bridge Note, and (c) a waiver of certain redemption rights in the event of a change of control under the Prior Notes as a result of the execution of the Merger Agreement, the consummation of the Merger, or the change of control that would result from the Bridge Loan Conversion.

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Fourth Amended and Restated Credit Agreement with CapitalSource

The Fourth Amended and Restated Credit Agreement maintained the $10,000,000 revolving credit facility (the “Revolving Loan”) and the multi-draw term loan (the “Term Loan”) in the original principal amount of $7,000,000. The Term Loan was utilized to finance the acquisition of providers of diabetic supplies, and the Company is no longer permitted to make any draws under such facility. The terms of the Fourth Amended and Restated Credit Agreement are similar to those contained in the Third Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of April 11, 2007, between the Borrowers and CapitalSource, except that, among other things, the financial covenants set forth in the Fourth Amended and Restated Credit Agreement have been modified to provide that the Borrowers will comply with a certain set of financial covenants prior to the Effective Time or the Bridge Loan Conversion and a certain set of financial covenants after the Effective Time or Bridge Loan Conversion. Prior to the Effective Time or Bridge Loan Conversion, the Borrowers will be required to comply with Minimum EBITDA, Fixed Charge Coverage Ratio, Cash Velocity, Active Diabetes Customers, and Minimum Liquidity covenants. After the Effective Time or the Bridge Loan Conversion, the Minimum EBITDA covenant will be removed and a new Permitted Acquisition Expenditures covenant will be added to the Fourth Amended and Restated Credit Agreement, which will provide the Company with greater flexibility in making acquisitions in the healthcare industry.

Interest on the outstanding principal balance of the Revolving Loan is payable monthly at an annual rate of prime plus 3.0%, and interest on the outstanding principal balance of the Term Loan is payable monthly at an annual rate of prime plus 6.0%. In each case, the minimum prime rate will be the per annum rate of 5.25%. Payment of the principal balance outstanding under the Term Loan is to be made on a straight-line basis, according to an amortization schedule, in 29 consecutive monthly installments, which commenced on January 1, 2008. The Term Loan matures on April 30, 2010, and the Revolving Loan matures on April 30, 2011, unless extended or terminated by CapitalSource in accordance with the terms of the Fourth Amended and Restated Credit Agreement.

Notes with the MHR Holders

The Notes represent an amendment and restatement of the Prior Notes. These Notes continue to accrue interest at a rate of 7-3/4% per annum, compounded monthly, based on a 360-day year and mature on February 28, 2012. The terms of these Notes allow the MHR Holders, at their discretion, to convert all or part of these Notes into shares of the Company’s common stock. The number of shares of the Company’s common stock to be delivered upon such conversion shall be determined by dividing the amount of principal and interest under the Notes being converted by a conversion price of $3.40 (subject to adjustment), which are currently exercisable for an aggregate of 4,411,763 shares of the Company’s common stock.

The Notes contain restrictive covenants that limit the Issuers’ ability to, among other things (a) incur additional debt, (b) create or permit liens on certain assets to secure debt, (c) pay dividends on or make other distributions in respect of their capital stock or make other restricted payments, (d) make certain investments, (e) sell certain assets, and (f) enter into certain transactions with their affiliates.

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The Notes may be redeemed at the option of the Issuers under certain circumstances, and upon a change of control transaction (excluding any change of control resulting from the Merger or the Bridge Loan Conversion). If any Note is redeemed at the option of the Issuers other than upon a change of control transaction, the MHR Holders may receive, at their discretion, either (a) the principal amount plus any accrued and unpaid interest of the Notes being redeemed (the “Par Redemption Price”) plus warrants exercisable for such number of shares of the Company’s common stock the MHR Holder would have received had the Notes being redeemed been converted immediately prior to such redemption, which warrants shall have an exercise price equal to the conversion price of the Notes in effect immediately prior to issuance of the warrant, and shall expire on February 28, 2012 (a “Redemption Warrant”), or (b) 110% of the outstanding principal amount of the Notes being redeemed plus any accrued and unpaid interest thereon (the “Premium Redemption Price”). If a Note is redeemed pursuant to a change of control transaction, the Issuers may redeem the Notes at the Premium Redemption Price, or if the Issuers do not act, the MHR Holder may choose to either receive the Premium Redemption Price or require that the surviving entity assume the obligations of the Note.

At the Effective Time, the Issuers have agreed to execute and deliver (and the MHR Holders have agreed to accept) the Second Amended and Restated 7 ³/4% Convertible Secured Notes, issued by the Issuers (the “Second Amended and Restated Notes”) in exchange for the Notes, each of which shall contain terms substantially similar to the Notes; provided that, among other things, the Premium Redemption Price will be reduced to 105%, and the MHR Holders will agree to waive certain tax payments payable by the Company to the MHR Holders due in February 2010 with respect to AHYDO.

Warrants issued to the MHR Holders

In exchange for the MHR Waiver and Consent, the Issuers and the MHR Holders agreed, among other things, (a) to enter into the Notes, effective as of April 30, 2009, to, among other things, modify certain restrictive covenants, to adjust the conversion price of the Notes to $3.40 per share of the Company’s common stock (subject to further adjustment) and to issue to the MHR Holders certain warrants to purchase shares of the Company’s common stock (the “Waiver Warrants”) and (b) to further amend and restate the Notes effective as of the Effective Time in the form of the Second Amended and Restated Notes to, among other things, further amend certain restrictive covenants, delete certain redemption provisions and reduce the change of control premium, to issue to the MHR Holders certain warrants to purchase the Surviving Corporation’s common stock (the “Merger Warrants”) and to effect the Exchange and Rollover Agreement.

The Waiver Warrants will become exercisable in whole or in part at an exercise price of $0.05 per share (subject to adjustments) upon the occurrence of the Bridge Loan Conversion, and will remain exercisable until 5:00 p.m. Eastern time on the 10th anniversary of the date on which the Waiver Warrants become exercisable. The Waiver Warrants will be exercisable into a number of shares of the Company’s common stock equal to 10% of the total number of shares of the Company’s common stock outstanding on a fully diluted basis immediately following the Bridge Loan Conversion, which number is subject to adjustment pursuant to the terms of the Waiver Warrants. At the Effective Time, the Waiver Warrants will be deemed null and void, and of no further force and effect, and the MHR Holders will exchange the Notes for the Second Amended and Restated Notes and the Merger Warrants.

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The Merger Warrants will be issued as of and will become exercisable at an exercise price of $0.12 per share (subject to adjustments) at the Effective Time, and will remain exercisable until 5:00 p.m. Eastern time on the 8th anniversary following the date on which the Merger Warrants are issued. The Merger Warrants are exercisable into shares of the Surviving Corporation’s common stock equal to 10% of the total number of shares of common stock on a fully diluted basis immediately following the Effective Time. Moreover, if Parent were to exercise the Preferred Stock Investment Option, then the number of shares of common stock that may be acquired upon exercise of the Merger Warrants will be increased to reflect a recalculation of the 10% figure as if such purchases had occurred at the Effective Time.

Subordination Agreements

Under the terms of the Notes, the MHR Holders hold a security interest on each Issuer’s tangible and intangible personal property, which security interest and repayment obligations on the Notes have been subordinated to the security interest held by, and payment obligations owed to, CapitalSource pursuant to the Amended and Restated Subordination Agreement, dated as of April 30, 2009, by and among CapitalSource and the MHR Holders (and acknowledged by the Issuers) and to the Parent and MSL Family, LLC (as holders of the Bridge Loan), pursuant to the Subordination Agreement by and among Parent, MSL Family, LLC and the MHR Holders (and acknowledged by the Issuers). Under the terms of the Bridge Loan, Parent holds a security interest on each Borrower’s tangible and intangible personal property, which security interest and repayment obligations on the Bridge Note have been subordinated to the security interest held by, and payment obligations owed to, CapitalSource, pursuant to the Senior Subordination Agreement by and among Parent, MSL Family, LLC and the CapitalSource (and acknowledged by the Borrowers).

Preferred Stock Investment Documents

To fund the Aggregate Merger Consideration, the Company and Parent entered into the Series A Preferred Stock Purchase Agreement (the “Series A Preferred Stock Purchase Agreement”), which becomes effective only upon the Effective Time and will be null and void and have no force or effect in the event the Merger Agreement is terminated in accordance with its terms.

In furtherance of the transactions contemplated by Series A Preferred Stock Purchase Agreement and the Exchange and Rollover Agreement, and in order to set forth the relative rights of the holders of the Surviving Corporation’s Series A Preferred Stock and common stock, Parent, the MHR Holders, Mark Lama, and the Senior Managers entered into the following agreements, each of which becomes effective only upon the Effective Time and will be null and void and have no force or effect in the event the Merger Agreement is terminated in accordance with its terms: (a) the Right of First Refusal and Co-Sale Agreement, by and among Parent, the Company, the MHR Holders, the Senior Managers, Mark Lama, and RGGPLS, LLC (the “Right of First Refusal and Co-Sale Agreement”), (b) the Investor Rights Agreement, by and among Parent, the Company, the MHR Holders, the Senior Managers, Mark Lama, and RGGPLS, LLC (the “Investor Rights Agreement”), and (c) the Voting Agreement, by and among Parent, the Company, the MHR Holders, the Senior Managers, Mark Lama, and RGGPLS, LLC (the “Voting Agreement”).

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     Series A Preferred Stock Purchase Agreement

     In connection with Merger and at the Effective Time, Parent shall purchase and the Company shall sell 41,666,667 shares of Surviving Corporation’s Series A Preferred Stock, as described above under “Preferred Stock Investment and Preferred Stock Investment Option.” The rights, preferences and privileges of the Surviving Corporation’s Series A Preferred Stock are set forth in the Company’s Amended and Restated Certificate.

     Right of First Refusal and Co-Sale Agreement

     As a condition to Parent’s purchase of the Series A Preferred Stock and entering into certain agreements related thereto, Parent, the Company, the MHR Holders, the Senior Managers, Mark Lama and RGGPLS, LLC executed the Right of First Refusal and Co-Sale Agreement for the purposes of, among others, setting forth certain rights and obligations of the parties thereto as stockholders of the Surviving Corporation, and certain restrictions, with respect to the transfer of securities of the Surviving Corporation.

     General Transfer Restrictions

     Subject to the terms, conditions and exceptions set forth in the Right of First Refusal and Co-Sale Agreement, neither the MHR Holders, the Senior Managers, Mark Lama nor RGGPLS, LLC may sell, give, pledge, transfer, encumber, or otherwise dispose of all or any portion of their respective Capital Stock (as defined in the Right of First Refusal and Co-Sale Agreement, whether now owned or acquired subsequent to the date of the Right of First Refusal and Co-Sale Agreement, except as may otherwise be specifically provided for in the Right of First Refusal and Co-Sale Agreement. The Right of First Refusal and Co-Sale Agreement shall not apply to or restrict the transfer of the Notes by the MHR Holders.

     Right of First Refusal

     Subject to certain exceptions, if any time any of the Senior Managers, Mark Lama or RGGPLS, LLC proposes to transfer any shares of Capital Stock, among other transfer restrictions described more fully in the Right of First Refusal and Co-Sale Agreement, such stockholders must provide the Company and Parent a written notice thereof (a “Key Holder Proposed Transfer Notice”), which must include the identity of such transferee, a description of the type of, and the number of shares of, common stock such stockholder desires to transfer, the purchase price for thereof, and other material terms and conditions for such disposition. In the event the Company does not purchase all of such Capital Stock, each of the Senior Managers, Mark Lama and/or RGGPLS, LLC must provide Parent a right to purchase all or any portion of such Capital Stock not purchased by the Company at the price and on the terms set forth in the Key Holder Proposed Transfer Notice.

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     Right of Co-Sale

     If any Capital Stock set forth in a Key Holder Proposed Transfer Notice is not purchased and thereafter is to be sold to a transferee, Parent may elect to participate in such transfer on a pro rata basis and on the same terms and conditions specified in the Key Holder Proposed Transfer Notice.

     Right of First Offer

     Subject to certain exceptions, if at any time any of the MHR Holders desire to transfer any shares of Capital Stock, among other transfer restrictions described more fully in the Right of First Refusal and Co-Sale Agreement, MHR Holders must provide Parent written notice thereof (the “Offer Notice”), which must include a description of the type of, and the number of shares of, common stock the MHR Holders desire to transfer (the “Offered Shares”), the purchase price for the Offered Shares, and other material terms and conditions for such disposition. Parent will have the right to purchase the Offered Shares at the price and on the terms set forth in the Offer Notice (the “Right of First Offer”). To the extent that Parent does not exercise its Right of First Offer, the MHR Holders may transfer the Offered Shares to a third-party transferee during the 90 day period after the expiration of the Right of First Offer, at a price not less than and on material terms no more favorable to the third party offeree than those set forth in the Offer Notice.

     Tag Along Rights

     In the event that Parent (or any of its affiliates) proposes to transfer any Capital Stock (a “Parent Proposed Transfer”), Parent must provide to the other stockholders party to the Right of First Refusal and Co-Sale Agreement written notice thereof (the “Parent Proposed Transfer Notice”) not later than 45 days prior to the consummation of such Parent Proposed Transfer, which notice shall (a) state Parent’s intention to transfer or sell Capital Stock to a transferee, the identity of such transferee, the amount and types of Capital Stock proposed to be transferred, the per share purchase price (which shall be reflected on an as converted to common stock basis) for such Capital Stock and a summary of the other material terms of the transfer (including, without limitation, the proposed transfer date) and (b) invite the other stockholders party to the Right of First Refusal and Co-Sale Agreement to sell a pro rata portion of such Capital Stock being transferred (determined on a fully diluted and as converted to common stock basis assuming full conversion or exercise of all of the Surviving Corporation’s convertible securities and options, other than the Second Amended and Restated Notes) in the Parent Proposed Transfer at the same per share purchase price (which shall be reflected on an as converted to common stock basis), in the same form of consideration, and on the terms and conditions, set forth in the Parent Proposed Transfer Notice.

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     Drag Along Rights

     In the event of an Approved Drag-Along Sale (as defined in the Right of First Refusal and Co-Sale Agreement) and subject to other limitations set forth in the Right of First Refusal and Co-Sale Agreement, the stockholders and the other persons party to the Right of First Refusal and Co-Sale Agreement from time to time are required to, among other things, (a) sell their respective Share Equivalents (as defined in the Right of First Refusal and Co-Sale Agreement) in connection with such Approved Drag-Along Sale and (b) vote for, consent to, raise no objections to, and not contest such Approved Drag-Along Sale, all as described more fully in the Right of First Refusal and Co-Sale Agreement.

     Investor Rights Agreement

     Registration Rights

     The Company agreed to grant registration rights to the MHR Holders and Parent and certain other stockholders with respect to certain securities of the Surviving Corporation held by them at any time now or in the future, as described more fully in the Investor Rights Agreement (such covered securities, the “Registrable Securities”).

     Demand Registration Rights

     Upon the terms and conditions more fully described in the Investor Rights Agreement, the MHR Holders may require on up to 2 occasions that the Surviving Corporation register the Registrable Securities held by the MHR Holders on Form S-1 at any time following the 1 year anniversary of an initial public offering; provided, that the Surviving Corporation shall grant to the MHR Holders an additional demand registration for each year the Surviving Corporation is not in compliance with the rules and regulations of the Securities Act of 1933, as amended (the “Securities Act”) or the Securities and Exchange Act of 1934, as amended, and, as a result, is not eligible to use a Form S-3, which additional demand registrations shall not exceed 2 in the aggregate.

     Form S-3 Registration Rights

     The MHR Holders have the right to require, on an unlimited number of occasions, that the Surviving Corporation register their shares of Registrable Securities on a Form S-3 or other short-form registration statement that may be available, subject to certain limitations described in the Investor Rights Agreement.

     Piggy-back Registration Rights

     If at any time after the date a registration statement for an initial public offering is declared effective by the SEC or at such earlier time to the extent other stockholders are granted the right to registration before such time, the Surviving Corporation proposes to file a registration statement under the Securities Act with respect to an offering of equity or debt securities solely for cash, then those certain stockholders, including the MHR Holders, the Senior Managers, Mark Lama and/or RGGPLS, LLC, will have the right to include in the registration statement their Registrable Securities and other securities with respect to which registration rights have been granted, subject to, in each case, the limitations set forth in the Investor Rights Agreement.

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     Preemptive Rights

     Each time the Surviving Corporation proposes to sell any equity securities of the Surviving Corporation and/or its subsidiaries, as well as any rights, options, or warrants to purchase equity securities of the Surviving Corporation and/or its subsidiaries, or securities that are, or may become, convertible or exchangeable into or exercisable for equity securities of the Surviving Corporation and/or its subsidiaries, as described more fully in the Investor Rights Agreement, (the “New Securities”), subject to certain excluded issuances, the Surviving Corporation must also make an offering of such securities to the MHR Holders, the Senior Managers, Mark Lama and RGGPLS, LLC (collectively, the “Preemptive Stockholders”), who may elect to purchase, at the price and on the terms specified in the preemptive rights notice provided by the Surviving Corporation to the Preemptive Stockholders, up to such Preemptive Stockholder’s pro rata portion of such securities, as more fully described in the Investor Rights Agreement.

     In the event the Parent or any of its affiliates proposes to make or participate as a lender in making a loan to or purchasing debt securities from the Surviving Corporation and/or any of its subsidiaries (a “Debt Transaction”), each other Preemptive Stockholder shall have the right to participate in such Debt Transaction on the same terms and conditions as Parent or any of its affiliates, and such Debt Transaction shall be subject to the preemptive rights provisions in the Investor Rights Agreement as if such loan or debt security were a New Security.

Voting Agreement

The Voting Agreement provides that the stockholders of the Surviving Corporation agree to, among other things, vote their respective voting securities of the Surviving Corporation owned beneficially or of record by such stockholders in favor of electing such members of the board of directors of the Surviving Corporation as are designated in accordance with the Voting Agreement, and grant voting rights to certain stockholders of the Surviving Corporation.

So long as the MHR Holders satisfy any one of the following: (a) the MHR Holders hold any Second Amended and Restated Notes, (b) the MHR Holders own a number of Shares (as defined in the Voting Agreement) equal to at least 33% of the shares of common stock owned by the MHR Holders at the Effective Time (determined on a fully diluted and as converted to common stock basis assuming full conversion or exercise of all of the Surviving Corporation’s convertible securities and options, other than the Second Amended and Restated Notes) or (c) the MHR Holders own at least 5% of the shares of the Surviving Corporation’s common stock outstanding (determined on a fully diluted and as converted to common stock basis assuming full conversion or exercise of all of the Surviving Corporation’s convertible securities and options, other than the Second Amended and Restated Notes), the MHR Holders may elect to the Surviving Corporation’s board of directors 1 individual designated by the MHR Holders.

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So long as Glenn Parker (a) owns at least 2.5% of the shares of the Surviving Corporation’s common stock (determined on a fully diluted and as converted to common stock basis assuming full conversion or exercise of all of the Surviving Corporation’s convertible securities and options) or (b) is the Chief Executive Officer of the Surviving Corporation, Glenn Parker may elect to the Surviving Corporation’s board of directors 1 individual designated by Glenn Parker.

Employment Agreements

As part of the transactions contemplated by the Merger Agreement, the Company entered into (a) an employment agreement with each of Glenn Parker, Lewis Stone and Timothy Fairbanks, each an existing officer of the Company, that will replace each of their respective current employment agreements and shall become effective at the Effective Time and (b) an employment agreement with Mark Lama, a new employee of the Company affiliated with ComVest. The employment agreements become effective only upon the Effective Time and will be null and void and have no force or effect in the event the Merger Agreement is terminated in accordance with its terms.

Each employment agreement has the following similar terms (the specific terms for each employee will be described in the Company’s Proxy Statement to be filed with the SEC subsequent to the date hereof):

Each employment agreement commences on the Effective Time and continues for a period of 4 years, without any automatic renewal provisions. Compensation includes a base salary of $375,000 per year with respect to Glenn Parker, $300,000 per year with respect to Timothy Fairbanks, $250,000 per year with respect to Lewis Stone, and $300,000 per year with respect to Mark Lama, and an incentive bonus for such employees, the first year, based on the Company’s Adjusted EBITDA.

Moreover, each employment agreement grants the employee an option to purchase shares of the Surviving Corporation’s common stock, which will vest over a 4 year period, with 25% vesting on the first anniversary date of the Effective Time and the remaining portion vesting over a 3 year period in equal 6 month installments. The options will vest upon the occurrence of (a) termination of the employee by the Surviving Corporation without cause, (b) termination by the employee for good reason, (c) upon the death of the employee, (d) termination of employee’s employment due to disability, and (e) change of control of the Surviving Corporation. Vested options are exercisable for a 10 year period commencing on the date of option grant.

Also, each employment agreement may be terminated for cause, without cause or for good reason and contains a non-compete with respect to the businesses in which the Surviving Corporation and its subsidiaries are engaged in the United States on the date the employee’s employment with the Surviving Corporation is terminated, and any other business that the Surviving Corporation is actively pursuing as of such date in the United States. The non-compete provision applies upon any termination of the employment agreement, except where the employment agreement expires at the end of the term and the Surviving Corporation has not offered to renew on substantially similar terms, in which case the non-compete is rendered inapplicable.

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Each of the employment agreements includes an indemnification provision, whereby the Surviving Corporation, to the extent that it may under applicable law, will indemnify the employee if the employee is a party to, or threatened to be, a party of any suit or proceeding for all liabilities incurred or suffered by the employee in connection with such suit.

Additional Information and Where to Find It:

In connection with the proposed merger, NationsHealth will file a proxy statement with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the proxy statement (when available) and other documents filed by NationsHealth at the Securities and Exchange Commission’s web site at http://www.sec.gov and on NationsHealth’s website at http://www.nationshealth.com.

NationsHealth and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the proposed merger. Information concerning the interests of NationsHealth’s participants in the solicitation will be set forth in NationsHealth’s proxy statement relating to the merger when it becomes available.

This Current Report and the exhibits hereto may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including without limitation, statements containing the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions and statements related to potential cost savings and synergies expected to be realized in the Merger. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements. Such factors include those risks described from time to time in the Company’s filings with the SEC, including, without limitation, the risks described in the Company’s most recent Annual Report on Form 10-K on file with the SEC. These factors should be considered carefully and you are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date of this report, and the Company undertakes no duty to update this information, except as required by securities laws.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under and Off-Balance Sheet Arrangement of Registrant

See Item 1.01 described herein.

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

On May 4, 2009, the Company received an OTCBB Delinquency Notification with a notification date of April 16, 2009 (the “Notification”) stating that the Company was delinquent with respect to the filing of its Annual Report on Form 10-K for the year ended December 31, 2008, which had an extended due date of April 15, 2009 following the filing of the Company’s Form 12b-25 on March 31, 2009. The Notification stated that, pursuant to NASD Rule 6530, unless the delinquent filing has been received and time stamped by the Commission’s EDGAR system by 5:30 pm on May 18, 2009, the Company’s securities would not be eligible for quotation on the OTC Bulletin Board and will be removed therefrom effective May 20, 2009. The Company filed its Form 10-K for the year ended December 31, 2008 prior to the May 20, 2009 deadline and is now in compliance with its reporting obligation requirements pursuant to NASD Rule 6530.

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Item 3.02 Unregistered Sales of Equity Securities

See Item 1.01 described herein.

Item 3.03 Material Modification to Rights of Security Holders

See Item 1.01 described herein.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

See Item 1.01 described herein.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

2.4	Agreement and Plan of Merger, dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, NationsHealth Acquisition Corp. and NationsHealth, Inc.*
3.3	Amended and Restated Certificate of Incorporation of NationsHealth, Inc.*
3.4	Certificate of Designations for Series A-1 Preferred Stock*
3.5	Amended and Restated Bylaws of NationsHealth, Inc.*
4.12	Series A Preferred Stock Purchase Agreement, dated as of April 30, 2009, by and between ComVest NationsHealth Holdings, LLC and NationsHealth, Inc.*
4.13	10% Secured Convertible Subordinated Promissory Note, dated as of April 30, 2009, issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC for the benefit of ComVest NationsHealth Holdings, LLC*
4.14	Bridge Loan and Security Agreement, dated as of April 30, 2009, by and among NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., National Pharmaceuticals and Medical Products (USA), LLC and ComVest NationsHealth Holdings, LLC*

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4.15	Form of Warrant to purchase Shares, issued by NationsHealth, Inc. in favor of ComVest NationsHealth Holdings, LLC*
4.16	Right of First Refusal and Co-Sale Agreement, dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, NationsHealth, Inc., MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP, OTQ LLC, Dr. Rachesky, Glenn Parker, Lewis Stone, Timothy Fairbanks, Mark Lama and RGGPLS, LLC*
4.17	Warrant, dated as of April 30, 2009, in favor of MHR Capital Partners Master Account LP, issued by NationsHealth, Inc.*
4.18	Warrant, dated as of April 30, 2009, in favor of MHR Capital Partners (100) LP, issued by NationsHealth, Inc.*
4.19	Warrant, dated as of April 30, 2009, in favor of OTQ LLC, issued by NationsHealth, Inc.*
4.20	First Amended and Restated 7 3/4% Convertible Secured Note, dated as of April 30, 2009, in favor of MHR Capital Partners Master Account LP issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC.**
4.21	First Amended and Restated 7 3/4% Convertible Secured Note, dated as of April 30, 2009, in favor of MHR Capital Partners (100) LP issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC.**
4.22	First Amended and Restated 7 3/4% Convertible Secured Note in favor of OTQ LLC, dated as of April 30, 2009, issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC.**
4.23	Investor Rights Agreement, dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, NationsHealth, Inc., MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP, OTQ LLC, Dr. Rachesky, Glenn Parker, Lewis Stone, Timothy Fairbanks, Mark Lama and RGGPLS, LLC. *
4.24	Limited Waiver and Consent, dated as of April 30, 2009, by and among NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., National Pharmaceuticals and Medical Products (USA), LLC, MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP and OTQ LLC, and MHR Capital Partners (500) LP as collateral agent*
4.25	Senior Subordination Agreement, dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, MSL Family, LLC, and CapitalSource Finance LLC, and acknowledged by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC*

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4.26	Subordination Agreement, dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, MSL Family, LLC, MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP and OTQ LLC, and MHR Capital Partners (500) LP as collateral agent, and acknowledged by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC.*
4.27	Exchange and Rollover Agreement, dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, NationsHealth Acquisition Corp., NationsHealth, Inc., MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP, OTQ LLC, Dr. Rachesky, Glenn Parker, Lewis Stone and Timothy Fairbanks*
4.28	Form of Second Amended and Restated 7 3/4% Convertible Secured Note issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC**
9.1	Voting Agreement, dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, NationsHealth, Inc., MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP, OTQ LLC, Dr. Rachesky, Glenn Parker, Lewis Stone, Timothy Fairbanks, Mark Lama and RGGPLS, LLC*
9.2	Voting Agreement, dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, NationsHealth Acquisition Corp. and certain stockholders of NationsHealth, Inc.*
10.79	Consent, Waiver, Joinder and Eighth Amendment to Third Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of April 30, 2009, by and among NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., National Pharmaceuticals and Medical Products (USA), LLC, and CapitalSource Finance LLC*
10.80	Fourth Amended and Restated Revolving Credit, Term Loan And Security Agreement, dated as of April 30, 2009, by and among NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., National Pharmaceuticals and Medical Products (USA), LLC, and CapitalSource Finance LLC*
10.82	Employment Agreement, dated April 30, 2009, by and between Dr. Glenn Parker and NationsHealth, Inc.**
10.83	Employment Agreement, dated April 30, 2009, by and between Mr. Timothy Fairbanks and NationsHealth, Inc. (as supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009, by and between Mr. Timothy Fairbanks and NationsHealth, Inc.)**

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10.84	Employment Agreement, dated April 30, 2009, by and between Mr. Lewis Stone and NationsHealth, Inc. (as supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009, by and between Mr. Lewis Stone and NationsHealth, Inc.) **
10.85	Letter Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc. **
10.86	Employment Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc. (as supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc.)**
99.1	Press Release of NationsHealth, Inc., dated April 30, 2009*

*	Filed as an exhibit with the same number to the Company’s Form 8-K (File No. 000-50348, Film No. 09795409) on May 5, 2009, and incorporated by reference.
**	Filed herewith.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NATIONSHEALTH, INC.
Date: June 2, 2009	By:	/s/ Glenn Parker
		Glenn Parker, M.D.
		Chief Executive Officer

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EXHIBIT INDEX

Exhibit 4.20	First Amended and Restated 7 3/4% Convertible Secured Note, dated as of April 30, 2009, in favor of MHR Capital Partners Master Account LP issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC
Exhibit 4.21	First Amended and Restated 7 3/4% Convertible Secured Note, dated as of April 30, 2009, in favor of MHR Capital Partners (100) LP issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC
Exhibit 4.22	First Amended and Restated 7 3/4% Convertible Secured Note in favor of OTQ LLC, dated as of April 30, 2009, issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC
Exhibit 10.82	Employment Agreement, dated April 30, 2009, by and between Dr. Glenn Parker and NationsHealth, Inc.
Exhibit 10.83	Employment Agreement, dated April 30, 2009, by and between Mr. Timothy Fairbanks and NationsHealth, Inc. (as supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009, by and between Mr. Timothy Fairbanks and NationsHealth, Inc.)
Exhibit 10.84	Employment Agreement, dated April 30, 2009, by and between Mr. Lewis Stone and NationsHealth, Inc. (as supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009, by and between Mr. Lewis Stone and NationsHealth, Inc.)
Exhibit 10.85	Letter Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc.
Exhibit 10.86	Employment Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc. (as supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc.)

EX-4.20

Exhibit 4.20

First Amended and Restated 7 ^3/4% Convertible Secured Note, dated as of April 30, 2009, in favor of MHR Capital
Partners Master Account LP issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States
Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical
Products (USA), LLC

EXECUTION VERSION

FIRST AMENDED AND RESTATED
7 3/4% CONVERTIBLE SECURED NOTE

$7,551,403	April 30, 2009 (the “Effective Date”)
	Original Issue Date: February 28, 2005
N-1

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW WITH RESPECT THERETO, (II) PURSUANT TO RULE 144 OF THE SECURITIES ACT OR (III) UPON THE ADVICE OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.

THIS PROMISSORY NOTE IS SUBORDINATED TO CERTAIN SENIOR INDEBTEDNESS OF THE ISSUERS IN THE MANNER AND TO THE EXTENT SET FORTH IN THE INTERCREDITOR AGREEMENT (AS DEFINED BELOW) AND THE COMVEST SUBORDINATION AGREEMENT (AS DEFINED BELOW) AND ALL RIGHTS, REMEDIES AND OBLIGATIONS UNDER THIS NOTE AND THE OTHER NOTES DOCUMENTS ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR AGREEMENT AND THE COMVEST SUBORDINATION AGREEMENT.

          FOR VALUE RECEIVED, NATIONSHEALTH, INC., a Delaware corporation (the “Company”), NATIONSHEALTH HOLDINGS, L.L.C., a Florida limited liability company and a wholly-owned subsidiary of the Company (“NH LLC”), UNITED STATES PHARMACEUTICAL GROUP, L.L.C., a Delaware limited liability company and an indirect wholly-owned subsidiary of the Company (“USPG”), DIABETES CARE & EDUCATION, INC., a South Carolina corporation (“Diabetes”) and NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC, a Florida limited liability company (“National” and jointly and severally with the Company, NH LLC, USPG and Diabetes, the “Issuers”), hereby promise to pay to the order of MHR Capital Partners Master Account LP, an Anguilla, British West Indies limited partnership (the “Holder”), at c/o MHR Fund Management LLC, 40 West 57th Street, 24th Floor, New York, New York 10019, the principal amount of Seven Million Five Hundred Fifty One Thousand Four Hundred Three Dollars ($7,551,403) in lawful money of the United States of America, on the terms set forth in Section 2 hereof. This First Amended and Restated Promissory Note (this “Note”) amends and restates that certain Promissory Note, dated as of February 5, 2007, issued by the Company, NH LLC and USPG (the “Initial Issuers”) to the Holder in the aggregate principal amount of $7,551,403 (the “Original Note,” and collectively with such other convertible notes issued pursuant to the Purchase Agreement (defined herein),

the “Original Notes”) and is being issued by the Issuers along with substantially identical convertible notes also designated as First Amended and Restated 7 3/4% Convertible Secured Notes (the “Other Notes,” and together with this Note, the “Notes”) in an original aggregate principal amount of $15,000,000. The Notes are being issued pursuant to that certain Consent and Waiver to the Convertible Notes, dated April 30, 2009 among the Issuers and the holders thereto (together with the Holder, the “Holders”), pursuant to which, inter alia, the Holders have agreed to waive the Change of Control in Section 5(b) hereof upon the conversion of the Bridge Loans (as defined herein) subject to the terms and conditions of the Bridge Notes (as defined herein) and the Consent and Waiver (the “Bridge Loan Conversion”). Pursuant to the Original Notes, the Initial Issuers granted a security interest to the Collateral Agent (defined herein) for the benefit of the Holders pursuant to Section 4 of the Original Notes and each of the Initial Issuers acknowledges, confirms and reaffirms the perfected security interest of the Collateral Agent, as amended and restated hereby. The Obligations are secured by a security interest in the assets of the Issuers pursuant to Section 4 of the Notes and will also be secured by a security interest in the assets of any future Subsidiaries pursuant to Section 6(l) of the Notes for the benefit of the Holders.

          1. Definitions. The following terms shall have the meanings ascribed to them below:

          “Acquisition” shall mean the acquisition by the Company of obligations or stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person or any joint venture.

          “Active Diabetes Customer” shall mean, as of the end of any calendar month, a Diabetes Customer of the Issuers who has purchased diabetes medicines or supplies within the 180 day period ending on the last day of such calendar month.

          “Additional Shares of Common Stock” shall have the meaning specified in Section 3(d)(iv).

          “Affiliate” shall mean, as to any Person, any other Person (a) that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, (b) who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect to such Person, or (c) which, directly or indirectly through one or more intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, as the same is in effect on the date hereof) of ten percent (10%) or more of any class of the outstanding voting stock, securities or other equity or ownership interests of such Person. For purposes of this definition, the term “control” (and the correlative terms, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies, whether through ownership of securities or other interests, by Contract or otherwise. “Affiliate” shall include any Subsidiary.

          “Bridge Loan Agreement” shall mean that certain Bridge Loan Agreement by and between Parent, the Company, USPG, NH LLC, Diabetes and National dated as of April 30,

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2009, as amended or modified in effect from time to time in accordance with the ComVest Subordination Agreement and the ComVest Senior Subordination Agreement.

          “Bridge Loan Documents” shall mean the Bridge Loan Documents as defined in the Bridge Loan Agreement.

          “Bridge Loans” shall mean the loans made by Parent under the Bridge Loan Agreement.

          “Bridge Notes” shall mean the 10% Secured Convertible Subordinated Promissory Notes issued pursuant to the Bridge Loan Agreement.

          “Business Day” shall mean any day, other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by Law, regulation or executive order to close.

          “Capital Lease” shall mean, as to any Person, a lease of any interest in any kind of property or asset by that Person as lessee that is, should be or should have been recorded as a “capital lease” in accordance with GAAP.

          “Capital Stock” shall mean the capital stock of or other equity interests in a Person.

          “Closing Date” shall mean the date of the closing of the Merger.

          “Collateral” shall mean, collectively, all of the real, personal and mixed property in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations.

          “Collateral Agent” means MHR Capital Partners (500) LP.

          “Collateral Documents” means the Notes, the Subsidiary Security Agreements and all other instruments or documents delivered by any of the Issuers or their Subsidiaries pursuant to the Notes or any of the other Notes Documents in order to grant to the Collateral Agent, on behalf of the Holders, a Lien on any real, personal or mixed property of such Person as security for the Obligations.

          “ComVest” shall mean ComVest Investment Partners III, L.P.

          “ComVest Cure” shall have the meaning specified in Section 6(e).

          “ComVest Senior Subordination Agreement” shall mean, that certain Senior Subordination Agreement dated as of April 30, 2009 by and between Parent and CapitalSource Finance LLC, as amended or modified and in effect from time to time.

          “ComVest Subordination Agreement” shall mean, that certain Subordination Agreement dated as of April 30, 2009 among Parent, the Holders, the Collateral Agent and the Issuers, as amended or modified and in effect from time to time.

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          “Consolidated Senior Leverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (i) Senior Indebtedness as at such day to (ii) EBITDA for the consecutive four Fiscal Quarters ending on such day.

          “Contract” means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, license, commitment or other arrangement, understanding or undertaking, commitment or obligation, whether written or oral.

          “Conversion Amount” shall mean the portion of the principal amount of this Note being converted plus any accrued and unpaid interest thereon through the Conversion Date each as specified in the notice of conversion in the form attached as Exhibit A hereto (the “Notice of Conversion”).

          “Conversion Date” shall mean, for any conversion, the date specified in the Notice of Conversion so long as the copy of the Notice of Conversion is faxed (or delivered by other means resulting in notice) to the Company at or before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion; provided, however, that if the Notice of Conversion is not so faxed or otherwise delivered before such time, then the Conversion Date shall be the date the Holder faxes or otherwise delivers the Notice of Conversion to the Company.

          “Conversion Price” shall mean $3.40 per share of common stock, par value $.0001 per share of the Company (“Common Stock”), subject to adjustment as set forth herein.

          “Conversion Shares” shall have the meaning specified in Section 3(a).

          “Convertible Securities” shall mean any Capital Stock or security convertible into or exchangeable for Common Stock.

          “Customer Acquisition and Related Costs” shall mean costs incurred by the Company in the development of its customer base related to marketing activities, which costs include, without limitation, advertising, promotion, call center and data collection expenses.

          “Credit Agreement” shall mean the Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of April 30, 2009 among the Issuers and CapitalSource Finance LLC, as it may be amended, modified, replaced or refinanced from time to time in accordance with the Intercreditor Agreement.

          “Daily Market Price” shall mean, as of any date of determination, the closing sale price for the Common Stock (or such other applicable subject security), for the Trading Day of such date of determination (subject to equitable adjustment for any stock splits, stock dividends, reclassifications or similar events during such Trading Day and further subject to adjustment as provided herein) on the principal United States securities exchange or trading market where the Common Stock (or such other applicable subject security) is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the closing sale price for the Common Stock (or such other applicable subject security) in the OTC Bulletin Board for such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the closing sale price as reported in the “pink sheets” by the Pink Sheets LLC, in each case for such date or, if such date was not a Trading Day for such security, on the next preceding date which was a

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Trading Day. If the Daily Market Price cannot be calculated for such security as of either of such dates on any of the foregoing bases, the Daily Market Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Holders of a majority of the principal amount and interest of the Notes outstanding and reasonably acceptable to the Company, with the costs of such appraisal to be borne by the Company.

          “Default” shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both, would constitute or be or result in an Event of Default.

          “Deferred Purchase Price Obligations” means any and all obligations of the Company incurred as permitted under the Notes for amounts deferred, financed or withheld in respect of the purchase price for any Diabetes Business Acquisition, including Indebtedness which consists of purchase money financing by the seller and amounts withheld or escrowed as potential set-offs against customer terminations, purchase price adjustments or otherwise.

          “Delivery Period” shall have the meaning specified in Section 3(c).

          “Diabetes Business Acquisition” shall mean the acquisition by the Company of Diabetes Customer lists.

          “Diabetes Customers” shall mean any and all customers and patients of the Company for the purchase of diabetes medicines, supplies and other products, whether now existing or hereinafter acquired or arising.

          “Distribution” shall mean any fee, payment, bonus or other remuneration of any kind, and any repayment of or debt service on loans or other Indebtedness.

          “Dollars” and the sign “$” mean the lawful money of the United States of America.

          “DTC” shall have the meaning specified in Section 3(c).

          “DTC Transfer” shall have the meaning specified in Section 3(c).

          “EBITDA” shall mean, the sum for any period, without duplication, of the following for the Issuers and each Subsidiary, on a consolidated basis: Net Income, (I) plus (a) Interest Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation expense, (d) amortization expense, (e) all other non-cash, non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business, (f) loss from any sale of assets, other than sales in the ordinary course of business, (g) one-time, non-recurring charges and expenses incurred by the Company in connection with the Transactions (“Merger Expenses”), provided that such non-recurring charges and expenses shall not exceed $1,500,000 during the term of this Note, and (h) severance expenses incurred by the Company in an amount not to exceed $1,000,000 for any twelve month period and an aggregate of $2,000,000 during the term of this Note, and in the case of (a) through (h) above, all of the foregoing determined without duplication and in accordance with GAAP (II) minus (a) gains from any sale of assets,

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other than sales in the ordinary course of business, (b) other extraordinary or non-recurring gains and (c) non-cash items added in the calculation of Net Income.

          “Equity Contribution” shall mean, in connection with the consummation of the Merger, the contribution by the Senior Management and MHR, directly or indirectly, of rollover equity to or of the Company on the Closing Date pursuant to the Rollover Documents (assuming the conversion into Common Stock of all Options and Convertible Securities outstanding on the Closing Date other than convertible debt instruments) and the purchase or contribution by ComVest and its Affiliates, directly or indirectly, of cash equity and the Bridge Loan to the Company pursuant to the Merger Agreement, the Bridge Note and the Series A Preferred Stock Purchase Agreement, by and between Parent and the Company, dated as of the April 30, 2009 (assuming the conversion into Common Stock of all Options and Convertible Securities outstanding on the Closing Date other than convertible debt instruments).

          “Event of Default” shall have the meaning specified in Section 2(d).

          “Extraordinary Event” shall have the meaning specified in Section 3(d)(iii).

          “Fiscal Quarter” shall mean a fiscal quarter of any fiscal year.

          “First Priority Lien Indebtedness” shall mean Senior Indebtedness of the Issuers and their Subsidiaries secured by a first priority Lien on any assets or property of the Issuers or any such Subsidiaries, including the Indebtedness of the Issuers under the Credit Agreement permitted to be incurred by the Company under Section 6(c).

          “GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time as applied by nationally recognized accounting firms.

          “Governmental Authority” shall mean any federal, state, municipal, national, local or other governmental department, court, commission, board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative, or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case, whether of the United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District of Columbia.

          “Hedge Agreement” means any and all transactions, agreements or documents now existing or hereafter entered into by the Company or its Subsidiaries, which provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

          “Indebtedness” of any Person shall mean, without duplication, (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes or other similar instruments and all reimbursement or other obligations in respect of letter of credit, bankers acceptances, interest rate swaps, hedges, derivatives or other financial products, (c) all obligations as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by

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a Lien on any asset of a Person or its Subsidiaries, irrespective of whether such obligation or liability is assumed, (e) all obligations to pay the deferred purchase price of assets (other than Deferred Purchase Price Obligations not to exceed $250,000 outstanding at any time), (f) all obligations owing under Hedge Agreements, (g) all notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, and (h) all obligations or liabilities of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock, equity or other ownership interest purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. For the avoidance of any doubt, Indebtedness does not include trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and any obligations as a lessee under leases that are not Capital Leases.

          “Intercreditor Agreement” shall have the meaning specified in Section 4(f).

          “Interest Expense” shall mean, for any period, total interest expense and fees (including attributable to Capital Leases in accordance with GAAP and capitalized interest) of the Issuers and their Subsidiaries on a consolidated basis with, with respect to all outstanding Indebtedness but excluding all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements.

          “Interest Rate Agreement” shall mean any interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to hedge the position with respect to interest rates.

          “Inventory” shall mean all “inventory” (as defined in the UCC) of the Issuers and the Subsidiaries (or, if referring to another Person, of such other Person), now owned or hereafter acquired, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.

          “Investor Rights Agreement” shall mean the Investor Rights Agreement dated as of April 30, 2009 by and among Parent, Mark Lama, RGGPLS, LLC, MHR and the Senior Management.

          “Landlord Waiver and Consent” shall mean a waiver/consent in form and substance satisfactory to the Holders from the owner/lessor of any premises not owned by the Issuers or their Subsidiaries at which any of the Collateral is now or hereafter located for the purpose of providing the Collateral Agent (for the benefit of the Holders) access to such Collateral, in each case as such may be modified, amended or supplemented from time to time.

          “Law” means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation, Order or other similar requirement.

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          “Leasehold Property” means any leasehold interest of any of the Company or its Subsidiaries as lessee under any lease of real property, other than any such leasehold interest designated from time to time by the Collateral Agent in its sole discretion as not being required to be included in the Collateral.

          “Lien” shall mean any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, civil law, statute, or Contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien, hypothecation or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment from security purposes and also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property.

          “Maturity Date” shall have the meaning specified in Section 2(b).

          “Merger Agreement” shall mean the Agreement and Plan of Merger, dated as of April 30, 2009, by and among Parent, Merger Sub and the Company as amended or supplemented pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving, and upon the closing of which Merger, Parent, the members of Senior Management and MHR shall own shares of the Company Capital Stock.

          “Merger Documents” shall mean the collective reference to the Merger Agreement, all material exhibits and schedules thereto and all agreements expressly contemplated thereby.

          “Merger Sub” shall mean NationsHealth Acquisition Corp., a Delaware corporation.

          “MHR” shall have the meaning specified in Section 6(e).

          “MHR Warrants” shall mean the warrants to purchase Common Stock issued to MHR on the Closing Date pursuant to the Transactions.

          “Mortgage” means a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by the Company or any Subsidiary pursuant to Section 4(i), in such form as may be approved by the Collateral Agent in its sole discretion, in each case with such changes thereto as may be recommended by the Collateral Agent’s local counsel based on local laws or customary local mortgage or deed of trust practices.

          “Net Income” shall mean, for any period, the net income (or loss) of the Issuers and their Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP (and, with respect to expensing of Customer Acquisition and Related Costs, as currently applied by the Company consistent with past practice), provided that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of the

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Issuers) in which any other Person (other than the Issuers or any of their Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to an Issuer by such Person, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of an Issuer or is merged into or consolidated with an Issuer or any of its Subsidiaries or that Person’s assets are acquired by an Issuer or any of its Subsidiaries, (iii) the income of any Subsidiary of the Issuers to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, Order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) compensation expense resulting from the issuance of Capital Stock, stock options or stock appreciation rights issued to former or current employees, including officers, of an Issuer or any Subsidiary, or the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by an Issuer or such Subsidiary or any Affiliate thereof, and (v) compensation expense resulting from the repurchase of Capital Stock, options and rights described in clause (iv) of this definition of Net Income.

          “Notes Documents” shall mean the Notes, the Transaction Documents as defined in the Purchase Agreement, the Consent and Waiver, dated as of April 30, 2009, the Waiver Warrants, the Subsidiary Security Agreements, the Subsidiary Guaranties, and the other Collateral Documents.

          “Obligations” shall mean all obligations of every nature of the Issuers and Subsidiaries from time to time owed to the Holders, the Collateral Agent or any of them, in each case, under the Notes Documents, whether for principal, interest, fees, expenses, indemnification or otherwise (including, without limitation, interest and other amounts that, but for the filing of a petition in bankruptcy with respect to any Issuer or any Subsidiary, would accrue on such obligations, whether or not a claim is allowed against such Issuer or Subsidiary for such amounts in the related bankruptcy proceeding), including to the extent all or any part of such payment is avoided or recovered directly or indirectly from any Holder or the Collateral Agent as a preference, fraudulent transfer or otherwise.

          “Officer’s Certificate” as applied to any Person that is a corporation, partnership, trust or limited liability company, means a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company.

          “Options” shall mean warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock.

          “Order” means any order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of a Governmental Authority.

          “Original Issue Date” shall mean February 28, 2005.

          “Par Redemption Price” shall have the meaning specified in Section 5(a)(ii).

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          “Parent” shall mean ComVest NationsHealth Holdings, LLC.

          “Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Authority.

          “Permitted Liens” means the following: (i) Liens with respect to the Notes and the other Obligations, (ii) Liens with respect to Senior Indebtedness allowed to be incurred under Section 6(c), (iii) Liens imposed by Law for taxes (other than payroll taxes), assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of the Holders of a majority of the principal and interest of the Notes outstanding, in their sole discretion, (iv) (A) statutory Liens of landlords (provided that any such landlord has executed a Landlord Waiver and Consent in form and substance satisfactory to the Holders of a majority of the principal and interest of the Notes outstanding) and of carriers, warehousemen (provided that any such warehousemen have executed a Warehouse Waiver and Consent in form and substance satisfactory to the Holders of a majority of the principal and interest of the Notes outstanding), mechanics, materialmen, and (B) other Liens imposed by Law or that arise by operation of Law in the ordinary course of business from the date of creation thereof, in each case only for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of the Holders of a majority of the principal and interest of the Notes outstanding, in their sole discretion, (v) Liens (A) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, Contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations, or (B) arising as a result of progress payments under government contracts, (vi) purchase money Liens, including, without limitation, UCC-1 notice filings by equipment lessors and the like, in connection with the purchase by such Person of equipment in the normal course of business, (vii) Liens securing Subordinated Indebtedness allowed to be incurred under Section 6(c) junior to the Lien under the Notes and (viii) Liens described on Schedule I to this Note.

          “Person” shall mean an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture, or any other entity of whatever nature.

          “Preferred Stock” shall mean with respect to any Person, any and all preferred or preference stock or other preferred equity interests (however designated) of such Person whether no outstanding or issued after the date hereof.

          “Premium Redemption Price” shall have the meaning specified in Section 5(a)(ii).

          “Purchase Agreement” shall mean that certain Investment Unit Purchase Agreement, dated February 28, 2005, among the Issuers and the Holders.

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          “Redemption Warrant” shall have the meaning specified in Section 5(a)(ii).

          “Right of First Refusal and Tag and Co-Sale Agreement” shall mean the Right of First Refusal and Tag and Co-Sale Agreement dated as of April 30, 2009 by and among Parent, Mark Lama, RGGPLS, LLC, MHR and the Senior Management.

          “Rollover Documents” shall mean the Exchange and Rollover Agreement dated as of April 30, 2009 by and among the Company, MHR and the Senior Management.

          “RGGPLS Cure” shall have the meaning specified in Section 6(e).

          “Senior Indebtedness” means, as of any date of determination, the aggregate stated balance sheet amount of all Indebtedness of the Issuers and their Subsidiaries, other than (i) the Notes and (ii) Subordinated Indebtedness, determined on a consolidated basis in accordance with GAAP and incurred in compliance with Section 6(c) hereof, which Senior Indebtedness shall (x) include (A) Indebtedness under the Credit Agreement (including extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) and (B) the Bridge Loans but not any refinancings or replacements thereof (other than refinancings or replacements thereof with Senior Indebtedness due to CapitalSource Finance LLC under the Credit Agreement and which, when aggregated with all other Indebtedness outstanding under the Credit Agreement, does not exceed the principal amount permitted under Section 6(c)(iii)) and (y) otherwise be in the form of credit extensions or other obligations on terms and conditions customarily provided at such time by senior secured lenders, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Obligations. For the avoidance of doubt, Senior Indebtedness (other then the Bridge Loans but not any refinancings or replacement thereof) shall not include any financing arrangements in the form of convertible debt or that would customarily be considered “mezzanine”, “sub debt” or similar financing arrangements.

          “Senior Management” shall mean Glenn Parker, Lewis Stone, Timothy Fairbanks and such other executives party to the Rollover Documents.

          “Subordinated Indebtedness” means Indebtedness (secured or unsecured) incurred by the Company and/or its Subsidiaries that is made expressly subordinated in right to payment to the Obligations, as reflected in a written subordination agreement acceptable to the Holders and approved by the Holders in writing; provided that no such Indebtedness shall provide at any time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (2) total cash interest at a rate in excess of the prevailing market rate for subordinated debt at the time of issuance, except to the extent permitted by the terms of such written subordination agreement.

          “Subsidiary” shall mean, (i) as to the Issuers, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by an Issuer or one or more of its Subsidiaries, and (ii) as to any other Person, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by such Person or by one or more of such Person’s Subsidiaries.

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          “Subsidiary Guaranty” means a guaranty agreement executed by a Subsidiary pursuant to Section 6(l), in form and substance satisfactory to the Holders, the Company and such Subsidiary, guaranteeing payment of the Obligations and providing, without limitation, that such Subsidiary shall be bound by the covenants set forth in this Note, and shall make such representations and warranties as the Holders may reasonably require.

          “Subsidiary Security Agreement” means a pledge and security agreement executed by a Subsidiary pursuant to Section 6(l), containing provisions substantially similar to the grant of security in Section 4 hereof, and in form and substance satisfactory to the Holders, the Company and such Subsidiary, securing payment of the Obligations.

          “Tax Put Right” shall have the meaning specified in Section 5(f).

          “Trading Day” shall mean any day on which the principal United States securities exchange or trading market where the Common Stock (or such other applicable subject security) is then listed or traded, is open for trading.

          “Transaction Documents” shall mean the Merger Documents, the Bridge Loan Documents, the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement), the Notes Documents, the Rollover Documents, the Investor Rights Agreement, the Right of First Refusal and Tag and Co-Sale Agreement, the Voting Agreement and all documents executed and delivered in connection herewith and therewith.

          “Transactions” shall mean, collectively, the transactions to occur pursuant to or in connection with the Transaction Documents, including (a) the consummation of the Merger; (b) the Equity Contribution; (c) the execution and delivery of the Bridge Loan Documents and the borrowings thereunder; (d) the execution and delivery and issuance of the Notes and execution and delivery of the Notes Documents; (e) the issuance of the MHR Warrants, (f) the refinancing of the Credit Agreement, and (g) the payment of all fees and expenses to be paid in connection with the foregoing.

          “UCC” means the Uniform Commercial Code, as it exists on the date of this Note or as it may hereafter be amended, in the State of New York.

          “Voting Agreement” means the Voting Agreement dated as of April 30, 2009, by and among the Company, Parent, Mark Lama, RGGPLS, LLC, MHR and Senior Management.

          “Waiver Warrants” shall mean the warrants to purchase Common Stock issued to MHR on the Effective Date.

          “Warehouse Waiver and Consent” shall mean a waiver/consent in form and substance satisfactory to the Holders from any warehouseman, fulfillment house or other person owning a facility not owned by the Issuers at which any inventory is now or hereafter located for the purpose of providing the Collateral Agent (for the benefit of the Holders) access to such inventory, in each case as such may be modified, amended or supplemented from time to time.

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          2. Payments of Interest and Principal. Subject to the provisions of Section 3 below, payments of principal plus interest on the unpaid principal balance of this Note outstanding from time to time shall be payable in accordance with the following:

               (a) Interest. During the period commencing on the Original Issue Date and terminating on the Maturity Date, interest on the unpaid principal amount of this Note shall accrue at a rate equal to 7 3/4% per annum, compounded monthly, computed on the basis of actual days elapsed over a 360-day year, and shall be payable monthly (commencing on February 28, 2005 and thereafter on the 28th of each month) in cash up to and including the Maturity Date, subject to a ten (10) day grace period; provided that if a required interest payment is not paid within such ten (10) day grace period, interest shall be compounded from the date that such interest was due and payable without regard to such grace period.

               (b) Principal. The principal balance outstanding on this Note, and any accrued and unpaid interest thereon, shall be due and payable to the Holder on February 28, 2012 (the “Maturity Date”). Contemporaneously with the repayment of this Note, the Holder shall surrender this Note, duly endorsed, at the office of the Company.

               (c) Payments. All payments of principal, interest, fees and other amounts due hereunder shall be made by the Issuers in lawful money of the United States of America by wire transfer or by any other method approved in advance by the Holder to the account of the Holder at the address of the Holder set forth in Section 10 hereof or at such other place designated by the Holder in writing to the Company.

               (d) Acceleration of the Maturity Date. Notwithstanding anything to the contrary contained herein, this Note and all other Obligations shall become due and payable together with all accrued interest due on the outstanding principal amount hereunder, at the option of the Holders of at least 25% of the principal amount and interest outstanding exercised, by written notice to the Company, in the case of clauses (i) to (viii) below and without notice or any other action by such Holders in the case of clauses (ix) or (x) below, in the event (each an “Event of Default”) that (i) the Issuers fail to pay the principal of or interest on this Note as and when due, subject to a ten (10) day grace period; (ii) any of the Issuers or their Subsidiaries shall default in the performance of or otherwise breach any of its representations and warranties, covenants or other obligations set forth in this Note, the Purchase Agreement or any of the Notes Documents, and if such default is capable of cure, such default remains uncured beyond any applicable cure period; provided that with respect to any breach or default of the covenants in Section 6, there shall be a fifteen (15) calendar day cure period (to the extent such breach or default is capable of cure) commencing from the earlier of (i) receipt by the Company of written notice of such breach or default from the Holder and (ii) the time at which an authorized officer of the Company or any Subsidiary knew or became aware of such breach or default; provided further that with respect to the covenant set forth in Sections 6(a) there shall be no cure period with respect to any breach or default that adversely affects the Holder; (iii) the Collateral Agent (on behalf of the Holders) shall not have the right to enforce its remedies under Section 4 of this Note or under any Subsidiary Security Agreement; (iv) the Holder shall not have a perfected security interest in the Collateral pursuant to the terms set forth herein or in any Subsidiary Security Agreement other than Holder’s action or inaction; (v) the Company fails when required to remove any restrictive legend of any certificate relating to Conversion Shares, Redemption

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Warrants, Waiver Warrants or any other securities issuable in accordance with the terms of the Notes or the exercise or conversion of the Redemption Warrants, Waiver Warrants or any other convertible securities issuable in accordance with the terms of the Notes, issued to the Holders, and any such failure continues uncured for ten (10) Business Days after the Company has been notified of such failure in writing by the Holder; (vi) the Issuers or any of their Subsidiaries fail to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness of the Issuers or their Subsidiaries having an outstanding principal amount in excess of $250,000 (including, without limitation, any of the Other Notes), or otherwise is in breach or violation of any agreement for Indebtedness in an amount in excess of $250,000 which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder and which breach or violation is not waived or otherwise cured hereunder or under the documents evidencing such Indebtedness, including, without limitation, by exercise of the RGGPLS Cure or ComVest Cure, as applicable, pursuant to Section 6(e); (vii) the entry of a final judgment against any of the Issuers or their Subsidiaries not covered by insurance of a financially sound and reputable insurer that has not declined coverage, which is not subject to appeal by the Issuers or their Subsidiaries and is not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being entered, in an amount in excess of $250,000, or the attachment or seizure of or levy upon any property of the Issuers or their Subsidiaries valued in excess of $250,000 to satisfy an obligation of the Issuers or their Subsidiaries; (viii) the Company provides notice to any Holder of the Notes, including by way of public announcement, at any time, of its intention not to issue, or otherwise refuses to issue, Conversion Shares to any Holder of the Note upon conversion in accordance with the terms of the Notes or shares of Common Stock upon exercise of the Waiver Warrants; (ix) any of the Issuers or their Subsidiaries shall file a petition under bankruptcy, insolvency or debtor’s relief Law or make an assignment for the benefit of its creditors or (x) proceedings shall be instituted against any of the Issuers or their Subsidiaries before a court of competent jurisdiction under any federal or state bankruptcy Law that (X) is for relief against the Issuers or their Subsidiaries in an involuntary case brought with respect to the Issuers or their Subsidiaries in such court, (Y) seeks to appoint a custodian, receiver or other similar official for all or substantially all the Issuers’ property or of their Subsidiaries or (Z) seeks to liquidate the Issuers of their Subsidiaries, and such proceedings remain unstayed and in effect for sixty (60) days. In the event that the Obligations hereunder are accelerated pursuant to this Section 2(d), interest shall continue to accrue at 10 3/4% per annum as of the date of such acceleration until such date as the Holder is paid in full under this Note.

          3. Conversion.

               (a) Conversion at the Option of the Holder. The Holder may, at any time and from time to time on or after the Original Issue Date, convert all or any part of the outstanding principal amount of this Note, plus all accrued interest thereon through the Conversion Date, into a number of fully paid and nonassessable shares of Common Stock (“Conversion Shares”) upon surrender of the Note. The number of shares of Common Stock issuable upon surrender of the Note shall be determined in accordance with the following formula:

Conversion Amount
Conversion Price

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               (b) Mechanics of Conversion. In order to effect a conversion pursuant to this Section 3, the Holder shall: (a) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to the Company and (b) surrender or cause to be surrendered this Note, duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Company. Upon receipt by the Company of a facsimile copy of a Notice of Conversion from a Holder, the Company shall within two (2) business days send, via facsimile, a confirmation to such Holder stating that the Notice of Conversion has been received, advising the Holder of any additional documentation required by the transfer agent for the Common Stock to issue the Conversion Shares in the manner provided in the Notice of Conversion (the “Additional Documentation”) and the name and telephone number of a contact person at the Company regarding the conversion. The Company shall not be obligated to issue Conversion Shares upon a conversion unless either this Note is delivered to the Company as provided above, or the Holder notifies the Company that such certificates have been lost, stolen or destroyed and delivers the documentation to the Company required by Section 13. Such conversion shall be deemed to have been made effective as of the Conversion Date and the rights of the Holder of the Notes being converted shall cease as of the Conversion Date except for the rights to receive Conversion Shares, and the Person entitled to receive the Conversion Shares shall be treated for all purposes as having become the record holder of such Conversion Shares at such time and shall have all the rights and privileges of a holder of Common Stock with respect to such Conversion Shares.

               (c) Delivery of Conversion Shares Upon Conversion. Upon the surrender of this Note accompanied by a Notice of Conversion and any Additional Documentation, the Company shall, no later than the later of (a) the second Business Day following the Conversion Date and (b) the third Business Day following the date of such surrender (or, in the case of lost, stolen or destroyed certificates, after provision of indemnity pursuant to Section 13) (the “Delivery Period”), issue and deliver to the Holder or its nominee (x) that number of Conversion Shares issuable upon conversion of the portion of this Note being converted and (y) a new Note in the form hereof representing the balance of the principal amount hereof not being converted, if any. If the Company’s transfer agent is participating in the Depositary Trust Company (“DTC”) Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend and the Holder thereof is not then required to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Conversion Shares to the Holder by crediting the account of the Holder or its nominee with DTC, as specified in the Notice of Conversion, through its DTC Deposit Withdrawal Agent Commission System (“DTC Transfer”). If the aforementioned conditions to a DTC Transfer are not satisfied, the Company shall deliver to the Holder physical certificates representing the Conversion Shares. Further, the Holder may instruct the Company to deliver to the Holder physical certificates representing the Conversion Shares in lieu of delivering such shares by way of DTC Transfer.

               (d) Adjustment to Conversion Price. The Conversion Price in effect at any time shall be subject to adjustment from time to time upon the happening of certain events, as follows:

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                    (i) Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits. If the Company, at any time while this Note is outstanding, (A) shall pay a stock dividend on its Common Stock, (B) subdivide outstanding shares of Common Stock into a larger number of shares, or (C) combine outstanding shares of Common Stock into a smaller number of shares, the Conversion Price shall be multiplied by a fraction the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(d)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

                    (ii) Subscription Rights. If the Company, at any time while this Note is outstanding, shall fix a record date for the distribution to all of the holders of Common Stock evidence of its indebtedness or assets or rights, options, warrants or other securities entitling them to subscribe for, purchase, convert to, exchange for or to otherwise acquire any security (excluding those referred to in Section 3(d)(i) above), then in each such case the Conversion Price at which this Note shall thereafter be exercisable shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the average Daily Market Price of the Common Stock for the ten (10) Trading Days prior to the record date mentioned above, and the numerator of which shall be such average Daily Market Price of the Common Stock for the ten (10) Trading Days prior to such record date less the then fair market value at such record date of the portion of such evidence of indebtedness or assets or rights, options, warrants or other securities so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding twenty percent (20%) of the net assets of the Issuers, such fair market value shall be determined by an appraiser selected by the Holders of a majority of the principal amount and interest of the Notes outstanding and reasonably acceptable to the Company. The Company shall pay for all such appraisals. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

                    (iii) Other Events. In case of (A) any reclassification of the Common Stock into other securities of the Company, (B) any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property or (C) any merger or consolidation with or into any persons, or any sale or other disposition of all or substantially all of the assets of the Issuers to any person (each of (A), (B) or (C), an “Extraordinary Event”), the Holder shall have the right thereafter to convert this Note into shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Extraordinary Event, that the Holder would have been entitled to receive had it converted this Note immediately prior to such Extraordinary Event (without taking into account any limitations or restrictions on the convertibility of the Notes). In the case of an Extraordinary Event, the terms of any such Extraordinary Event shall include such terms so as to continue to give to the Holder the right to receive the securities, cash or property set forth in this Section 3(d)(iii) upon any conversion following such Extraordinary Event. This provision shall similarly apply to successive Extraordinary Events. For the avoidance of doubt, nothing

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contained in this clause (iii) shall be construed to impair the Issuers’ or Holders’ rights under Section 5, including, without limitation, under Section 5(b).

                    (iv) Partial Redemption of Notes Pursuant to Section 5(c). Upon the happening of a partial redemption of the Note pursuant to Section 5(c), the Conversion Price in effect immediately prior to such redemption shall be reduced to the price determined by multiplying the Conversion Price, in effect immediately prior to the redemption, by a fraction, the numerator of which shall be the principal amount of the Note outstanding immediately after the partial redemption and the denominator of which shall be the principal amount of the Note immediately prior to the partial redemption.

                    (v) No Impairment. If any event shall occur as to which the provisions of this Section 3(d) are not strictly applicable but the failure to make any adjustment would adversely affect the conversion rights under the Notes in accordance with the essential intent and principles of such Section, then, in each such case, the Conversion Price of the Notes shall be adjusted in such manner as the Board of Directors of the Company shall in good faith determine to be equitable under the circumstances; provided, however, that no adjustment to the Conversion Price shall be made under this clause (v) as a result of any bona fide sale of the Company’s Capital Stock to a third party.

                    The Issuers will not, by amendment of their organizational documents or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders hereunder against dilution of the type contemplated by the provisions of this Section 3(d) or other impairment.

               (e) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be, provided, however, that any such adjustment in the Conversion Price shall be reversed or shall not become effective, as applicable, if the Company abandons the action to which the record date pertains.

               (f) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned Subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of Section 5(d).

               (g) Fractional Shares. Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a

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share based on the closing bid price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

               (h) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 3, the Company, at its own expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

          4. Security; Remedies. Unless otherwise defined in this Note, each of the defined terms used in this Section 4 shall have the meanings ascribed to them in the Credit Agreement as of the date hereof.

               (a) To secure the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all the Obligations, each Issuer hereby grants and each Initial Issuer hereby confirms and continues to grant to the Collateral Agent (for the benefit of the Holders) a continuing security interest in and Lien upon, and pledges to the Collateral Agent (for the benefit of the Holders), all of its right, title and interest in and to the following Collateral, which security interest is intended to be a security interest, which is subordinate to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c):

                    (i) all of such Issuer’s tangible personal property, including without limitation all present and future Inventory and Equipment (including items of equipment which are or become Fixtures), now owned or hereafter acquired;

                    (ii) all of such Issuer’s intangible personal property, including without limitation all present and future Accounts, Contract rights, Permits, General Intangibles, Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Letter-of-Credit Rights, Supporting Obligations, rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing;

                    (iii) all of such Issuer’s present and future Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such Issuer; provided, however, that the Holder shall not have a security interest in any rights under any Government Contract of such Issuer or in the related Government Account where the taking of such security interest is a violation of an express prohibition contained in the Government Contract (for purposes of this limitation, the fact that a Government Contract is subject to, or otherwise refers to, Title 31, §  203 or Title 41, § 15 of the United States Code shall not be deemed an express prohibition against assignment thereof) or is prohibited by applicable Law, unless in any case consent is otherwise validly obtained; and

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                    (iv) any and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.

               (b) Notwithstanding the foregoing provisions of this Section 4, such grant of a security interest shall not extend to, and the term “Collateral” shall not include, any General Intangibles of Issuers to the extent that (i) such General Intangibles are not assignable or capable of being encumbered as a matter of Law or under the terms of any license or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable Law) without the consent of the licensor thereof or other applicable party thereto, and (ii) such consent has not been obtained; provided, however, that the foregoing grant of a security interest shall extend to, and the term “Collateral” shall include, each of the following: (a) any General Intangible which is in the nature of an Account or a right to the payment of money or a proceed of, or otherwise related to the enforcement or collection of, any Account or right to the payment of money, or goods which are the subject of any Account or right to the payment of money, (b) any and all proceeds of any General Intangible that is otherwise excluded to the extent that the assignment, pledge or encumbrance of such proceeds is not so restricted, and (c) upon obtaining the consent of any such licensor or other applicable party with respect to any such otherwise excluded General Intangible, such General Intangible as well as any and all proceeds thereof that might theretofore have been excluded from such grant of a security interest and from the term “Collateral.”

               (c) Representations and Warranties.

                    (i) Upon the execution and delivery of the Original Notes on the Original Issue Date, and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, the Holder had as of such date, and as of the date hereof upon the execution and delivery of the Notes will continue to have, a good, valid and perfected Lien and security interest in the Collateral of the Initial Issuers, which is subordinate only to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c) and subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. Upon the execution and delivery of this Note (and in the case of any future Subsidiary, upon the execution and delivery of the Subsidiary Guaranty and Subsidiary Security Agreement), and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, the Holder will have, a good, valid and perfected Lien and security interest in the Collateral of Diabetes and National (and any future Subsidiary that executes and delivers a Subsidiary Guaranty and Subsidiary Security Agreement), which is subordinate only to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c) and subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. Except as expressly permitted by the Notes, each Issuer owns its interests in the Collateral free and clear of any Liens and no financing statement relating to any of the Collateral is on file in any public office except those (i) on behalf of the Holders, (ii) in connection with Permitted Liens and/or (iii) those being terminated.

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                    (ii) No Issuer (or predecessor by merger or otherwise of such Issuer), has within the five-year period preceding the date hereof, had a different name from the name of such Issuer listed on the signature pages hereof, except the names set forth on Schedule 4(c).

                    (iii) This Note shall create a continuing security interest in the Collateral and the security interest created herein shall (i) remain in full force and effect until the payment and performance in full of the Obligations, (ii) be binding upon Issuers and their respective successors and assigns, and (iii) inure, together with the rights and remedies of the Holders and the Collateral Agent hereunder, to the benefit of the Holders, the Collateral Agent and their successors, transferees and assigns.

               (d) Collateral Administration.

                    (i) All Collateral (except Deposit Accounts) will at all times be kept by Issuer at the locations set forth on Schedule 4(d) and shall not, without thirty (30) calendar days prior written notice to the Collateral Agent, be moved therefrom unless the Collateral Agent has entered into the necessary documents to perfect and enforce its security interest therein at such new location, and in any case shall not be moved outside the continental United States.

                    (ii) Each Issuer shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit such records to the Collateral Agent on such periodic basis as the Collateral Agent may request. Following the occurrence and during the continuance of an Event of Default, if requested by the Collateral Agent, such Issuer shall execute and deliver to the Collateral Agent formal written assignments (or, in the case of Medicaid/Medicare Account Debtors, documents necessary to comply with the Federal Assignment of Claims Act) of all of its Accounts weekly or daily as the Collateral Agent may request, including all Accounts created since the date of the last assignment, together with copies of claims, invoices and/or other information related thereto. To the extent that collections from such assigned accounts exceed the outstanding principal amount together with any accrued interest due on the Notes and all First Priority Lien Indebtedness, such excess amount shall not accrue interest in favor of such Issuer, but shall be available to such Issuer upon such Issuer’s written request.

                    (iii) Following an occurrence or during the continuance of an Event of Default, any of the Collateral Agent’s officers, employees, representatives or agents shall have the right, at any time during normal business hours, in the name of the Collateral Agent, any designee of the Collateral Agent or Issuers, to verify the validity, amount or any other matter relating to any Accounts or Inventory of Issuer. Issuers shall cooperate fully with the Collateral Agent in an effort to facilitate and promptly conclude such verification process.

                    (iv) To expedite collection, each Issuer shall endeavor in the first instance to make collection of its Accounts for the Collateral Agent. The Collateral Agent shall have the right at all times after the occurrence and during the continuance of an Event of Default to notify (a) Account Debtors owing Accounts to Issuer other than Medicaid/Medicare Account Debtors that their Accounts have been assigned to the Collateral Agent and to collect

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such Accounts directly in its own name and to charge collection costs and expenses, including reasonable attorney’s fees, to such Issuer, and (b) Medicaid/Medicare Account Debtors that such Issuer has waived any and all defenses and counterclaims it may have or could interpose in any such action or procedure brought by the Collateral Agent to obtain a court order recognizing the collateral assignment or security interest and lien of the Collateral Agent in and to any Account or other Collateral and that the Collateral Agent is seeking or may seek to obtain a court order recognizing the collateral assignment or security interest and lien of the Collateral Agent in and to all Accounts and other Collateral payable by Medicaid/Medicare Account Debtors.

                    (v) As and when determined by the Collateral Agent in its sole discretion but not more often than four (4) times per year prior to the occurrence and continuance of an Event of Default, the Collateral Agent may perform the searches described in clauses (a), (b) and (c) below against Issuer, all at Issuer’s expense: (a) UCC searches with the Secretary of State of the jurisdiction of organization of each Issuer and the Secretary of State and local filing offices of each jurisdiction where Issuer maintain their respective executive offices, a place of business or assets; (b) lien searches with the United States Patent and Trademark Office and the United States Copyright Office; and (c) judgment, federal tax lien and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above.

                    (vi) Each Issuer (a) shall provide prompt written notice to its current bank to transfer all items, collections and remittances to the Concentration Account, (b) shall provide prompt written notice to each Account Debtor (other than Medicaid/Medicare Account Debtors) that the Collateral Agent has been granted a lien and security interest in, upon and to all Accounts applicable to such Account Debtor and shall direct each Account Debtor to make payments to the appropriate Lockbox Account, and each Issuer hereby authorizes the Collateral Agent, upon any failure to send such notices and directions within ten (10) calendar days after the date hereof (or ten (10) calendar days after the Person becomes an Account Debtor), to send any and all similar notices and directions to such Account Debtors, and (c) shall do anything further that may be lawfully required by the Collateral Agent to create and perfect the Collateral Agent’s lien on any collateral and effectuate the intentions of the Collateral Documents. At the Collateral Agent’s request, each Issuer shall immediately deliver or make arrangements to deliver to the Collateral Agent all items for which the Collateral Agent must receive possession to obtain a perfected security interest and all notes, certificates, and documents of title, Chattel Paper, warehouse receipts, Instruments, and any other similar instruments constituting Collateral.

                    (vii) Each Issuer shall give the Collateral Agent at least 30 days’ prior written notice of (i) any change in such Issuer’s name, identity or corporate structure and (ii) any reincorporation, reorganization or other action that results in a change of the jurisdiction of organization of such Issuer.

                    (viii) If any Event of Default shall have occurred and be continuing, the Collateral Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (i) require each Issuer to, and each Issuer hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the

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Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Collateral Agent deems appropriate, (iv) take possession of any Issuer’s premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of such Issuer’s equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii), and collecting any Obligation, (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable, and (vi)  provide entitlement orders with respect to Security Entitlements (as defined in Section 8-102 of the UCC) and other Investment Property constituting a part of the Collateral and, without notice to any Issuer, transfer to or register in the name of the Collateral Agent or any of its nominees any or all of the Securities Collateral (defined below). The Collateral Agent or any Holder may be the purchaser of any or all of the Collateral at any such sale and the Collateral Agent, as agent for and representative of the Holders (but not any Holder in its individual capacity unless Holders of a majority of the principal amount and interest of the Notes shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Issuer, and each Issuer hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Issuer agrees that, to the extent notice of sale shall be required by law, at least ten days’ notice to such Issuer of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Issuer hereby waives any claims against the Collateral Agent and the Holders arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Agent and the Holders accept the first offer received and do not offer such Collateral to more than one offeree; provided that nothing contained herein shall be deemed to be a waiver by any Issuer or any Subsidiary that such sale must be conducted in a commercially reasonable manner and otherwise in accordance with applicable Law. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Obligations, Issuers shall be jointly and severally liable for the deficiency and the fees of any attorneys employed by the Collateral Agent to collect such deficiency. Each Issuer further agrees that a breach of any of the covenants contained in this Section 4(d)(viii) will cause irreparable injury to the Collateral Agent and the Holders, that the Collateral Agent and the Holders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this

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Section shall be specifically enforceable against such Issuer, and each Issuer hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Obligations becoming due and payable prior to their stated maturities.

               (e) Power of Attorney. The Collateral Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Issuer (without requiring the Collateral Agent to act as such, but to be exercised after the occurrence and during the continuance of an Event of Default) with full power of substitution to do the following: (i) endorse the name of any such Person upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to such Person and constitute collections on its or their Accounts; (ii) execute in the name of such Person any financing statements, schedules, assignments, instruments, documents, and statements that it is or they are obligated to give the Collateral Agent under any of the Notes Documents; and (iii) do such other and further acts and deeds in the name of such Person that the Collateral Agent may deem necessary or desirable to enforce any Account or other Collateral or to perfect the Collateral Agent’s security interest or Lien in any Collateral (including any additional Collateral pursuant to Sections 6(d) and 6(l)). In addition, if any such Person breaches its obligation hereunder to direct payments of Accounts or the proceeds of any other Collateral to the appropriate Lockbox Account, the Collateral Agent, as the irrevocably made, constituted and appointed true and lawful attorney for such Person pursuant to this paragraph, may, by the signature or other act of any of the Collateral Agent’s officers or authorized signatories (without requiring any of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral to the appropriate Lockbox Account.

               (f) Intercreditor Agreement. This Note and the other Notes Documents and all rights, remedies and obligations under this Note and the other Notes Documents are subject to the Amended and Restated Senior Subordination Agreement, dated as of April 30, 2009, by and among the Holders, the Collateral Agent and CapitalSource Finance LLC in the form attached hereto as Exhibit B, as it may be amended or modified from time to time in accordance with the terms thereof (the “Intercreditor Agreement”) and the ComVest Subordination Agreement. The parties to this Note and the other Notes Documents and all Persons claiming any right under or in respect of this Note and the other Notes Documents are bound by and (to the extent provided in the Intercreditor Agreement and the ComVest Subordination Agreement) entitled to the benefit of the Intercreditor Agreement and the ComVest Subordination Agreement.

               (g) Acknowledgement of Joint and Several Liability; Additional Subsidiaries.

                    (i) Each Issuer acknowledges that it is jointly and severally liable for all of the Obligations. Each Issuer expressly understands, agrees and acknowledges that (i) Issuers are all Affiliated entities by common ownership, (ii) each Issuer desires to have the availability of one common issuance of Notes instead of separate issuances, (iii) each Issuer has requested that the Holder purchase the Note on the terms herein provided, (iv) Holders will be relying on a Lien upon, all of Issuers’ assets even though the proceeds of any particular Note may not be advanced directly to a particular Issuer, (v) each Issuer will nonetheless benefit by

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the issuance of the Notes to the Holders, and (vi) all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in the Notes Documents shall be applicable to and shall be binding upon each Issuer.

                    (ii) From time to time subsequent to the date hereof, additional Subsidiaries may guarantee the Obligations and pledge additional Collateral by entering into a Subsidiary Guaranty and Subsidiary Security Agreement in accordance with Section 6(l). Each Issuer expressly agrees that its Obligations shall not be affected or diminished by the addition or release of any Issuer or Subsidiary hereunder, nor by any election of the Holders (in their sole discretion) not to cause any Subsidiary to comply with Section 6(l). The grant of security interest hereunder shall be fully effective as to any Issuer that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be an Issuer hereunder or party to a Subsidiary Guaranty and Subsidiary Security Agreement.

               (h) Further Assurances. Each Issuer agrees that from time to time, at the expense of the Issuers, such Issuer will promptly execute, obtain, deliver, file, register and/or record all financing statements, continuation statements, stock powers, further instruments and other documents, or cause the execution, filing, registration, recording or delivery of any of the foregoing and take all further action, that may be necessary or desirable, or that the Collateral Agent may request, to be executed, filed, registered, obtained, delivered or recorded, in order to create, maintain, perfect, preserve, validate or otherwise protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral, including any additional Collateral pursuant to Sections 6(d) and 6(l). Without limiting the generality of the foregoing, each Issuer will: (i) notify the Collateral Agent in writing of receipt by such Issuer of any interest in Chattel Paper and, at the request of the Collateral Agent, mark conspicuously each item of Chattel Paper and each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such Collateral is subject to the security interest granted hereby, (ii) deliver to the Collateral Agent all promissory notes and other Instruments and, at the request of the Collateral Agent, all original counterparts of Chattel Paper, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (iii) (A) execute (if necessary) and file such financing or continuation statements, or amendments thereto, (B) deliver such documents, instruments, notices, records and consents and take such other actions necessary to establish that the Collateral Agent has control over electronic Chattel Paper and Letter-of-Credit Rights of such Issuer and (C) deliver such other instruments or notices, in each case, as may be necessary or desirable, or as the Collateral Agent may request, in order to perfect and preserve the security interests granted or purported to be granted hereby, (iv) within two business days of learning thereof, report to the Collateral Agent any reclamation, return or repossession of goods in excess of $10,000 (individually or in the aggregate), (v) furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail, (vi) defend the Collateral and the Collateral Agent’s perfected Lien thereon against any claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent, and pay all reasonable costs and expenses in connection with such defense, which at the Collateral Agent’s discretion may be added to the Obligations; and (vii) use commercially reasonable efforts to obtain any necessary consents of third parties to

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the creation and perfection of a security interest in favor of the Collateral Agent with respect to any Collateral. Each Issuer hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral (including any financing statement indicating that it covers “all assets” or “all personal property” of such Issuer) without the signature of any Issuer.

               (i) Acquired Mortgaged Property Etc. Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the locations set forth on Schedule 4(i) unless the Company shall provide to the Holders at least thirty (30) Business Days prior written notice. From and after the Effective Date, in the event that (i) any Issuer or any Subsidiary acquires any fee interest in real property or any Leasehold Property or (ii) at the time any Person becomes a Subsidiary and following compliance with Section 6(l), such Person owns or holds any fee interest in real property or any Leasehold Property, (any such interest in real property or Leasehold Property described in the foregoing clause (i) or (ii) being a “Acquired Mortgaged Property”), if a mortgage is being granted in favor of any Senior Indebtedness, the Company or such Subsidiary shall deliver to Collateral Agent, as soon as practicable after such Person acquires such Acquired Mortgaged Property or becomes a Subsidiary and following compliance with Section 6(l), as the case may be, a fully executed and notarized Mortgage junior only to the mortgage securing the Senior Indebtedness, in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Person in such Acquired Mortgaged Property; and such opinions, appraisal, documents, title insurance, environmental reports that may be reasonably required by the Collateral Agent.

               (j) Application of Proceeds of Collateral. Except as expressly provided elsewhere in the Notes, all proceeds received by the Collateral Agent and the Holders in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in the following order of priority, subject to the Intercreditor Agreement and the ComVest Subordination Agreement.

                    FIRST: To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Agent, the Holders and their agents and counsel, and all other expenses, liabilities and advances made or incurred by the Collateral Agent and the Holders in connection therewith, and all amounts for which the Collateral Agent and the Holders are entitled to indemnification hereunder and all advances made by the Collateral Agent and the Holders hereunder for the account of Issuers, and to the payment of all costs and expenses paid or incurred by the Collateral Agent and the Holders in connection with the exercise of any right or remedy hereunder;

                    SECOND: To the payment of amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively;

                    THIRD: To the payment of other all other Obligations; and

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                    FOURTH: To the payment to, or upon the order of, the Issuers, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.

          5. Redemption.

               (a) Optional Redemption.

                    (i) Intentionally Deleted.

                    (ii) At any time after the first anniversary of the Original Issue Date, and in accordance with the procedures set forth in Section 5(e), the Issuers shall have the option to redeem the Note. If the Issuers elect to redeem the Note pursuant to this Section 5(a)(ii), then the Issuers shall at the option of the Holder (delivered by notice to the Issuers at least two (2) Business Days prior to the redemption date) (a) pay to the Holder the outstanding principal amount of the Note, plus accrued and unpaid interest thereon, through the redemption date (the “Par Redemption Price”) and issue to the Holder a warrant to purchase the number of shares of Common Stock equal to the number of Conversion Shares that the Holder would have been entitled to receive had it converted the Note immediately prior to such redemption date (without taking into account any limitations or restrictions on the convertibility of the Note), which shall have an exercise price equal to the applicable Conversion Price and shall be exercisable until the Maturity Date, substantially in the form attached as Exhibit C (the “Redemption Warrant”), or (b) pay to the Holder an amount equal to 110% of the aggregate outstanding principal amount of the Notes, plus accrued and unpaid interest thereon, if any, through the redemption date (the “Premium Redemption Price”). The Issuers and Holders agree that the letter dated as of the Original Issue Date among MHR, the Company, NH LLC and USPG regarding Procedures with Respect to Redemption shall be terminated as of the Effective Date and shall be of no further force and effect.

               (b) Redemption upon Change of Control. Notwithstanding anything to the contrary contained herein, prior to the occurrence of a Change of Control or in anticipation of a Change of Control, the Issuers shall notify the Holders thereof. Upon the occurrence of or in anticipation of a Change of Control (1) prior to the Bridge Loan Conversion contemplated by clauses (i), (ii), (iii), (iv) or (v) in the applicable definition of Change of Control below, and (2) following the date of the Bridge Loan Conversion, contemplated by clauses (i), (ii) (iii), (iv), (v) or (vi) in the applicable definition of Change of Control below, the Issuers shall have the option to redeem all, or any portion, of the outstanding Notes by paying to the Holder the Premium Redemption Price. Upon the occurrence of or in anticipation of any Change of Control, in the event that the Issuers had the option, but do not elect such option, or in the event that the Holder has the sole option, the Holder shall have the option to cause the Issuers (or the surviving corporation) to (a) redeem all, or any portion, of the outstanding Notes by paying to the Holder the Premium Redemption Price and/or (b) have the surviving corporation (which shall be a corporation, partnership, trust or limited liability company organized and existing under the Laws of the United States of America, any state thereof or the District of the Columbia) in such Change of Control expressly assume, by documents in form and substance satisfactory to the Holders, all the Obligations of the Company under the Notes and the Notes Documents.

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          Prior to the Bridge Loan Conversion, a “Change of Control” shall mean the occurrence of any of the following events:

          (i) any person or group (as such terms are defined in Section 13(d) or Section 14(d) of the Exchange Act or any successor provision to either of the foregoing) of persons, other than a person who as of the Original Issue Date beneficially owns 25% or more of the combined voting power of all Capital Stock of the Company, becomes the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) directly or indirectly, of more than 50% of the combined voting power of all Capital Stock of the Company or any successor thereto;

          (ii) the failure of RGGPLS Holding, Inc. or any successor thereto (“RGGPLS”) to (A) beneficially own and control, directly or indirectly, at least fifty one percent (51%) of the combined voting power of all Capital Stock of the Company or any successor thereto prior to December 31, 2010 and (B) beneficially own and control, directly or indirectly, at least forty (40%) of the combined voting power of all Capital Stock of the Company or any successor thereto on or after December 31, 2010;

          (iii) the failure of the Company to own and control, directly or indirectly, one hundred percent of the combined voting power of all Capital Stock and the economic interests of USPG, NH LLC and Diabetes and 66-2/3% of National or any successor thereof or transferee of substantially all the assets of any of the foregoing;

          (iv) during any calendar year, individuals who at the beginning of such period constituted the Company’s board of directors (and any new members of such board of directors whose election by the Company’s board of directors or whose nomination for election by the Company’s stockholders was approved by a vote of a majority of the members of such board of directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of the Company’s board of directors;

          (v) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, including by way of merger, consolidation, amalgamation or other business combination by any Issuer of all or substantially all of such Issuer’s assets on a consolidated basis;

          (vi) any “change in/of control” or “sale” or “disposition” or similar event as defined in any document governing indebtedness or Preferred Stock of Parent or any Issuer or other Subsidiary in excess of $ 100,000 which gives the holder of such indebtedness or equity securities the right to accelerate or otherwise require payment, repurchase or redemption of such indebtedness or Preferred Stock prior to the maturity date or term thereof; or

          (viii) the liquidation, dissolution, or the winding up of the affairs of the Company.

          From and after the Bridge Loan Conversion, a “Change of Control” shall mean the occurrence of any of the following events:

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          (i) the failure of ComVest (which for purposes of this Section 5(b) shall include any successor thereof) or any person or group (as such terms are defined in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, the “Exchange Act”) of persons holding the majority of the voting power of or otherwise controlling ComVest, at any time, to maintain sole (A) beneficial ownership (as defined in Rule 13d-3 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934), (B) control, directly or indirectly, in either case, of, the aggregate voting power of all Capital Stock of Parent and the Company (which for purposes of this Section 5(b) shall include any successor thereof) representing at least fifty one percent of the combined voting power of all Capital Stock of each of Parent and the Company and (C) the majority and controlling economic interests of Parent and the Company;

          (ii) any person or group (as such terms are defined in Section 13(d) or Section 14(d) of the Exchange Act or any successor provision to either of the foregoing) of persons, other than a person who as of immediately following the effective time of the Merger beneficially owns 25% or more of the combined voting power of all Capital Stock of the Company, becomes the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) directly or indirectly, of more than 50% of the combined voting power of all Capital Stock of the Company, Parent or ComVest (as applicable) or any successor thereto;

          (iii) the failure of Parent to own and control, directly or indirectly, at least fifty one percent of the combined voting power of all Capital Stock of the Company or any successor thereto;

          (iv) the failure of the Company to own and control, directly or indirectly, one hundred percent of the combined voting power of all Capital Stock and the economic interests of USPG, NH LLC and Diabetes and 66-2/3% of National or any successor thereof or transferee of substantially all the assets of any of the foregoing;

          (v) the failure of ComVest or Parent to maintain voting control, directly or indirectly, of the election of a majority of the Board of Directors (or similar governing body) of each of Parent, the Company and any other Issuer and any of their successors;

          (vi) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, including by way of merger, consolidation, amalgamation or other business combination by any Issuer of all or substantially all of such Issuer’s assets on a consolidated basis;

          (vii) any “change in/of control” or “sale” or “disposition” or similar event as defined in any document governing indebtedness of Parent or any Issuer or other Subsidiary in excess of $ 100,000 which gives the holder of such indebtedness or equity securities the right to accelerate or otherwise require payment, repurchase or redemption of such indebtedness prior to the maturity date or term thereof; or

          (viii) the liquidation, dissolution, or the winding up of the affairs of the Company.

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               (c) Partial Redemption.

                    (i) On February 28, 2010, and from time to time thereafter, the Issuers shall redeem that portion of the Notes as is necessary to ensure that the Notes shall not be considered an “applicable high yield discount obligation” within the meaning of Sections 163(e)(5) and 163(i) of the Internal Revenue Code of 1986, as amended or any successor provisions thereof.

                    (ii) The Notes shall be redeemed on a pro-rata basis and in portions of the principal of Notes that have denominations of $1,000 principal amount or multiples thereof. Notes in denominations larger than $1,000 principal amount may be redeemed in part but only in whole multiples of $1,000.

                    (iii) Upon the partial redemption of the Note, the Issuers shall (i) pay to the Holder a percentage of the Par Redemption Price equal to the Par Redemption Price multiplied by a fraction, the numerator of which shall be the principal amount of the Note being redeemed and the denominator of which shall be the principal amount of the Note immediately prior to the redemption date, and (ii) issue a new Note in the form hereof representing the balance of the principal amount hereof not redeemed and change the Conversion Price in accordance with Section 3(d)(iv) such that such new Note will be convertible into the number of shares of Common Stock equal to the number of Conversion Shares that the Holder would have been entitled to receive had it converted the Note immediately prior to such redemption.

               (d) Intentionally Deleted.

               (e) Redemption Procedures.

                    (i) Notice to Holders Upon Redemption. In the case of a redemption pursuant to Sections 5(a), 5(b) or 5(c) at least 30 days prior to a redemption date of Notes, except in the case of Section 5(c) for which at least 60 days prior to such redemption date of the Notes, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes at such Holder’s registered address.

     The notice shall identify the amount Notes to be redeemed and shall state:

     (A) the redemption date;

     (B) the applicable subsection of Section 5 pursuant to which the redemption will occur;

     (C) if applicable, the Redemption Price and the number of shares into which the Redemption Warrant will be exercisable, on the redemption date;

     (D) if applicable, the Premium Redemption Price on the redemption date;

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     (E) if redemption will occur pursuant to Section 5(c), the Notes or portions of Notes to be redeemed, the Redemption Price and the new Conversion Price that will be in effect for each of the remaining Notes.

     (F) that Notes called for redemption must be surrendered to the Company to collect the consideration (or if to an agent of the Company, the name and address of the agent where the Notes must be surrendered); and

     (G) that, unless the Company defaults in making such redemption payment interest on the Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date.

                    (ii) Such notice shall be accompanied by an Officer’s Certificate and a written opinion from legal counsel from the Company to the effect that such redemption will comply with the conditions herein.

                    (iii) Once notice of redemption is mailed, Notes called for redemption become due and payable on the redemption date. Upon surrender to the Company, the consideration shall be delivered as stated in the notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

                    (iv) Holders shall be required to surrender the Notes being purchased by the Company, with an appropriate form duly completed, to the Company at the address specified in the notice of redemption. Holders whose Notes are purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Securities surrendered.

                    (v) If any Note surrendered for redemption in the manner provided herein shall not be so paid on the redemption date due to the failure of the Company to deliver the required consideration, interest shall continue to accrue from the redemption date until such consideration is delivered, with such consideration being based on the unpaid principal and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the date and in the manner provided in the Notes which were to be redeemed.

                    (vi) Any redemption shall be conditioned upon and occur either concurrently with or immediately prior to or after the consummation of the transaction, including without limitation a Change of Control, related to such redemption.

                    (vii) Holders shall have the right to convert the Notes or any portion thereof in accordance with Section 3 at any time prior to the actual redemption of the Notes or applicable portion of the Notes, including without limitation, during the thirty (30) day (or, in the case of Section 5(c), sixty (60) day) notice period under this Section 5(e).

               (f) Tax Put Right.

                    (i) For 30 days following a redemption in which the Holder receives Redemption Warrants, (A) the Holder shall have a right (the “Tax Put Right”) by written notice to the Company (which such notice shall include the number of shares of Common

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Stock desired to be put to the Company and the value thereof as of the date of such notice) to require the Issuers to purchase an amount of shares of Common Stock from the Holder, based on the average Daily Market Price during the ten (10) Trading Days prior to such redemption, that is equal to an amount of up to $5,000,000 in the aggregate for all such redemptions for all Holders of all Notes and (B) if the amount received by the Holder after exercising its rights up to the maximum aggregate amount pursuant to clause (A) is, when combined with the consideration received by the Holder upon redemption of the Convertible Notes, still insufficient to pay the income taxes relating to the redemption, the receipt of the Redemption Warrants and the exercise of the Tax Put Right, then, upon receipt of written notice from the Holder (or any other Holder of Notes) of such insufficiency, the Company shall use commercially reasonable efforts to file one registration statement for all Holders of Notes (regardless of the number of redemptions) as soon as reasonably practicable after such redemption but in any event within thirty (30) days after such redemption and cause such registration statement to be declared effective as soon as practicable after such filing but in any event within sixty (60) days after such filing, failing which the Holders of all Notes shall have an additional Tax Put Right in the amount of up to $2,500,000 in the aggregate for all such redemptions.

                    (ii) Upon the receipt of notice from a Holder that such Holder has elected to exercise its Tax Put Right, the Company shall promptly, but in no event later than two (2) business days after the receipt thereof, deliver a copy of such notice to the other Holders. For a period of five (5) Business Days following its receipt of a Tax Put Right notice, each other Holder shall have the right and option (but not the obligation) to also exercise a Tax Put Right by delivering written notice thereof (which such notice shall include the number of shares of Common Stock desired to be put to the Company and the value thereof as of the date of such notice). If the Holders electing to exercise their Tax Put Right elect to put more than the aggregate amount of shares that the Company is required to repurchase pursuant to Section 5(f)(i), then each Holder delivering a Tax Put Right notice shall be entitled to require the Company to repurchase that number of shares of Common Stock calculated by multiplying the aggregate number of shares of Common Stock that the Company is required to repurchase pursuant to Section 5(f)(i) by a fraction the numerator of which is equal to the number of shares of Common Stock elected to be repurchased from such Holder and the denominator of which is equal to the total number of shares of Common Stock elected to be repurchased by all Holders that elect to exercise their Tax Put Right.

          6. Covenants.

               (a) Reservation of Conversion Shares and Common Stock Underlying Waiver Warrants. The Company agrees that it will at all times reserve and keep available out of its authorized shares of Common Stock, free from preemptive rights, solely for the purpose of the issue upon conversion of the Notes, issue upon the exercise of the Waiver Warrants and issuances of shares of Common Stock in accordance with the terms hereof. The Company agrees that the Conversion Shares and shares of Common Stock issued upon the exercise of the Waiver Warrants shall, when issued, be duly and validly issued and fully paid and non-assessable.

               (b) Required Registration. The Company agrees that if any Conversion Shares or shares issued upon the exercise of the Waiver Warrants require registration with or approval of any governmental authority under any Federal or state Law, or any national

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securities exchange, before such shares may be issued upon conversion, the Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be.

               (c) Limitation on Senior Indebtedness.

                    (i) The Issuers covenant and agree that so long as any Notes shall remain outstanding, at any time prior to the Bridge Loan Conversion, the Issuers shall not, and shall not permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, including, without limitation, by way of assumption or acquisition in a business combination (each event, an “incurrence”) any Indebtedness other than (x) the Notes, (y) Senior Indebtedness in an aggregate principal amount outstanding not to exceed (1) $15 million of which at least $10 million principal amount of such Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan plus (2) $3 million principal amount under the Bridge Loan; provided, however that the Issuers may incur additional Senior Indebtedness up to $4 million the proceeds of which shall be used for the sole purpose of paying off the Bridge Loan, and (z) Subordinated Indebtedness.

                    (ii) The Issuers covenant and agree that so long as any Notes shall remain outstanding, at any time from and after the Bridge Loan Conversion, the Issuers shall not, and shall not permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, including, without limitation, by way of assumption or acquisition in a business combination (each event, an “incurrence”) any Indebtedness other than (x) the Notes, (y) Senior Indebtedness in an aggregate principal amount outstanding not to exceed $18 million (which amount shall be increased by an amount equal to the cash proceeds (net of any broker, finder’s or transaction fees or commissions incurred in connection therewith, if any) of any cash equity contribution to the Company by Parent, the aggregate amount of which equity contributions shall in no event exceed $7 million), at least $10 million principal amount of which Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan; provided however, that the incurrence of any Indebtedness pursuant hereto shall not cause the Consolidated Senior Leverage Ratio to exceed 2.00 to 1.00 for the most recently ended four full Fiscal Quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is incurred determined on a pro forma basis (including pro a forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred and the application of proceeds therefrom had occurred at the beginning of such four Fiscal Quarter period, and (z) Subordinated Indebtedness. Notwithstanding anything contained in the foregoing to the contrary, the Issuers shall be permitted to incur a minimum of $15 million in Senior Indebtedness, provided that at least $10 million principal amount of such Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan.

                    (iii) Notwithstanding any provision of this Section 6(c) to the contrary, as long as any Obligations (as such term is defined in the Credit Agreement) (or any extensions, modifications, refinancings, renewals and refundings thereof in accordance with the

32

Intercreditor Agreement) are outstanding under the Credit Agreement and the Credit Agreement has not been terminated, the Issuers shall be permitted, and shall be allowed to permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, Senior Indebtedness under the Credit Agreement (including any extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) in the principal amount of $17,000,000 and the provisions of clauses (i) and (ii) above shall not be applicable to any of such Senior Indebtedness unless and until ComVest, Parent or any of their Affiliates becomes the holder of such Indebtedness under the Credit Agreement, whether as a result of the purchase of such Senior Indebtedness pursuant to their exercise of the purchase option under Section 22 of the ComVest Senior Subordination Agreement or otherwise. The limitation on the principal amount of Senior Indebtedness set forth in this clause (iii) shall not limit or otherwise affect the right of the holder of any such Senior Indebtedness to accrue and receive payment of interest (including at the default rate and including postpetition interest), fees, expenses or other charges. Upon the purchase of Senior Indebtedness under the Credit Agreement by ComVest, Parent or any of their Affiliates, this clause (iii) shall be null and void and the limitation on Senior Indebtedness shall be determined pursuant to clauses (i) and (ii) above.

                    (iv) If on any date the Issuers incur Senior Indebtedness in breach of this Section 6(c) as a result of the aggregate principal amount of Senior Indebtedness exceeding the amount then permitted under subclause 6(c)(i)(y) or 6(c)(ii)(y) hereof, such breach shall not constitute an Event of Default if, and only if, the Issuers shall have concurrently with such incurrence prepaid to the Holder in respect of the outstanding principal amount of the Note an amount equal to 110% of the amount by which the Senior Indebtedness incurred, when aggregated with all such Senior Indebtedness then outstanding, exceeds the maximum aggregate principal amount of Senior Indebtedness then permitted under such subclause 6(c)(i)(y) or 6(c)(ii)(y). In connection with any payment to the Holder under this Section 6(c)(iv), the Issuers shall comply with the procedures applicable to redemption under Section 5(e) (including the giving of a notice to the Holder at least 30 days in advance of any prepayment) to the same extent as if such prepayment was being made as a redemption of the Notes pursuant to the provisions applicable to redemptions under Sections 5 (a) or (b) above.

               (d) Limitation on Liens. The Issuers and their Subsidiaries shall not create, incur, assume or suffer to exist any Lien upon, in or against, or pledge of, any of the Collateral or any of their properties or assets or any of their authorized but unissued or treasury shares, securities or other equity or ownership or partnership interests, whether now owned or hereafter acquired, except for Permitted Liens; provided further, if the Issuers and their Subsidiaries shall incur any Liens securing Senior Indebtedness, the Issuers and their Subsidiaries shall cause all Obligations to also be secured by a Lien in favor of the Collateral Agent for the benefit of the Holders, pursuant to a validly created and effective security interest, on a basis junior only to such Senior Indebtedness being so secured, in such manner as is consistent with the Credit Agreement and otherwise reasonably acceptable to the Holders of a majority of the principal amount and interest of the Notes outstanding.

               (e) Right to Cure Default of First Priority Lien Indebtedness. The Issuers agree that, upon any default, breach, violation, event, fact or circumstance under any First

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Priority Lien Indebtedness (including a Default or Event of Default under the Credit Agreement, as defined therein) which, with the giving of applicable notice or passage of time or both, would permit the holder of such Indebtedness to declare a default or otherwise accelerate amounts due thereunder, which the Issuers have not cured within the permitted time period and RGGPLS or an RGGPLS Permitted Assignee (as defined below) have not elected, within five (5) Business Days of any such event, to repay, refinance or replace such Indebtedness or otherwise cure or provide funding to the Company for the purposes of curing such default (the “RGGPLS Cure”), MHR Fund Management LLC, its Affiliates, and any Person, directly or indirectly, managed or controlled by MHR Fund Management LLC or its Affiliates, including without limitation, MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP and OTQ LLC (collectively “MHR”) shall have the right, but not the obligation, to fund the repayment of such Indebtedness (including, without limitation, by way of purchasing interests in the loans under the Credit Agreement) or otherwise cure such default within five (5) Business Days of the earlier of (i) the expiration of the RGGPLS Cure period above and (ii) the receipt of notice from RGGPLS or any RGGPLS Permitted Assignee that it has elected not to pursue an RGGPLS Cure. The Company shall give MHR written notice of any such default promptly after the occurrence thereof, but in no event later than two (2) Business Days after the occurrence of any such default. For purposes of the foregoing, an “RGGPLS Permitted Assignee” shall mean the surviving entity in a reorganization or recapitalization of RGGPLS, including without limitation, by way of merger or consolidation with or into another person or entity, if the percentage interest of the members or stockholders, as the case may be, in the equity interests of the surviving entity following consummation of such transaction is substantially the same (on a relative basis) as each such stockholder’s percentage interest in RGGPLS immediately prior to the consummation of such transaction. From and after the date of the Bridge Loan Conversion, all references to RGGPLS in this Section 6(e) shall be replaced by Parent, all references to RGGPLS Cure in this Section 6(e) shall be replaced by “ComVest Cure” and references to RGGPLS Permitted Assignee in this Section 6(e) shall be replaced by “Parent Permitted Assignee”.

               (f) Financial Statements, Financial Reports and Other Information.

                    (i) Financial Reports. The Company shall furnish to the Holder (i) as soon as available and in any event within ninety (90) calendar days after the end of each fiscal year of the Company (or such earlier date required by the laws, regulations and rules of the Securities and Exchange Commission), audited annual consolidated financial statements of the Company, including the notes thereto, consisting of a consolidated balance sheet at the end of such completed fiscal year and the related consolidated statements of income, retained earnings, cash flows and owners’ equity for such completed fiscal year, which financial statements shall be prepared and certified without qualification by an independent certified public accounting firm satisfactory to the Holder and accompanied by related management letters, if available, and (ii) as soon as available and in any event within thirty (30) calendar days after the end of each calendar month, unaudited consolidated financial statements of the Company consisting of a balance sheet and statements of income, retained earnings, cash flows and owners’ equity as of the end of the immediately preceding calendar month. All such financial statements shall be prepared in accordance with GAAP consistently applied with prior periods. With each such financial statement, the Company shall also deliver a certificate of its chief financial officer in substantially the form of Exhibit D hereto (a “Compliance Certificate”) stating that (A) such person has reviewed the relevant terms of the Notes Documents and the condition of the

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Company, and (B) no Default or Event of Default has occurred or is continuing, or, if any of the foregoing has occurred or is continuing, specifying the nature and status and period of existence thereof and the steps taken or proposed to be taken with respect thereto.

                    (ii) Other Materials. The Issuers shall furnish to the Holder as soon as available, and in any event within ten (10) calendar days after the preparation or issuance thereof or at such other time as set forth below: (1) copies of such financial statements (other than those required to be delivered pursuant to Section 6.1(f)(i) prepared by, for or on behalf of the Company and any other notes, reports and other materials related thereto, including, without limitation, any pro forma financial statements, (2) any reports, returns, information, notices and other materials that the Company shall send to its stockholders, members, partners or other equity owners at any time, (3) all Medicare and Medicaid cost reports and other documents and materials filed by the Company and any other reports, materials or other information regarding or otherwise relating to Medicaid or Medicare prepared by, for or on behalf of the Company, including, without limitation, (A) copies of licenses and Permits required by any applicable Law or Governmental Authority for the operation of its business, (B) Medicare and Medicaid provider numbers and agreements, (C) state surveys pertaining to any healthcare facility operated, owned or leased by the Company and any of its Affiliates or Subsidiaries, and (D) within ten (10) calendar days following the request of the Holder, participating agreements relating to medical plans, (4) (A) within fifteen (15) calendar days following the request of the Holder, a summary report of the status of all payments, denials and appeals of all Medicare and/or Medicaid Accounts and accounts receivable and account payable aging schedule and (B), within thirty (30) calendar days following the request of the Holder, a sales and collection report, including a report of sales, credits issued and collections received, all such reports showing a reconciliation to the amounts reported in the monthly financial statements, (5) promptly upon receipt thereof, copies of any reports submitted to the Company by its independent accountants in connection with any interim audit of the books of such Person or any of its Affiliates and copies of each management control letter provided by such independent accountants, (6) within fifteen (15) calendar days after the execution thereof, a copy of any contracts with the federal government or with a Governmental Authority in the State of New York, Vermont or Washington, and (7) such additional information, documents, statements, reports and other materials as the Holder may reasonably request from a credit or security perspective or otherwise from time to time.

                    (iii) Operating Budget. The Company shall furnish to the Holder on or prior to the Effective Date and for each fiscal year of the Company thereafter not later than the earlier of (1) thirty (30) calendar days after the end of each fiscal year or (2) thirty (30) calendar days after the same is available, consolidated month by month projected operating budgets, annual projections, profit and loss statements, balance sheets and cash flow reports of and for the Company for such upcoming fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), in each case prepared in accordance with GAAP consistently applied with prior periods.

               (g) Books and Records; Inspection Rights.

                    (i) Each of the Issuers and the Subsidiaries shall (i) keep true, complete and accurate books of record and account in accordance with commercially reasonable business practices in which true and correct entries are made of all of its and their dealings and

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transactions in all material respects; and (ii) set up and maintain on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business, and include such reserves in its quarterly as well as year end financial statements.

                    (ii) Each of the Issuers shall permit the representatives of the Holder, at the expense of the Company, from time to time during normal business hours upon reasonable notice, to (i) visit and inspect any of its offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and other papers (but not more often than four (4) times per year so long as no Default or Event of Default exists), (ii) make copies and extracts therefrom, and (iii) discuss its business, operations, prospects, properties, assets, liabilities, condition and/or Accounts and Inventory with its officers and independent public accountants (and by this provision such officers and accountants are authorized to discuss the foregoing).

               (h) Active Diabetes Customers. As of the last day of each calendar month commencing as of the last day of the calendar month in which the Effective Date occurs and continuing through the Term Loan Maturity Date (as defined in the Credit Agreement), the Company shall have not less than 35,000 Active Diabetes Customers; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(h) shall be replaced by the covenant in Schedule 6(h) attached hereto.

               (i) Transfer of Assets. Notwithstanding any other provision of this Note or any other Notes Documents, each of the Issuers shall not and shall cause their Subsidiaries not to sell, lease, transfer, assign or otherwise dispose of any interest in any properties or assets (other than obsolete equipment or excess equipment no longer needed in the conduct of the business in the ordinary course of business and sales of Inventory in the ordinary course of business), or agree to do any of the foregoing at any future time, unless permitted by the terms of the Credit Agreement; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(i) shall be replaced by the covenant in Schedule 6(i) attached hereto.

               (j) Transactions With Affiliates. Each of the Issuers shall not and shall cause their Subsidiaries not to enter into or consummate any transaction of any kind with (i) any of its Affiliates or (ii) any Subsidiary Guarantor or any of their respective Affiliates other than: (a) salary, bonus, severance, employee stock option and other compensation and employment arrangements with directors or officers in the ordinary course of business (including employment arrangements with Mark Lama on customary terms consistent with the Company’s prior employment arrangements and agreements in connection with his participation in the Bridge Loan and the conversion of his participation in the Bridge Loan into Preferred Stock pursuant to the terms of the Bridge Loan), (b) Distributions and dividends permitted pursuant to Section 6(m), (c) transactions with the Holders or any Affiliate of the Holders, (d) payments permitted under and pursuant to written agreements entered into by and between any Issuer or any Subsidiary and one or more of its Affiliates that (A) reflect and constitute transactions on overall terms at least as favorable to such Issuer or Subsidiary as would be the case in an arm’s-

36

length transaction between unrelated parties of equal bargaining power and (B) in the event that the total consideration with respect to any such agreement together with any related agreements exceeds $375,000, has been approved by an independent appraisal or valuation firm; provided that, from and after the date of the Bridge Loan Conversion, any Subordinated Indebtedness issued to an Affiliate in compliance with this subclause (d) shall not be subject to any maximum cash interest rate; provided further, that notwithstanding the foregoing clauses (A) and (B) above such Issuer or Subsidiary shall not enter into or consummate any transaction or agreement pursuant to which it becomes a party to any mortgage, note, indenture or guarantee evidencing any Indebtedness of any of its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant to agreement for any Indebtedness of any such Affiliate, and (e) from and after the date of the Bridge Loan Conversion, transactions with ComVest and its Affiliates in connection with equity investments and contributions by ComVest or its Affiliates to an Issuer or a Subsidiary. Notwithstanding anything to the contrary herein, it shall be a condition precedent to any issuance of Subordinated Indebtedness permitted under subclause (d) above and any equity investment or contribution permitted under subclause (e) above, that the Holders or any of their Affiliates shall have been given the prior notice of and opportunity to participate ratably (based on the relative ownership of Common Stock on a fully diluted and as-converted basis of ComVest and all the Holders and their respective Affiliates) in providing such equity investments (including equity equivalents and equity linked securities), contributions and Subordinated Indebtedness on no less favorable terms and conditions as those applicable to ComVest and its Affiliates.

               (k) Investments; New Facilities or Collateral; Subsidiaries. Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to (i) purchase, own, hold, invest in or otherwise acquire obligations or Capital Stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person, or any joint venture, that is not in the healthcare industry, including without limitation insurance related services to Medicare and managed care end users, so long as the equity and assets so acquired shall constitute Collateral under the Notes Documents, or (ii) make or permit to exist any loans, advances or guarantees to or for the benefit of any Person or assume, guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of any other Person (other than those created by the Notes Documents and Indebtedness permitted to be incurred under Section 6(c) and other than (A) trade credit extended in the ordinary course of business, (B) advances for business travel and similar temporary advances made in the ordinary course of business to officers, directors and employees, and (C) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business). Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the locations set forth on Schedule 6(k) unless the Company shall provide to the Holder at least thirty (30) Business Days prior written notice. Notwithstanding any provision of this Section 6(k) to the contrary, the Issuers may make Acquisitions to the extent permitted by the Credit Agreement so long as the equity and assets so acquired shall constitute Collateral under the Notes Documents; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(k) shall be replaced by the covenant in Schedule 6(k) attached hereto.

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               (l) Subsidiaries. Any Subsidiary of the Company that is not an Issuer as of the date hereof and any newly acquired or created Subsidiary shall promptly execute a Subsidiary Guaranty and a Subsidiary Security Agreement, and such other documents and such other documents and instruments as the Holder may reasonably require.

               (m) Restricted Payments. Each of the Issuers shall not and shall cause their Subsidiaries not to (i) declare, pay or make any dividend or Distribution on any shares of capital stock or other securities or interests (other than dividends or Distributions payable in its stock, or split-ups or reclassifications of its stock), (ii) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital stock or other securities or interests or of any options to purchase or acquire any of the foregoing (provided, however, that such Issuer or Subsidiary may redeem its capital stock from terminated employees pursuant to, but only to the extent required under, the terms of the related employment agreements as long as no Default or Event of Default has occurred and is continuing or would be caused by or result from the payment thereof and as long as the aggregate amount of payments made to such terminating employees in any fiscal year does not exceed $100,000), (iii) otherwise make any payments or Distributions to any stockholder, member, partner or other equity owner in such Person’s capacity as such, or (iv) make any payment of any management or service fee other than pursuant to arrangements that are reasonably acceptable to the Holders and provided that such payments are subject to the execution of a subordination agreement with the Holders in form and substance reasonably acceptable to the Holders (“Management Fee Payments”).

               Except as permitted by the subordination agreement between such lender and the Holders relating to such Subordinated Debt, the Issuers shall not (i) make any prepayment of any part or all of any Subordinated Debt, (ii) repurchase, redeem or retire any instrument evidencing any such Subordinated Debt prior to maturity, or (iii) enter into any agreement (oral or written) which could in any way be construed to amend, modify, alter or terminate any one or more instruments or agreements evidencing or relating to any Subordinated Debt in a manner adverse to Holder, as determined by the Holders of a majority of the principal amount and interest of the Notes outstanding.

               (n) Amendments of Documents Relating to Subordinated Indebtedness. Each of the Issuers shall not, and shall not permit any of their Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to have such Subordinated Indebtedness provide for (1) the payment, prepayment, redemption, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon before ninety-one (91) days after the Maturity Date or later or (2) total cash interest at a rate in excess of the prevailing market rate for subordinated debt at the time of issuance, except to the extent permitted by the terms of any written subordination agreement acceptable to the Holders.

               (o) Charter Documents; Fiscal Year; Dissolution; Use of Proceeds; Accounting Methods. Each of the Issuers shall not, and shall not permit any of their Subsidiaries to, (i) amend, modify, restate or change its certificate of incorporation (including the terms of the Preferred Stock issued pursuant to the Bridge Loan Conversion) or certificate of formation or bylaws or similar organizational documents in a manner that would be adverse to any Issuer or

38

any Subsidiary or the Holders or inconsistent with the rights granted to the Holders in connection with the Notes Documents, provided, however, that any such amendment, modification, restatement, or change shall be permitted in connection with any additional equity contributions to Issuer or a Subsidiary, (ii) amend, alter or suspend or terminate or make provisional in any material way, any material Permit without the prior written consent of the Holders of a majority of the principal amount and interest of the Notes outstanding, which consent shall not be unreasonably withheld, (iii) wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking or that would result in any of the foregoing, or (iv) make any material changes in financial or tax accounting methods, principles or practices (or change an annual accounting period), except insofar as may be required by a change in GAAP, applicable Law or any applicable Governmental Authority.

          7. Transfer of Note. Upon due presentment for registration of transfer of this Note, the Company will execute, register and deliver in exchange a new Note equal in aggregate principal amount to the then unpaid principal amount of this Note, dated the date to which interest has been paid and registered in the name of the transferee.

          8. Governing Law. This Note shall be governed by and construed in accordance with the domestic substantive Laws of the State of New York, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

          9. Jurisdiction. The Issuers irrevocably consent to the exclusive jurisdiction of the United States federal courts and the state courts located in the County of New York, State of New York in any suit or proceeding based on or arising under this Note and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Issuers irrevocably waive the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Issuers further agree that service of process upon the Issuers mailed by first class mail shall be deemed in every respect effective service of process upon the Issuers in any such suit or proceeding. The Issuers agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. Nothing herein shall affect the right of the Holder to institute suit and conduct an action in any other appropriate manner, jurisdiction or court or to serve process in any other manner permitted by Law.

          10. Notices. All notices and other communications given to any party hereto pursuant to this Note shall be in writing and shall be delivered, or mailed first class postage prepaid, registered or certified mail, addressed as follows:

               (a) If to the Issuers, to:

NationsHealth, Inc.
13650 N.W. 8th Street
Suite 109
Sunrise, FL 33325
Fax number: (954) 903-5005
Attention: Chief Executive Officer

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with a copy to:

McDermott Will & Emery LLP
201 South Biscayne Blvd.
Miami, Florida 33131
Fax number: (305) 347-6500
Attention: Ira J. Coleman, Esq.

Fred Levenson, Esq.
Michael Boykins, Esq.

with a copy to:

Foley & Lardner LLP
100 N. Tampa St., Suite 2700
Tampa, Florida 33602
Fax number: (813) 221-4210
Attention: Steven Vazquez, Esq.

               (b) If to the Holder, to:

MHR Fund Management LLC
40 West 57th Street, 24th Floor,
New York, NY 10019
Fax number: (212) 262-9356
Attention: Hal Goldstein and

Emily Fine

with a copy to:

O’Melveny & Myers LLP
7 Times Square
Times Square Tower
New York, NY 10036
Fax number: (212) 408-2419
Attention: Patricia M. Perez, Esq.

Each such notice or other communication shall for all purposes be treated as being effective or having been given when delivered, if delivered personally, by e-mail or facsimile with confirmation of receipt or by overnight courier or, if sent by mail, at the earlier of its actual receipt or three (3) days after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid. The Company shall use commercially reasonable efforts to provide Holder with notices that the Company provides under the Credit Agreement concurrently with the giving of such notices under the Credit Agreement and shall provide Holder with copies of such notices upon written request of such Holder no later than five business days following receipt of such written request.

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          11. Company’s Waivers. The Issuers, to the extent permitted by Law, waive and agree not to assert or take advantage of any of the following: (a) any defense based upon an election of remedies by the Holder which may destroy or otherwise impair any subrogation or other rights of the Issuers or any guarantor or endorser of this Note; (b) any duty on the part of the Holder to disclose any facts or other data the Holder may now or hereafter know; (c) acceptance or notice of acceptance of this Note by the Issuers; (d) presentment and/or demand for payment of this Note or any other Obligations; and (e) protest and notice of dishonor with respect to this Note or other Obligations or performance of obligations arising under the Notes Documents.

          12. Amendment; Waiver. All amendments or waivers of any of the terms hereof (including, without limitation, any waiver of acceleration of the Maturity Date) and any payment of this Note with any consideration other than cash, shall be made or effected only with the written consent of the Holders of a majority of the principal amount and interest of the Notes outstanding. No failure or delay on the part of any Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

          13. Replacement of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Note by the Holder, the Company shall issue a replacement instrument, at the Company’s expense, representing such Note in lieu of such lost, stolen, destroyed, or mutilated instrument, provided that the Holder agrees to indemnify the Company for any losses incurred by the Company with respect to such lost instrument (other than the cost of issuing the new instrument).

          14. Headings. The headings of the sections of this Note are inserted for convenience only and do not constitute a part of this Note.

          15. Ranking. The Notes shall rank senior in right of payment to any Indebtedness and future Indebtedness of the Issuers and their Subsidiaries other than the Senior Indebtedness permitted by Section 6(c) and in the Intercreditor Agreement and the ComVest Subordination Agreement.

          16. Assignability. This Note shall be binding upon the Issuers and their successors and assigns and shall inure to the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary contained herein or in the Notes Documents, this Note may be pledged and all rights of the Holder under this Note may be assigned to any Affiliate or to any other person or entity without the consent of the Issuers, subject to the Securities Act of 1933.

          17. Cost of Collection. If default is made in the payment of this Note, the Issuers shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

          18. Remedies Cumulative. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at Law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein

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shall limit a Holder’s right to pursue actual damages for any failure by the Issuers to comply with the terms of this Note. The Issuers acknowledge that a breach by them of their obligations hereunder will cause irreparable harm to the Holder of the Note and that the remedy at Law for any such breach may be inadequate. The Issuers therefore agree, in the event of any such breach or threatened breach, that the Holder of the Note shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

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          IN WITNESS WHEREOF, the Company has caused this Note to be signed and to be dated the day and year first above written.

NATIONSHEALTH, INC.
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO
NATIONSHEALTH HOLDINGS, L.L.C.
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO
UNITED STATES PHARMACEUTICAL GROUP, L.L.C.
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO
DIABETES CARE & EDUCATION, INC.
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO
NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO

EX-4.21

Exhibit 4.21

First Amended and Restated 7 ^3/4% Convertible Secured Note, dated as of April 30, 2009, in favor of MHR Capital
Partners (100) LP issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical
Group, L.L.C., Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC

EXECUTION VERSION

FIRST AMENDED AND RESTATED
7 3/4% CONVERTIBLE SECURED NOTE

$1,008,597	April 30, 2009 (the “Effective Date”)
	Original Issue Date: February 28, 2005
N-2

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW WITH RESPECT THERETO, (II) PURSUANT TO RULE 144 OF THE SECURITIES ACT OR (III) UPON THE ADVICE OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.

THIS PROMISSORY NOTE IS SUBORDINATED TO CERTAIN SENIOR INDEBTEDNESS OF THE ISSUERS IN THE MANNER AND TO THE EXTENT SET FORTH IN THE INTERCREDITOR AGREEMENT (AS DEFINED BELOW) AND THE COMVEST SUBORDINATION AGREEMENT (AS DEFINED BELOW) AND ALL RIGHTS, REMEDIES AND OBLIGATIONS UNDER THIS NOTE AND THE OTHER NOTES DOCUMENTS ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR AGREEMENT AND THE COMVEST SUBORDINATION AGREEMENT.

     FOR VALUE RECEIVED, NATIONSHEALTH, INC., a Delaware corporation (the “Company”), NATIONSHEALTH HOLDINGS, L.L.C., a Florida limited liability company and a wholly-owned subsidiary of the Company (“NH LLC”), UNITED STATES PHARMACEUTICAL GROUP, L.L.C., a Delaware limited liability company and an indirect wholly-owned subsidiary of the Company (“USPG”), DIABETES CARE & EDUCATION, INC., a South Carolina corporation (“Diabetes”) and NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC, a Florida limited liability company (“National” and jointly and severally with the Company, NH LLC, USPG and Diabetes, the “Issuers”), hereby promise to pay to the order of MHR Capital Partners (100) LP, a Delaware limited partnership (the “Holder”), at c/o MHR Fund Management LLC, 40 West 57th Street, 24th Floor, New York, New York 10019, the principal amount of One Million Eight Thousand Five Hundred Ninety Seven Dollars ($1,008,597) in lawful money of the United States of America, on the terms set forth in Section 2 hereof. This First Amended and Restated Promissory Note (this “Note”) amends and restates that certain Promissory Note, dated as of February 28, 2005, issued by the Company, NH LLC and USPG (the “Initial Issuers”) to the Holder in the aggregate principal amount of $1,008,597 (the “Original Note,” and collectively with such other convertible notes issued pursuant to the Purchase Agreement (defined herein), the “Original Notes”) and is being

issued by the Issuers along with substantially identical convertible notes also designated as First Amended and Restated 7 3/4% Convertible Secured Notes (the “Other Notes,” and together with this Note, the “Notes”) in an original aggregate principal amount of $15,000,000. The Notes are being issued pursuant to that certain Consent and Waiver to the Convertible Notes, dated April 30, 2009 among the Issuers and the holders thereto (together with the Holder, the “Holders”), pursuant to which, inter alia, the Holders have agreed to waive the Change of Control in Section 5(b) hereof upon the conversion of the Bridge Loans (as defined herein) subject to the terms and conditions of the Bridge Notes (as defined herein) and the Consent and Waiver (the “Bridge Loan Conversion”). Pursuant to the Original Notes, the Initial Issuers granted a security interest to the Collateral Agent (defined herein) for the benefit of the Holders pursuant to Section 4 of the Original Notes and each of the Initial Issuers acknowledges, confirms and reaffirms the perfected security interest of the Collateral Agent, as amended and restated hereby. The Obligations are secured by a security interest in the assets of the Issuers pursuant to Section 4 of the Notes and will also be secured by a security interest in the assets of any future Subsidiaries pursuant to Section 6(l) of the Notes for the benefit of the Holders.

     1. Definitions. The following terms shall have the meanings ascribed to them below:

     “Acquisition” shall mean the acquisition by the Company of obligations or stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person or any joint venture.

     “Active Diabetes Customer” shall mean, as of the end of any calendar month, a Diabetes Customer of the Issuers who has purchased diabetes medicines or supplies within the 180 day period ending on the last day of such calendar month.

     “Additional Shares of Common Stock” shall have the meaning specified in Section 3(d)(iv).

     “Affiliate” shall mean, as to any Person, any other Person (a) that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, (b) who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect to such Person, or (c) which, directly or indirectly through one or more intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, as the same is in effect on the date hereof) of ten percent (10%) or more of any class of the outstanding voting stock, securities or other equity or ownership interests of such Person. For purposes of this definition, the term “control” (and the correlative terms, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies, whether through ownership of securities or other interests, by Contract or otherwise. “Affiliate” shall include any Subsidiary.

     “Bridge Loan Agreement” shall mean that certain Bridge Loan Agreement by and between Parent, the Company, USPG, NH LLC, Diabetes and National dated as of April 30, 2009, as amended or modified in effect from time to time in accordance with the ComVest Subordination Agreement and the ComVest Senior Subordination Agreement.

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     “Bridge Loan Documents” shall mean the Bridge Loan Documents as defined in the Bridge Loan Agreement.

     “Bridge Loans” shall mean the loans made by Parent under the Bridge Loan Agreement.

     “Bridge Notes” shall mean the 10% Secured Convertible Subordinated Promissory Notes issued pursuant to the Bridge Loan Agreement.

     “Business Day” shall mean any day, other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by Law, regulation or executive order to close.

     “Capital Lease” shall mean, as to any Person, a lease of any interest in any kind of property or asset by that Person as lessee that is, should be or should have been recorded as a “capital lease” in accordance with GAAP.

     “Capital Stock” shall mean the capital stock of or other equity interests in a Person.

     “Closing Date” shall mean the date of the closing of the Merger.

     “Collateral” shall mean, collectively, all of the real, personal and mixed property in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations.

     “Collateral Agent” means MHR Capital Partners (500) LP.

     “Collateral Documents” means the Notes, the Subsidiary Security Agreements and all other instruments or documents delivered by any of the Issuers or their Subsidiaries pursuant to the Notes or any of the other Notes Documents in order to grant to the Collateral Agent, on behalf of the Holders, a Lien on any real, personal or mixed property of such Person as security for the Obligations.

     “ComVest” shall mean ComVest Investment Partners III, L.P.

     “ComVest Cure” shall have the meaning specified in Section 6(e).

     “ComVest Senior Subordination Agreement” shall mean, that certain Senior Subordination Agreement dated as of April 30, 2009 by and between Parent and CapitalSource Finance LLC, as amended or modified and in effect from time to time.

     “ComVest Subordination Agreement” shall mean, that certain Subordination Agreement dated as of April 30, 2009 among Parent, the Holders, the Collateral Agent and the Issuers, as amended or modified and in effect from time to time.

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     “Consolidated Senior Leverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (i) Senior Indebtedness as at such day to (ii) EBITDA for the consecutive four Fiscal Quarters ending on such day.

     “Contract” means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, license, commitment or other arrangement, understanding or undertaking, commitment or obligation, whether written or oral.

     “Conversion Amount” shall mean the portion of the principal amount of this Note being converted plus any accrued and unpaid interest thereon through the Conversion Date each as specified in the notice of conversion in the form attached as Exhibit A hereto (the “Notice of Conversion”).

     “Conversion Date” shall mean, for any conversion, the date specified in the Notice of Conversion so long as the copy of the Notice of Conversion is faxed (or delivered by other means resulting in notice) to the Company at or before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion; provided, however, that if the Notice of Conversion is not so faxed or otherwise delivered before such time, then the Conversion Date shall be the date the Holder faxes or otherwise delivers the Notice of Conversion to the Company.

     “Conversion Price” shall mean $3.40 per share of common stock, par value $.0001 per share of the Company (“Common Stock”), subject to adjustment as set forth herein.

     “Conversion Shares” shall have the meaning specified in Section 3(a).

     “Convertible Securities” shall mean any Capital Stock or security convertible into or exchangeable for Common Stock.

     “Customer Acquisition and Related Costs” shall mean costs incurred by the Company in the development of its customer base related to marketing activities, which costs include, without limitation, advertising, promotion, call center and data collection expenses.

     “Credit Agreement” shall mean the Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of April 30, 2009 among the Issuers and CapitalSource Finance LLC, as it may be amended, modified, replaced or refinanced from time to time in accordance with the Intercreditor Agreement.

     “Daily Market Price” shall mean, as of any date of determination, the closing sale price for the Common Stock (or such other applicable subject security), for the Trading Day of such date of determination (subject to equitable adjustment for any stock splits, stock dividends, reclassifications or similar events during such Trading Day and further subject to adjustment as provided herein) on the principal United States securities exchange or trading market where the Common Stock (or such other applicable subject security) is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the closing sale price for the Common Stock (or such other applicable subject security) in the OTC Bulletin Board for such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the closing sale price as reported in the “pink sheets” by the Pink Sheets LLC, in each case for such date or, if such date was not a Trading Day for such security, on the next preceding date which was a

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Trading Day. If the Daily Market Price cannot be calculated for such security as of either of such dates on any of the foregoing bases, the Daily Market Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Holders of a majority of the principal amount and interest of the Notes outstanding and reasonably acceptable to the Company, with the costs of such appraisal to be borne by the Company.

     “Default” shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both, would constitute or be or result in an Event of Default.

     “Deferred Purchase Price Obligations” means any and all obligations of the Company incurred as permitted under the Notes for amounts deferred, financed or withheld in respect of the purchase price for any Diabetes Business Acquisition, including Indebtedness which consists of purchase money financing by the seller and amounts withheld or escrowed as potential set-offs against customer terminations, purchase price adjustments or otherwise.

     “Delivery Period” shall have the meaning specified in Section 3(c).

     “Diabetes Business Acquisition” shall mean the acquisition by the Company of Diabetes Customer lists.

     “Diabetes Customers” shall mean any and all customers and patients of the Company for the purchase of diabetes medicines, supplies and other products, whether now existing or hereinafter acquired or arising.

     “Distribution” shall mean any fee, payment, bonus or other remuneration of any kind, and any repayment of or debt service on loans or other Indebtedness.

     “Dollars” and the sign “$” mean the lawful money of the United States of America.

     “DTC” shall have the meaning specified in Section 3(c).

     “DTC Transfer” shall have the meaning specified in Section 3(c).

     “EBITDA” shall mean, the sum for any period, without duplication, of the following for the Issuers and each Subsidiary, on a consolidated basis: Net Income, (I) plus (a) Interest Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation expense, (d) amortization expense, (e) all other non-cash, non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business, (f) loss from any sale of assets, other than sales in the ordinary course of business, (g) one-time, non-recurring charges and expenses incurred by the Company in connection with the Transactions (“Merger Expenses”), provided that such non-recurring charges and expenses shall not exceed $1,500,000 during the term of this Note, and (h) severance expenses incurred by the Company in an amount not to exceed $1,000,000 for any twelve month period and an aggregate of $2,000,000 during the term of this Note, and in the case of (a) through (h) above, all of the foregoing determined without duplication and in accordance with GAAP (II) minus (a) gains from any sale of assets,

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other than sales in the ordinary course of business, (b) other extraordinary or non-recurring gains and (c) non-cash items added in the calculation of Net Income.

     “Equity Contribution” shall mean, in connection with the consummation of the Merger, the contribution by the Senior Management and MHR, directly or indirectly, of rollover equity to or of the Company on the Closing Date pursuant to the Rollover Documents (assuming the conversion into Common Stock of all Options and Convertible Securities outstanding on the Closing Date other than convertible debt instruments) and the purchase or contribution by ComVest and its Affiliates, directly or indirectly, of cash equity and the Bridge Loan to the Company pursuant to the Merger Agreement, the Bridge Note and the Series A Preferred Stock Purchase Agreement, by and between Parent and the Company, dated as of the April 30, 2009 (assuming the conversion into Common Stock of all Options and Convertible Securities outstanding on the Closing Date other than convertible debt instruments).

     “Event of Default” shall have the meaning specified in Section 2(d).

     “Extraordinary Event” shall have the meaning specified in Section 3(d)(iii).

     “Fiscal Quarter” shall mean a fiscal quarter of any fiscal year.

     “First Priority Lien Indebtedness” shall mean Senior Indebtedness of the Issuers and their Subsidiaries secured by a first priority Lien on any assets or property of the Issuers or any such Subsidiaries, including the Indebtedness of the Issuers under the Credit Agreement permitted to be incurred by the Company under Section 6(c).

     “GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time as applied by nationally recognized accounting firms.

     “Governmental Authority” shall mean any federal, state, municipal, national, local or other governmental department, court, commission, board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative, or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case, whether of the United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District of Columbia.

     “Hedge Agreement” means any and all transactions, agreements or documents now existing or hereafter entered into by the Company or its Subsidiaries, which provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

     “Indebtedness” of any Person shall mean, without duplication, (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes or other similar instruments and all reimbursement or other obligations in respect of letter of credit, bankers acceptances, interest rate swaps, hedges, derivatives or other financial products, (c) all obligations as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by

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a Lien on any asset of a Person or its Subsidiaries, irrespective of whether such obligation or liability is assumed, (e) all obligations to pay the deferred purchase price of assets (other than Deferred Purchase Price Obligations not to exceed $250,000 outstanding at any time), (f) all obligations owing under Hedge Agreements, (g) all notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, and (h) all obligations or liabilities of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock, equity or other ownership interest purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. For the avoidance of any doubt, Indebtedness does not include trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and any obligations as a lessee under leases that are not Capital Leases.

     “Intercreditor Agreement” shall have the meaning specified in Section 4(f).

     “Interest Expense” shall mean, for any period, total interest expense and fees (including attributable to Capital Leases in accordance with GAAP and capitalized interest) of the Issuers and their Subsidiaries on a consolidated basis with, with respect to all outstanding Indebtedness but excluding all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements.

     “Interest Rate Agreement” shall mean any interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to hedge the position with respect to interest rates.

     “Inventory” shall mean all “inventory” (as defined in the UCC) of the Issuers and the Subsidiaries (or, if referring to another Person, of such other Person), now owned or hereafter acquired, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.

     “Investor Rights Agreement” shall mean the Investor Rights Agreement dated as of April 30, 2009 by and among Parent, Mark Lama, RGGPLS, LLC, MHR and the Senior Management.

     “Landlord Waiver and Consent” shall mean a waiver/consent in form and substance satisfactory to the Holders from the owner/lessor of any premises not owned by the Issuers or their Subsidiaries at which any of the Collateral is now or hereafter located for the purpose of providing the Collateral Agent (for the benefit of the Holders) access to such Collateral, in each case as such may be modified, amended or supplemented from time to time.

     “Law” means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation, Order or other similar requirement.

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     “Leasehold Property” means any leasehold interest of any of the Company or its Subsidiaries as lessee under any lease of real property, other than any such leasehold interest designated from time to time by the Collateral Agent in its sole discretion as not being required to be included in the Collateral.

     “Lien” shall mean any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, civil law, statute, or Contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien, hypothecation or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment from security purposes and also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property.

     “Maturity Date” shall have the meaning specified in Section 2(b).

     “Merger Agreement” shall mean the Agreement and Plan of Merger, dated as of April 30, 2009, by and among Parent, Merger Sub and the Company as amended or supplemented pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving, and upon the closing of which Merger, Parent, the members of Senior Management and MHR shall own shares of the Company Capital Stock.

     “Merger Documents” shall mean the collective reference to the Merger Agreement, all material exhibits and schedules thereto and all agreements expressly contemplated thereby.

     “Merger Sub” shall mean NationsHealth Acquisition Corp., a Delaware corporation.

     “MHR” shall have the meaning specified in Section 6(e).

     “MHR Warrants” shall mean the warrants to purchase Common Stock issued to MHR on the Closing Date pursuant to the Transactions.

     “Mortgage” means a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by the Company or any Subsidiary pursuant to Section 4(i), in such form as may be approved by the Collateral Agent in its sole discretion, in each case with such changes thereto as may be recommended by the Collateral Agent’s local counsel based on local laws or customary local mortgage or deed of trust practices.

     “Net Income” shall mean, for any period, the net income (or loss) of the Issuers and their Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP (and, with respect to expensing of Customer Acquisition and Related Costs, as currently applied by the Company consistent with past practice), provided that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of the

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Issuers) in which any other Person (other than the Issuers or any of their Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to an Issuer by such Person, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of an Issuer or is merged into or consolidated with an Issuer or any of its Subsidiaries or that Person’s assets are acquired by an Issuer or any of its Subsidiaries, (iii) the income of any Subsidiary of the Issuers to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, Order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) compensation expense resulting from the issuance of Capital Stock, stock options or stock appreciation rights issued to former or current employees, including officers, of an Issuer or any Subsidiary, or the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by an Issuer or such Subsidiary or any Affiliate thereof, and (v) compensation expense resulting from the repurchase of Capital Stock, options and rights described in clause (iv) of this definition of Net Income.

     “Notes Documents” shall mean the Notes, the Transaction Documents as defined in the Purchase Agreement, the Consent and Waiver, dated as of April 30, 2009, the Waiver Warrants, the Subsidiary Security Agreements, the Subsidiary Guaranties, and the other Collateral Documents.

     “Obligations” shall mean all obligations of every nature of the Issuers and Subsidiaries from time to time owed to the Holders, the Collateral Agent or any of them, in each case, under the Notes Documents, whether for principal, interest, fees, expenses, indemnification or otherwise (including, without limitation, interest and other amounts that, but for the filing of a petition in bankruptcy with respect to any Issuer or any Subsidiary, would accrue on such obligations, whether or not a claim is allowed against such Issuer or Subsidiary for such amounts in the related bankruptcy proceeding), including to the extent all or any part of such payment is avoided or recovered directly or indirectly from any Holder or the Collateral Agent as a preference, fraudulent transfer or otherwise.

     “Officer’s Certificate” as applied to any Person that is a corporation, partnership, trust or limited liability company, means a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company.

     “Options” shall mean warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock.

     “Order” means any order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of a Governmental Authority.

     “Original Issue Date” shall mean February 28, 2005.

     “Par Redemption Price” shall have the meaning specified in Section 5(a)(ii).

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     “Parent” shall mean ComVest NationsHealth Holdings, LLC.

     “Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Authority.

     “Permitted Liens” means the following: (i) Liens with respect to the Notes and the other Obligations, (ii) Liens with respect to Senior Indebtedness allowed to be incurred under Section 6(c), (iii) Liens imposed by Law for taxes (other than payroll taxes), assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of the Holders of a majority of the principal and interest of the Notes outstanding, in their sole discretion, (iv) (A) statutory Liens of landlords (provided that any such landlord has executed a Landlord Waiver and Consent in form and substance satisfactory to the Holders of a majority of the principal and interest of the Notes outstanding) and of carriers, warehousemen (provided that any such warehousemen have executed a Warehouse Waiver and Consent in form and substance satisfactory to the Holders of a majority of the principal and interest of the Notes outstanding), mechanics, materialmen, and (B) other Liens imposed by Law or that arise by operation of Law in the ordinary course of business from the date of creation thereof, in each case only for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of the Holders of a majority of the principal and interest of the Notes outstanding, in their sole discretion, (v) Liens (A) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, Contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations, or (B) arising as a result of progress payments under government contracts, (vi) purchase money Liens, including, without limitation, UCC-1 notice filings by equipment lessors and the like, in connection with the purchase by such Person of equipment in the normal course of business, (vii) Liens securing Subordinated Indebtedness allowed to be incurred under Section 6(c) junior to the Lien under the Notes and (viii) Liens described on Schedule I to this Note.

     “Person” shall mean an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture, or any other entity of whatever nature.

     “Preferred Stock” shall mean with respect to any Person, any and all preferred or preference stock or other preferred equity interests (however designated) of such Person whether no outstanding or issued after the date hereof.

     “Premium Redemption Price” shall have the meaning specified in Section 5(a)(ii).

     “Purchase Agreement” shall mean that certain Investment Unit Purchase Agreement, dated February 28, 2005, among the Issuers and the Holders.

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     “Redemption Warrant” shall have the meaning specified in Section 5(a)(ii).

     “Right of First Refusal and Tag and Co-Sale Agreement” shall mean the Right of First Refusal and Tag and Co-Sale Agreement dated as of April 30, 2009 by and among Parent, Mark Lama, RGGPLS, LLC, MHR and the Senior Management.

     “Rollover Documents” shall mean the Exchange and Rollover Agreement dated as of April 30, 2009 by and among the Company, MHR and the Senior Management.

     “RGGPLS Cure” shall have the meaning specified in Section 6(e).

     “Senior Indebtedness” means, as of any date of determination, the aggregate stated balance sheet amount of all Indebtedness of the Issuers and their Subsidiaries, other than (i) the Notes and (ii) Subordinated Indebtedness, determined on a consolidated basis in accordance with GAAP and incurred in compliance with Section 6(c) hereof, which Senior Indebtedness shall (x) include (A) Indebtedness under the Credit Agreement (including extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) and (B) the Bridge Loans but not any refinancings or replacements thereof (other than refinancings or replacements thereof with Senior Indebtedness due to CapitalSource Finance LLC under the Credit Agreement and which, when aggregated with all other Indebtedness outstanding under the Credit Agreement, does not exceed the principal amount permitted under Section 6(c)(iii)) and (y) otherwise be in the form of credit extensions or other obligations on terms and conditions customarily provided at such time by senior secured lenders, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Obligations. For the avoidance of doubt, Senior Indebtedness (other then the Bridge Loans but not any refinancings or replacement thereof) shall not include any financing arrangements in the form of convertible debt or that would customarily be considered “mezzanine”, “sub debt” or similar financing arrangements.

     “Senior Management” shall mean Glenn Parker, Lewis Stone, Timothy Fairbanks and such other executives party to the Rollover Documents.

     “Subordinated Indebtedness” means Indebtedness (secured or unsecured) incurred by the Company and/or its Subsidiaries that is made expressly subordinated in right to payment to the Obligations, as reflected in a written subordination agreement acceptable to the Holders and approved by the Holders in writing; provided that no such Indebtedness shall provide at any time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (2) total cash interest at a rate in excess of the prevailing market rate for subordinated debt at the time of issuance, except to the extent permitted by the terms of such written subordination agreement.

     “Subsidiary” shall mean, (i) as to the Issuers, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by an Issuer or one or more of its Subsidiaries, and (ii) as to any other Person, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by such Person or by one or more of such Person’s Subsidiaries.

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     “Subsidiary Guaranty” means a guaranty agreement executed by a Subsidiary pursuant to Section 6(l), in form and substance satisfactory to the Holders, the Company and such Subsidiary, guaranteeing payment of the Obligations and providing, without limitation, that such Subsidiary shall be bound by the covenants set forth in this Note, and shall make such representations and warranties as the Holders may reasonably require.

     “Subsidiary Security Agreement” means a pledge and security agreement executed by a Subsidiary pursuant to Section 6(l), containing provisions substantially similar to the grant of security in Section 4 hereof, and in form and substance satisfactory to the Holders, the Company and such Subsidiary, securing payment of the Obligations.

     “Tax Put Right” shall have the meaning specified in Section 5(f).

     “Trading Day” shall mean any day on which the principal United States securities exchange or trading market where the Common Stock (or such other applicable subject security) is then listed or traded, is open for trading.

     “Transaction Documents” shall mean the Merger Documents, the Bridge Loan Documents, the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement), the Notes Documents, the Rollover Documents, the Investor Rights Agreement, the Right of First Refusal and Tag and Co-Sale Agreement, the Voting Agreement and all documents executed and delivered in connection herewith and therewith.

     “Transactions” shall mean, collectively, the transactions to occur pursuant to or in connection with the Transaction Documents, including (a) the consummation of the Merger; (b) the Equity Contribution; (c) the execution and delivery of the Bridge Loan Documents and the borrowings thereunder; (d) the execution and delivery and issuance of the Notes and execution and delivery of the Notes Documents; (e) the issuance of the MHR Warrants, (f) the refinancing of the Credit Agreement, and (g) the payment of all fees and expenses to be paid in connection with the foregoing.

     “UCC” means the Uniform Commercial Code, as it exists on the date of this Note or as it may hereafter be amended, in the State of New York.

     “Voting Agreement” means the Voting Agreement dated as of April 30, 2009, by and among the Company, Parent, Mark Lama, RGGPLS, LLC, MHR and Senior Management.

     “Waiver Warrants” shall mean the warrants to purchase Common Stock issued to MHR on the Effective Date.

     “Warehouse Waiver and Consent” shall mean a waiver/consent in form and substance satisfactory to the Holders from any warehouseman, fulfillment house or other person owning a facility not owned by the Issuers at which any inventory is now or hereafter located for the purpose of providing the Collateral Agent (for the benefit of the Holders) access to such inventory, in each case as such may be modified, amended or supplemented from time to time.

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     2. Payments of Interest and Principal. Subject to the provisions of Section 3 below, payments of principal plus interest on the unpaid principal balance of this Note outstanding from time to time shall be payable in accordance with the following:

          (a) Interest. During the period commencing on the Original Issue Date and terminating on the Maturity Date, interest on the unpaid principal amount of this Note shall accrue at a rate equal to 7 3/4% per annum, compounded monthly, computed on the basis of actual days elapsed over a 360-day year, and shall be payable monthly (commencing on February 28, 2005 and thereafter on the 28th of each month) in cash up to and including the Maturity Date, subject to a ten (10) day grace period; provided that if a required interest payment is not paid within such ten (10) day grace period, interest shall be compounded from the date that such interest was due and payable without regard to such grace period.

          (b) Principal. The principal balance outstanding on this Note, and any accrued and unpaid interest thereon, shall be due and payable to the Holder on February 28, 2012 (the “Maturity Date”). Contemporaneously with the repayment of this Note, the Holder shall surrender this Note, duly endorsed, at the office of the Company.

          (c) Payments. All payments of principal, interest, fees and other amounts due hereunder shall be made by the Issuers in lawful money of the United States of America by wire transfer or by any other method approved in advance by the Holder to the account of the Holder at the address of the Holder set forth in Section 10 hereof or at such other place designated by the Holder in writing to the Company.

          (d) Acceleration of the Maturity Date. Notwithstanding anything to the contrary contained herein, this Note and all other Obligations shall become due and payable together with all accrued interest due on the outstanding principal amount hereunder, at the option of the Holders of at least 25% of the principal amount and interest outstanding exercised, by written notice to the Company, in the case of clauses (i) to (viii) below and without notice or any other action by such Holders in the case of clauses (ix) or (x) below, in the event (each an “Event of Default”) that (i) the Issuers fail to pay the principal of or interest on this Note as and when due, subject to a ten (10) day grace period; (ii) any of the Issuers or their Subsidiaries shall default in the performance of or otherwise breach any of its representations and warranties, covenants or other obligations set forth in this Note, the Purchase Agreement or any of the Notes Documents, and if such default is capable of cure, such default remains uncured beyond any applicable cure period; provided that with respect to any breach or default of the covenants in Section 6, there shall be a fifteen (15) calendar day cure period (to the extent such breach or default is capable of cure) commencing from the earlier of (i) receipt by the Company of written notice of such breach or default from the Holder and (ii) the time at which an authorized officer of the Company or any Subsidiary knew or became aware of such breach or default; provided further that with respect to the covenant set forth in Sections 6(a) there shall be no cure period with respect to any breach or default that adversely affects the Holder; (iii) the Collateral Agent (on behalf of the Holders) shall not have the right to enforce its remedies under Section 4 of this Note or under any Subsidiary Security Agreement; (iv) the Holder shall not have a perfected security interest in the Collateral pursuant to the terms set forth herein or in any Subsidiary Security Agreement other than Holder’s action or inaction; (v) the Company fails when required to remove any restrictive legend of any certificate relating to Conversion Shares, Redemption

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Warrants, Waiver Warrants or any other securities issuable in accordance with the terms of the Notes or the exercise or conversion of the Redemption Warrants, Waiver Warrants or any other convertible securities issuable in accordance with the terms of the Notes, issued to the Holders, and any such failure continues uncured for ten (10) Business Days after the Company has been notified of such failure in writing by the Holder; (vi) the Issuers or any of their Subsidiaries fail to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness of the Issuers or their Subsidiaries having an outstanding principal amount in excess of $250,000 (including, without limitation, any of the Other Notes), or otherwise is in breach or violation of any agreement for Indebtedness in an amount in excess of $250,000 which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder and which breach or violation is not waived or otherwise cured hereunder or under the documents evidencing such Indebtedness, including, without limitation, by exercise of the RGGPLS Cure or ComVest Cure, as applicable, pursuant to Section 6(e); (vii) the entry of a final judgment against any of the Issuers or their Subsidiaries not covered by insurance of a financially sound and reputable insurer that has not declined coverage, which is not subject to appeal by the Issuers or their Subsidiaries and is not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being entered, in an amount in excess of $250,000, or the attachment or seizure of or levy upon any property of the Issuers or their Subsidiaries valued in excess of $250,000 to satisfy an obligation of the Issuers or their Subsidiaries; (viii) the Company provides notice to any Holder of the Notes, including by way of public announcement, at any time, of its intention not to issue, or otherwise refuses to issue, Conversion Shares to any Holder of the Note upon conversion in accordance with the terms of the Notes or shares of Common Stock upon exercise of the Waiver Warrants; (ix) any of the Issuers or their Subsidiaries shall file a petition under bankruptcy, insolvency or debtor’s relief Law or make an assignment for the benefit of its creditors or (x) proceedings shall be instituted against any of the Issuers or their Subsidiaries before a court of competent jurisdiction under any federal or state bankruptcy Law that (X) is for relief against the Issuers or their Subsidiaries in an involuntary case brought with respect to the Issuers or their Subsidiaries in such court, (Y) seeks to appoint a custodian, receiver or other similar official for all or substantially all the Issuers’ property or of their Subsidiaries or (Z) seeks to liquidate the Issuers of their Subsidiaries, and such proceedings remain unstayed and in effect for sixty (60) days. In the event that the Obligations hereunder are accelerated pursuant to this Section 2(d), interest shall continue to accrue at 10 3/4% per annum as of the date of such acceleration until such date as the Holder is paid in full under this Note.

     3. Conversion.

          (a) Conversion at the Option of the Holder. The Holder may, at any time and from time to time on or after the Original Issue Date, convert all or any part of the outstanding principal amount of this Note, plus all accrued interest thereon through the Conversion Date, into a number of fully paid and nonassessable shares of Common Stock (“Conversion Shares”) upon surrender of the Note. The number of shares of Common Stock issuable upon surrender of the Note shall be determined in accordance with the following formula:

Conversion Amount
Conversion Price

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          (b) Mechanics of Conversion. In order to effect a conversion pursuant to this Section 3, the Holder shall: (a) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to the Company and (b) surrender or cause to be surrendered this Note, duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Company. Upon receipt by the Company of a facsimile copy of a Notice of Conversion from a Holder, the Company shall within two (2) business days send, via facsimile, a confirmation to such Holder stating that the Notice of Conversion has been received, advising the Holder of any additional documentation required by the transfer agent for the Common Stock to issue the Conversion Shares in the manner provided in the Notice of Conversion (the “Additional Documentation”) and the name and telephone number of a contact person at the Company regarding the conversion. The Company shall not be obligated to issue Conversion Shares upon a conversion unless either this Note is delivered to the Company as provided above, or the Holder notifies the Company that such certificates have been lost, stolen or destroyed and delivers the documentation to the Company required by Section 13. Such conversion shall be deemed to have been made effective as of the Conversion Date and the rights of the Holder of the Notes being converted shall cease as of the Conversion Date except for the rights to receive Conversion Shares, and the Person entitled to receive the Conversion Shares shall be treated for all purposes as having become the record holder of such Conversion Shares at such time and shall have all the rights and privileges of a holder of Common Stock with respect to such Conversion Shares.

          (c) Delivery of Conversion Shares Upon Conversion. Upon the surrender of this Note accompanied by a Notice of Conversion and any Additional Documentation, the Company shall, no later than the later of (a) the second Business Day following the Conversion Date and (b) the third Business Day following the date of such surrender (or, in the case of lost, stolen or destroyed certificates, after provision of indemnity pursuant to Section 13) (the “Delivery Period”), issue and deliver to the Holder or its nominee (x) that number of Conversion Shares issuable upon conversion of the portion of this Note being converted and (y) a new Note in the form hereof representing the balance of the principal amount hereof not being converted, if any. If the Company’s transfer agent is participating in the Depositary Trust Company (“DTC”) Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend and the Holder thereof is not then required to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Conversion Shares to the Holder by crediting the account of the Holder or its nominee with DTC, as specified in the Notice of Conversion, through its DTC Deposit Withdrawal Agent Commission System (“DTC Transfer”). If the aforementioned conditions to a DTC Transfer are not satisfied, the Company shall deliver to the Holder physical certificates representing the Conversion Shares. Further, the Holder may instruct the Company to deliver to the Holder physical certificates representing the Conversion Shares in lieu of delivering such shares by way of DTC Transfer.

          (d) Adjustment to Conversion Price. The Conversion Price in effect at any time shall be subject to adjustment from time to time upon the happening of certain events, as follows:

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               (i) Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits. If the Company, at any time while this Note is outstanding, (A) shall pay a stock dividend on its Common Stock, (B) subdivide outstanding shares of Common Stock into a larger number of shares, or (C) combine outstanding shares of Common Stock into a smaller number of shares, the Conversion Price shall be multiplied by a fraction the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(d)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

               (ii) Subscription Rights. If the Company, at any time while this Note is outstanding, shall fix a record date for the distribution to all of the holders of Common Stock evidence of its indebtedness or assets or rights, options, warrants or other securities entitling them to subscribe for, purchase, convert to, exchange for or to otherwise acquire any security (excluding those referred to in Section 3(d)(i) above), then in each such case the Conversion Price at which this Note shall thereafter be exercisable shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the average Daily Market Price of the Common Stock for the ten (10) Trading Days prior to the record date mentioned above, and the numerator of which shall be such average Daily Market Price of the Common Stock for the ten (10) Trading Days prior to such record date less the then fair market value at such record date of the portion of such evidence of indebtedness or assets or rights, options, warrants or other securities so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding twenty percent (20%) of the net assets of the Issuers, such fair market value shall be determined by an appraiser selected by the Holders of a majority of the principal amount and interest of the Notes outstanding and reasonably acceptable to the Company. The Company shall pay for all such appraisals. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

               (iii) Other Events. In case of (A) any reclassification of the Common Stock into other securities of the Company, (B) any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property or (C) any merger or consolidation with or into any persons, or any sale or other disposition of all or substantially all of the assets of the Issuers to any person (each of (A), (B) or (C), an “Extraordinary Event”), the Holder shall have the right thereafter to convert this Note into shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Extraordinary Event, that the Holder would have been entitled to receive had it converted this Note immediately prior to such Extraordinary Event (without taking into account any limitations or restrictions on the convertibility of the Notes). In the case of an Extraordinary Event, the terms of any such Extraordinary Event shall include such terms so as to continue to give to the Holder the right to receive the securities, cash or property set forth in this Section 3(d)(iii) upon any conversion following such Extraordinary Event. This provision shall similarly apply to successive Extraordinary Events. For the avoidance of doubt, nothing

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contained in this clause (iii) shall be construed to impair the Issuers’ or Holders’ rights under Section 5, including, without limitation, under Section 5(b).

               (iv) Partial Redemption of Notes Pursuant to Section 5(c). Upon the happening of a partial redemption of the Note pursuant to Section 5(c), the Conversion Price in effect immediately prior to such redemption shall be reduced to the price determined by multiplying the Conversion Price, in effect immediately prior to the redemption, by a fraction, the numerator of which shall be the principal amount of the Note outstanding immediately after the partial redemption and the denominator of which shall be the principal amount of the Note immediately prior to the partial redemption.

               (v) No Impairment. If any event shall occur as to which the provisions of this Section 3(d) are not strictly applicable but the failure to make any adjustment would adversely affect the conversion rights under the Notes in accordance with the essential intent and principles of such Section, then, in each such case, the Conversion Price of the Notes shall be adjusted in such manner as the Board of Directors of the Company shall in good faith determine to be equitable under the circumstances; provided, however, that no adjustment to the Conversion Price shall be made under this clause (v) as a result of any bona fide sale of the Company’s Capital Stock to a third party.

               The Issuers will not, by amendment of their organizational documents or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders hereunder against dilution of the type contemplated by the provisions of this Section 3(d) or other impairment.

          (e) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be, provided, however, that any such adjustment in the Conversion Price shall be reversed or shall not become effective, as applicable, if the Company abandons the action to which the record date pertains.

          (f) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned Subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of Section 5(d).

          (g) Fractional Shares. Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a

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share based on the closing bid price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

          (h) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 3, the Company, at its own expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

     4. Security; Remedies. Unless otherwise defined in this Note, each of the defined terms used in this Section 4 shall have the meanings ascribed to them in the Credit Agreement as of the date hereof.

          (a) To secure the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all the Obligations, each Issuer hereby grants and each Initial Issuer hereby confirms and continues to grant to the Collateral Agent (for the benefit of the Holders) a continuing security interest in and Lien upon, and pledges to the Collateral Agent (for the benefit of the Holders), all of its right, title and interest in and to the following Collateral, which security interest is intended to be a security interest, which is subordinate to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c):

               (i) all of such Issuer’s tangible personal property, including without limitation all present and future Inventory and Equipment (including items of equipment which are or become Fixtures), now owned or hereafter acquired;

               (ii) all of such Issuer’s intangible personal property, including without limitation all present and future Accounts, Contract rights, Permits, General Intangibles, Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Letter-of-Credit Rights, Supporting Obligations, rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing;

               (iii) all of such Issuer’s present and future Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such Issuer; provided, however, that the Holder shall not have a security interest in any rights under any Government Contract of such Issuer or in the related Government Account where the taking of such security interest is a violation of an express prohibition contained in the Government Contract (for purposes of this limitation, the fact that a Government Contract is subject to, or otherwise refers to, Title 31, § 203 or Title 41, § 15 of the United States Code shall not be deemed an express prohibition against assignment thereof) or is prohibited by applicable Law, unless in any case consent is otherwise validly obtained; and

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               (iv) any and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.

          (b) Notwithstanding the foregoing provisions of this Section 4, such grant of a security interest shall not extend to, and the term “Collateral” shall not include, any General Intangibles of Issuers to the extent that (i) such General Intangibles are not assignable or capable of being encumbered as a matter of Law or under the terms of any license or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable Law) without the consent of the licensor thereof or other applicable party thereto, and (ii) such consent has not been obtained; provided, however, that the foregoing grant of a security interest shall extend to, and the term “Collateral” shall include, each of the following: (a) any General Intangible which is in the nature of an Account or a right to the payment of money or a proceed of, or otherwise related to the enforcement or collection of, any Account or right to the payment of money, or goods which are the subject of any Account or right to the payment of money, (b) any and all proceeds of any General Intangible that is otherwise excluded to the extent that the assignment, pledge or encumbrance of such proceeds is not so restricted, and (c) upon obtaining the consent of any such licensor or other applicable party with respect to any such otherwise excluded General Intangible, such General Intangible as well as any and all proceeds thereof that might theretofore have been excluded from such grant of a security interest and from the term “Collateral.”

          (c) Representations and Warranties.

               (i) Upon the execution and delivery of the Original Notes on the Original Issue Date, and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, the Holder had as of such date, and as of the date hereof upon the execution and delivery of the Notes will continue to have, a good, valid and perfected Lien and security interest in the Collateral of the Initial Issuers, which is subordinate only to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c) and subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. Upon the execution and delivery of this Note (and in the case of any future Subsidiary, upon the execution and delivery of the Subsidiary Guaranty and Subsidiary Security Agreement), and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, the Holder will have, a good, valid and perfected Lien and security interest in the Collateral of Diabetes and National (and any future Subsidiary that executes and delivers a Subsidiary Guaranty and Subsidiary Security Agreement), which is subordinate only to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c) and subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. Except as expressly permitted by the Notes, each Issuer owns its interests in the Collateral free and clear of any Liens and no financing statement relating to any of the Collateral is on file in any public office except those (i) on behalf of the Holders, (ii) in connection with Permitted Liens and/or (iii) those being terminated.

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               (ii) No Issuer (or predecessor by merger or otherwise of such Issuer), has within the five-year period preceding the date hereof, had a different name from the name of such Issuer listed on the signature pages hereof, except the names set forth on Schedule 4(c).

               (iii) This Note shall create a continuing security interest in the Collateral and the security interest created herein shall (i) remain in full force and effect until the payment and performance in full of the Obligations, (ii) be binding upon Issuers and their respective successors and assigns, and (iii) inure, together with the rights and remedies of the Holders and the Collateral Agent hereunder, to the benefit of the Holders, the Collateral Agent and their successors, transferees and assigns.

          (d) Collateral Administration.

               (i) All Collateral (except Deposit Accounts) will at all times be kept by Issuer at the locations set forth on Schedule 4(d) and shall not, without thirty (30) calendar days prior written notice to the Collateral Agent, be moved therefrom unless the Collateral Agent has entered into the necessary documents to perfect and enforce its security interest therein at such new location, and in any case shall not be moved outside the continental United States.

               (ii) Each Issuer shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit such records to the Collateral Agent on such periodic basis as the Collateral Agent may request. Following the occurrence and during the continuance of an Event of Default, if requested by the Collateral Agent, such Issuer shall execute and deliver to the Collateral Agent formal written assignments (or, in the case of Medicaid/Medicare Account Debtors, documents necessary to comply with the Federal Assignment of Claims Act) of all of its Accounts weekly or daily as the Collateral Agent may request, including all Accounts created since the date of the last assignment, together with copies of claims, invoices and/or other information related thereto. To the extent that collections from such assigned accounts exceed the outstanding principal amount together with any accrued interest due on the Notes and all First Priority Lien Indebtedness, such excess amount shall not accrue interest in favor of such Issuer, but shall be available to such Issuer upon such Issuer’s written request.

               (iii) Following an occurrence or during the continuance of an Event of Default, any of the Collateral Agent’s officers, employees, representatives or agents shall have the right, at any time during normal business hours, in the name of the Collateral Agent, any designee of the Collateral Agent or Issuers, to verify the validity, amount or any other matter relating to any Accounts or Inventory of Issuer. Issuers shall cooperate fully with the Collateral Agent in an effort to facilitate and promptly conclude such verification process.

               (iv) To expedite collection, each Issuer shall endeavor in the first instance to make collection of its Accounts for the Collateral Agent. The Collateral Agent shall have the right at all times after the occurrence and during the continuance of an Event of Default to notify (a) Account Debtors owing Accounts to Issuer other than Medicaid/Medicare Account Debtors that their Accounts have been assigned to the Collateral Agent and to collect

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such Accounts directly in its own name and to charge collection costs and expenses, including reasonable attorney’s fees, to such Issuer, and (b) Medicaid/Medicare Account Debtors that such Issuer has waived any and all defenses and counterclaims it may have or could interpose in any such action or procedure brought by the Collateral Agent to obtain a court order recognizing the collateral assignment or security interest and lien of the Collateral Agent in and to any Account or other Collateral and that the Collateral Agent is seeking or may seek to obtain a court order recognizing the collateral assignment or security interest and lien of the Collateral Agent in and to all Accounts and other Collateral payable by Medicaid/Medicare Account Debtors.

               (v) As and when determined by the Collateral Agent in its sole discretion but not more often than four (4) times per year prior to the occurrence and continuance of an Event of Default, the Collateral Agent may perform the searches described in clauses (a), (b) and (c) below against Issuer, all at Issuer’s expense: (a) UCC searches with the Secretary of State of the jurisdiction of organization of each Issuer and the Secretary of State and local filing offices of each jurisdiction where Issuer maintain their respective executive offices, a place of business or assets; (b) lien searches with the United States Patent and Trademark Office and the United States Copyright Office; and (c) judgment, federal tax lien and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above.

               (vi) Each Issuer (a) shall provide prompt written notice to its current bank to transfer all items, collections and remittances to the Concentration Account, (b) shall provide prompt written notice to each Account Debtor (other than Medicaid/Medicare Account Debtors) that the Collateral Agent has been granted a lien and security interest in, upon and to all Accounts applicable to such Account Debtor and shall direct each Account Debtor to make payments to the appropriate Lockbox Account, and each Issuer hereby authorizes the Collateral Agent, upon any failure to send such notices and directions within ten (10) calendar days after the date hereof (or ten (10) calendar days after the Person becomes an Account Debtor), to send any and all similar notices and directions to such Account Debtors, and (c) shall do anything further that may be lawfully required by the Collateral Agent to create and perfect the Collateral Agent’s lien on any collateral and effectuate the intentions of the Collateral Documents. At the Collateral Agent’s request, each Issuer shall immediately deliver or make arrangements to deliver to the Collateral Agent all items for which the Collateral Agent must receive possession to obtain a perfected security interest and all notes, certificates, and documents of title, Chattel Paper, warehouse receipts, Instruments, and any other similar instruments constituting Collateral.

               (vii) Each Issuer shall give the Collateral Agent at least 30 days’ prior written notice of (i) any change in such Issuer’s name, identity or corporate structure and (ii) any reincorporation, reorganization or other action that results in a change of the jurisdiction of organization of such Issuer.

               (viii) If any Event of Default shall have occurred and be continuing, the Collateral Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (i) require each Issuer to, and each Issuer hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the

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Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Collateral Agent deems appropriate, (iv) take possession of any Issuer’s premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of such Issuer’s equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii), and collecting any Obligation, (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable, and (vi) provide entitlement orders with respect to Security Entitlements (as defined in Section 8-102 of the UCC) and other Investment Property constituting a part of the Collateral and, without notice to any Issuer, transfer to or register in the name of the Collateral Agent or any of its nominees any or all of the Securities Collateral (defined below). The Collateral Agent or any Holder may be the purchaser of any or all of the Collateral at any such sale and the Collateral Agent, as agent for and representative of the Holders (but not any Holder in its individual capacity unless Holders of a majority of the principal amount and interest of the Notes shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Issuer, and each Issuer hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Issuer agrees that, to the extent notice of sale shall be required by law, at least ten days’ notice to such Issuer of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Issuer hereby waives any claims against the Collateral Agent and the Holders arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Agent and the Holders accept the first offer received and do not offer such Collateral to more than one offeree; provided that nothing contained herein shall be deemed to be a waiver by any Issuer or any Subsidiary that such sale must be conducted in a commercially reasonable manner and otherwise in accordance with applicable Law. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Obligations, Issuers shall be jointly and severally liable for the deficiency and the fees of any attorneys employed by the Collateral Agent to collect such deficiency. Each Issuer further agrees that a breach of any of the covenants contained in this Section 4(d)(viii) will cause irreparable injury to the Collateral Agent and the Holders, that the Collateral Agent and the Holders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this

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Section shall be specifically enforceable against such Issuer, and each Issuer hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Obligations becoming due and payable prior to their stated maturities.

          (e) Power of Attorney. The Collateral Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Issuer (without requiring the Collateral Agent to act as such, but to be exercised after the occurrence and during the continuance of an Event of Default) with full power of substitution to do the following: (i) endorse the name of any such Person upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to such Person and constitute collections on its or their Accounts; (ii) execute in the name of such Person any financing statements, schedules, assignments, instruments, documents, and statements that it is or they are obligated to give the Collateral Agent under any of the Notes Documents; and (iii) do such other and further acts and deeds in the name of such Person that the Collateral Agent may deem necessary or desirable to enforce any Account or other Collateral or to perfect the Collateral Agent’s security interest or Lien in any Collateral (including any additional Collateral pursuant to Sections 6(d) and 6(l)). In addition, if any such Person breaches its obligation hereunder to direct payments of Accounts or the proceeds of any other Collateral to the appropriate Lockbox Account, the Collateral Agent, as the irrevocably made, constituted and appointed true and lawful attorney for such Person pursuant to this paragraph, may, by the signature or other act of any of the Collateral Agent’s officers or authorized signatories (without requiring any of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral to the appropriate Lockbox Account.

          (f) Intercreditor Agreement. This Note and the other Notes Documents and all rights, remedies and obligations under this Note and the other Notes Documents are subject to the Amended and Restated Senior Subordination Agreement, dated as of April 30, 2009, by and among the Holders, the Collateral Agent and CapitalSource Finance LLC in the form attached hereto as Exhibit B, as it may be amended or modified from time to time in accordance with the terms thereof (the “Intercreditor Agreement”) and the ComVest Subordination Agreement. The parties to this Note and the other Notes Documents and all Persons claiming any right under or in respect of this Note and the other Notes Documents are bound by and (to the extent provided in the Intercreditor Agreement and the ComVest Subordination Agreement) entitled to the benefit of the Intercreditor Agreement and the ComVest Subordination Agreement.

          (g) Acknowledgement of Joint and Several Liability; Additional Subsidiaries.

               (i) Each Issuer acknowledges that it is jointly and severally liable for all of the Obligations. Each Issuer expressly understands, agrees and acknowledges that (i) Issuers are all Affiliated entities by common ownership, (ii) each Issuer desires to have the availability of one common issuance of Notes instead of separate issuances, (iii) each Issuer has requested that the Holder purchase the Note on the terms herein provided, (iv) Holders will be relying on a Lien upon, all of Issuers’ assets even though the proceeds of any particular Note may not be advanced directly to a particular Issuer, (v) each Issuer will nonetheless benefit by

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the issuance of the Notes to the Holders, and (vi) all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in the Notes Documents shall be applicable to and shall be binding upon each Issuer.

               (ii) From time to time subsequent to the date hereof, additional Subsidiaries may guarantee the Obligations and pledge additional Collateral by entering into a Subsidiary Guaranty and Subsidiary Security Agreement in accordance with Section 6(l). Each Issuer expressly agrees that its Obligations shall not be affected or diminished by the addition or release of any Issuer or Subsidiary hereunder, nor by any election of the Holders (in their sole discretion) not to cause any Subsidiary to comply with Section 6(l). The grant of security interest hereunder shall be fully effective as to any Issuer that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be an Issuer hereunder or party to a Subsidiary Guaranty and Subsidiary Security Agreement.

          (h) Further Assurances. Each Issuer agrees that from time to time, at the expense of the Issuers, such Issuer will promptly execute, obtain, deliver, file, register and/or record all financing statements, continuation statements, stock powers, further instruments and other documents, or cause the execution, filing, registration, recording or delivery of any of the foregoing and take all further action, that may be necessary or desirable, or that the Collateral Agent may request, to be executed, filed, registered, obtained, delivered or recorded, in order to create, maintain, perfect, preserve, validate or otherwise protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral, including any additional Collateral pursuant to Sections 6(d) and 6(l). Without limiting the generality of the foregoing, each Issuer will: (i) notify the Collateral Agent in writing of receipt by such Issuer of any interest in Chattel Paper and, at the request of the Collateral Agent, mark conspicuously each item of Chattel Paper and each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such Collateral is subject to the security interest granted hereby, (ii) deliver to the Collateral Agent all promissory notes and other Instruments and, at the request of the Collateral Agent, all original counterparts of Chattel Paper, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (iii) (A) execute (if necessary) and file such financing or continuation statements, or amendments thereto, (B) deliver such documents, instruments, notices, records and consents and take such other actions necessary to establish that the Collateral Agent has control over electronic Chattel Paper and Letter-of-Credit Rights of such Issuer and (C) deliver such other instruments or notices, in each case, as may be necessary or desirable, or as the Collateral Agent may request, in order to perfect and preserve the security interests granted or purported to be granted hereby, (iv) within two business days of learning thereof, report to the Collateral Agent any reclamation, return or repossession of goods in excess of $10,000 (individually or in the aggregate), (v) furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail, (vi) defend the Collateral and the Collateral Agent’s perfected Lien thereon against any claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent, and pay all reasonable costs and expenses in connection with such defense, which at the Collateral Agent’s discretion may be added to the Obligations; and (vii) use commercially reasonable efforts to obtain any necessary consents of third parties to

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the creation and perfection of a security interest in favor of the Collateral Agent with respect to any Collateral. Each Issuer hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral (including any financing statement indicating that it covers “all assets” or “all personal property” of such Issuer) without the signature of any Issuer.

               (i) Acquired Mortgaged Property Etc. Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the locations set forth on Schedule 4(i) unless the Company shall provide to the Holders at least thirty (30) Business Days prior written notice. From and after the Effective Date, in the event that (i) any Issuer or any Subsidiary acquires any fee interest in real property or any Leasehold Property or (ii) at the time any Person becomes a Subsidiary and following compliance with Section 6(l), such Person owns or holds any fee interest in real property or any Leasehold Property, (any such interest in real property or Leasehold Property described in the foregoing clause (i) or (ii) being a “Acquired Mortgaged Property”), if a mortgage is being granted in favor of any Senior Indebtedness, the Company or such Subsidiary shall deliver to Collateral Agent, as soon as practicable after such Person acquires such Acquired Mortgaged Property or becomes a Subsidiary and following compliance with Section 6(l), as the case may be, a fully executed and notarized Mortgage junior only to the mortgage securing the Senior Indebtedness, in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Person in such Acquired Mortgaged Property; and such opinions, appraisal, documents, title insurance, environmental reports that may be reasonably required by the Collateral Agent.

               (j) Application of Proceeds of Collateral. Except as expressly provided elsewhere in the Notes, all proceeds received by the Collateral Agent and the Holders in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in the following order of priority, subject to the Intercreditor Agreement and the ComVest Subordination Agreement.

                    FIRST: To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Agent, the Holders and their agents and counsel, and all other expenses, liabilities and advances made or incurred by the Collateral Agent and the Holders in connection therewith, and all amounts for which the Collateral Agent and the Holders are entitled to indemnification hereunder and all advances made by the Collateral Agent and the Holders hereunder for the account of Issuers, and to the payment of all costs and expenses paid or incurred by the Collateral Agent and the Holders in connection with the exercise of any right or remedy hereunder;

                    SECOND: To the payment of amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively;

                    THIRD: To the payment of other all other Obligations; and

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                    FOURTH: To the payment to, or upon the order of, the Issuers, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.

     5. Redemption.

          (a) Optional Redemption.

               (i) Intentionally Deleted.

               (ii) At any time after the first anniversary of the Original Issue Date, and in accordance with the procedures set forth in Section 5(e), the Issuers shall have the option to redeem the Note. If the Issuers elect to redeem the Note pursuant to this Section 5(a)(ii), then the Issuers shall at the option of the Holder (delivered by notice to the Issuers at least two (2) Business Days prior to the redemption date) (a) pay to the Holder the outstanding principal amount of the Note, plus accrued and unpaid interest thereon, through the redemption date (the “Par Redemption Price”) and issue to the Holder a warrant to purchase the number of shares of Common Stock equal to the number of Conversion Shares that the Holder would have been entitled to receive had it converted the Note immediately prior to such redemption date (without taking into account any limitations or restrictions on the convertibility of the Note), which shall have an exercise price equal to the applicable Conversion Price and shall be exercisable until the Maturity Date, substantially in the form attached as Exhibit C (the “Redemption Warrant”), or (b) pay to the Holder an amount equal to 110% of the aggregate outstanding principal amount of the Notes, plus accrued and unpaid interest thereon, if any, through the redemption date (the “Premium Redemption Price”). The Issuers and Holders agree that the letter dated as of the Original Issue Date among MHR, the Company, NH LLC and USPG regarding Procedures with Respect to Redemption shall be terminated as of the Effective Date and shall be of no further force and effect.

          (b) Redemption upon Change of Control. Notwithstanding anything to the contrary contained herein, prior to the occurrence of a Change of Control or in anticipation of a Change of Control, the Issuers shall notify the Holders thereof. Upon the occurrence of or in anticipation of a Change of Control (1) prior to the Bridge Loan Conversion contemplated by clauses (i), (ii), (iii), (iv) or (v) in the applicable definition of Change of Control below, and (2) following the date of the Bridge Loan Conversion, contemplated by clauses (i), (ii) (iii), (iv), (v) or (vi) in the applicable definition of Change of Control below, the Issuers shall have the option to redeem all, or any portion, of the outstanding Notes by paying to the Holder the Premium Redemption Price. Upon the occurrence of or in anticipation of any Change of Control, in the event that the Issuers had the option, but do not elect such option, or in the event that the Holder has the sole option, the Holder shall have the option to cause the Issuers (or the surviving corporation) to (a) redeem all, or any portion, of the outstanding Notes by paying to the Holder the Premium Redemption Price and/or (b) have the surviving corporation (which shall be a corporation, partnership, trust or limited liability company organized and existing under the Laws of the United States of America, any state thereof or the District of the Columbia) in such Change of Control expressly assume, by documents in form and substance satisfactory to the Holders, all the Obligations of the Company under the Notes and the Notes Documents.

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     Prior to the Bridge Loan Conversion, a “Change of Control” shall mean the occurrence of any of the following events:

     (i) any person or group (as such terms are defined in Section 13(d) or Section 14(d) of the Exchange Act or any successor provision to either of the foregoing) of persons, other than a person who as of the Original Issue Date beneficially owns 25% or more of the combined voting power of all Capital Stock of the Company, becomes the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) directly or indirectly, of more than 50% of the combined voting power of all Capital Stock of the Company or any successor thereto;

     (ii) the failure of RGGPLS Holding, Inc. or any successor thereto (“RGGPLS”) to (A) beneficially own and control, directly or indirectly, at least fifty one percent (51%) of the combined voting power of all Capital Stock of the Company or any successor thereto prior to December 31, 2010 and (B) beneficially own and control, directly or indirectly, at least forty (40%) of the combined voting power of all Capital Stock of the Company or any successor thereto on or after December 31, 2010;

     (iii) the failure of the Company to own and control, directly or indirectly, one hundred percent of the combined voting power of all Capital Stock and the economic interests of USPG, NH LLC and Diabetes and 66-2/3% of National or any successor thereof or transferee of substantially all the assets of any of the foregoing;

     (iv) during any calendar year, individuals who at the beginning of such period constituted the Company’s board of directors (and any new members of such board of directors whose election by the Company’s board of directors or whose nomination for election by the Company’s stockholders was approved by a vote of a majority of the members of such board of directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of the Company’s board of directors;

     (v) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, including by way of merger, consolidation, amalgamation or other business combination by any Issuer of all or substantially all of such Issuer’s assets on a consolidated basis;

     (vi) any “change in/of control” or “sale” or “disposition” or similar event as defined in any document governing indebtedness or Preferred Stock of Parent or any Issuer or other Subsidiary in excess of $100,000 which gives the holder of such indebtedness or equity securities the right to accelerate or otherwise require payment, repurchase or redemption of such indebtedness or Preferred Stock prior to the maturity date or term thereof; or

     (viii) the liquidation, dissolution, or the winding up of the affairs of the Company.

     From and after the Bridge Loan Conversion, a “Change of Control” shall mean the occurrence of any of the following events:

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     (i) the failure of ComVest (which for purposes of this Section 5(b) shall include any successor thereof) or any person or group (as such terms are defined in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, the “Exchange Act”) of persons holding the majority of the voting power of or otherwise controlling ComVest, at any time, to maintain sole (A) beneficial ownership (as defined in Rule 13d-3 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934), (B) control, directly or indirectly, in either case, of, the aggregate voting power of all Capital Stock of Parent and the Company (which for purposes of this Section 5(b) shall include any successor thereof) representing at least fifty one percent of the combined voting power of all Capital Stock of each of Parent and the Company and (C) the majority and controlling economic interests of Parent and the Company;

     (ii) any person or group (as such terms are defined in Section 13(d) or Section 14(d) of the Exchange Act or any successor provision to either of the foregoing) of persons, other than a person who as of immediately following the effective time of the Merger beneficially owns 25% or more of the combined voting power of all Capital Stock of the Company, becomes the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) directly or indirectly, of more than 50% of the combined voting power of all Capital Stock of the Company, Parent or ComVest (as applicable) or any successor thereto;

     (iii) the failure of Parent to own and control, directly or indirectly, at least fifty one percent of the combined voting power of all Capital Stock of the Company or any successor thereto;

     (iv) the failure of the Company to own and control, directly or indirectly, one hundred percent of the combined voting power of all Capital Stock and the economic interests of USPG, NH LLC and Diabetes and 66-2/3% of National or any successor thereof or transferee of substantially all the assets of any of the foregoing;

     (v) the failure of ComVest or Parent to maintain voting control, directly or indirectly, of the election of a majority of the Board of Directors (or similar governing body) of each of Parent, the Company and any other Issuer and any of their successors;

     (vi) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, including by way of merger, consolidation, amalgamation or other business combination by any Issuer of all or substantially all of such Issuer’s assets on a consolidated basis;

     (vii) any “change in/of control” or “sale” or “disposition” or similar event as defined in any document governing indebtedness of Parent or any Issuer or other Subsidiary in excess of $100,000 which gives the holder of such indebtedness or equity securities the right to accelerate or otherwise require payment, repurchase or redemption of such indebtedness prior to the maturity date or term thereof; or

     (viii) the liquidation, dissolution, or the winding up of the affairs of the Company.

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          (c) Partial Redemption.

               (i) On February 28, 2010, and from time to time thereafter, the Issuers shall redeem that portion of the Notes as is necessary to ensure that the Notes shall not be considered an “applicable high yield discount obligation” within the meaning of Sections 163(e)(5) and 163(i) of the Internal Revenue Code of 1986, as amended or any successor provisions thereof.

               (ii) The Notes shall be redeemed on a pro-rata basis and in portions of the principal of Notes that have denominations of $1,000 principal amount or multiples thereof. Notes in denominations larger than $1,000 principal amount may be redeemed in part but only in whole multiples of $1,000.

               (iii) Upon the partial redemption of the Note, the Issuers shall (i) pay to the Holder a percentage of the Par Redemption Price equal to the Par Redemption Price multiplied by a fraction, the numerator of which shall be the principal amount of the Note being redeemed and the denominator of which shall be the principal amount of the Note immediately prior to the redemption date, and (ii) issue a new Note in the form hereof representing the balance of the principal amount hereof not redeemed and change the Conversion Price in accordance with Section 3(d)(iv) such that such new Note will be convertible into the number of shares of Common Stock equal to the number of Conversion Shares that the Holder would have been entitled to receive had it converted the Note immediately prior to such redemption.

          (d) Intentionally Deleted.

          (e) Redemption Procedures.

               (i) Notice to Holders Upon Redemption. In the case of a redemption pursuant to Sections 5(a), 5(b) or 5(c) at least 30 days prior to a redemption date of Notes, except in the case of Section 5(c) for which at least 60 days prior to such redemption date of the Notes, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes at such Holder’s registered address.

     The notice shall identify the amount Notes to be redeemed and shall state:

     (A) the redemption date;

     (B) the applicable subsection of Section 5 pursuant to which the redemption will occur;

     (C) if applicable, the Redemption Price and the number of shares into which the Redemption Warrant will be exercisable, on the redemption date;

     (D) if applicable, the Premium Redemption Price on the redemption date;

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     (E) if redemption will occur pursuant to Section 5(c), the Notes or portions of Notes to be redeemed, the Redemption Price and the new Conversion Price that will be in effect for each of the remaining Notes.

     (F) that Notes called for redemption must be surrendered to the Company to collect the consideration (or if to an agent of the Company, the name and address of the agent where the Notes must be surrendered); and

     (G) that, unless the Company defaults in making such redemption payment interest on the Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date.

               (ii) Such notice shall be accompanied by an Officer’s Certificate and a written opinion from legal counsel from the Company to the effect that such redemption will comply with the conditions herein.

               (iii) Once notice of redemption is mailed, Notes called for redemption become due and payable on the redemption date. Upon surrender to the Company, the consideration shall be delivered as stated in the notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

               (iv) Holders shall be required to surrender the Notes being purchased by the Company, with an appropriate form duly completed, to the Company at the address specified in the notice of redemption. Holders whose Notes are purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Securities surrendered.

               (v) If any Note surrendered for redemption in the manner provided herein shall not be so paid on the redemption date due to the failure of the Company to deliver the required consideration, interest shall continue to accrue from the redemption date until such consideration is delivered, with such consideration being based on the unpaid principal and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the date and in the manner provided in the Notes which were to be redeemed.

               (vi) Any redemption shall be conditioned upon and occur either concurrently with or immediately prior to or after the consummation of the transaction, including without limitation a Change of Control, related to such redemption.

               (vii) Holders shall have the right to convert the Notes or any portion thereof in accordance with Section 3 at any time prior to the actual redemption of the Notes or applicable portion of the Notes, including without limitation, during the thirty (30) day (or, in the case of Section 5(c), sixty (60) day) notice period under this Section 5(e).

          (f) Tax Put Right.

               (i) For 30 days following a redemption in which the Holder receives Redemption Warrants, (A) the Holder shall have a right (the “Tax Put Right”) by written notice to the Company (which such notice shall include the number of shares of Common

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Stock desired to be put to the Company and the value thereof as of the date of such notice) to require the Issuers to purchase an amount of shares of Common Stock from the Holder, based on the average Daily Market Price during the ten (10) Trading Days prior to such redemption, that is equal to an amount of up to $5,000,000 in the aggregate for all such redemptions for all Holders of all Notes and (B) if the amount received by the Holder after exercising its rights up to the maximum aggregate amount pursuant to clause (A) is, when combined with the consideration received by the Holder upon redemption of the Convertible Notes, still insufficient to pay the income taxes relating to the redemption, the receipt of the Redemption Warrants and the exercise of the Tax Put Right, then, upon receipt of written notice from the Holder (or any other Holder of Notes) of such insufficiency, the Company shall use commercially reasonable efforts to file one registration statement for all Holders of Notes (regardless of the number of redemptions) as soon as reasonably practicable after such redemption but in any event within thirty (30) days after such redemption and cause such registration statement to be declared effective as soon as practicable after such filing but in any event within sixty (60) days after such filing, failing which the Holders of all Notes shall have an additional Tax Put Right in the amount of up to $2,500,000 in the aggregate for all such redemptions.

               (ii) Upon the receipt of notice from a Holder that such Holder has elected to exercise its Tax Put Right, the Company shall promptly, but in no event later than two (2) business days after the receipt thereof, deliver a copy of such notice to the other Holders. For a period of five (5) Business Days following its receipt of a Tax Put Right notice, each other Holder shall have the right and option (but not the obligation) to also exercise a Tax Put Right by delivering written notice thereof (which such notice shall include the number of shares of Common Stock desired to be put to the Company and the value thereof as of the date of such notice). If the Holders electing to exercise their Tax Put Right elect to put more than the aggregate amount of shares that the Company is required to repurchase pursuant to Section 5(f)(i), then each Holder delivering a Tax Put Right notice shall be entitled to require the Company to repurchase that number of shares of Common Stock calculated by multiplying the aggregate number of shares of Common Stock that the Company is required to repurchase pursuant to Section 5(f)(i) by a fraction the numerator of which is equal to the number of shares of Common Stock elected to be repurchased from such Holder and the denominator of which is equal to the total number of shares of Common Stock elected to be repurchased by all Holders that elect to exercise their Tax Put Right.

     6. Covenants.

          (a) Reservation of Conversion Shares and Common Stock Underlying Waiver Warrants. The Company agrees that it will at all times reserve and keep available out of its authorized shares of Common Stock, free from preemptive rights, solely for the purpose of the issue upon conversion of the Notes, issue upon the exercise of the Waiver Warrants and issuances of shares of Common Stock in accordance with the terms hereof. The Company agrees that the Conversion Shares and shares of Common Stock issued upon the exercise of the Waiver Warrants shall, when issued, be duly and validly issued and fully paid and non-assessable.

          (b) Required Registration. The Company agrees that if any Conversion Shares or shares issued upon the exercise of the Waiver Warrants require registration with or approval of any governmental authority under any Federal or state Law, or any national

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securities exchange, before such shares may be issued upon conversion, the Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be.

          (c) Limitation on Senior Indebtedness.

               (i) The Issuers covenant and agree that so long as any Notes shall remain outstanding, at any time prior to the Bridge Loan Conversion, the Issuers shall not, and shall not permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, including, without limitation, by way of assumption or acquisition in a business combination (each event, an “incurrence”) any Indebtedness other than (x) the Notes, (y) Senior Indebtedness in an aggregate principal amount outstanding not to exceed (1) $15 million of which at least $10 million principal amount of such Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan plus (2) $3 million principal amount under the Bridge Loan; provided, however that the Issuers may incur additional Senior Indebtedness up to $4 million the proceeds of which shall be used for the sole purpose of paying off the Bridge Loan, and (z) Subordinated Indebtedness.

               (ii) The Issuers covenant and agree that so long as any Notes shall remain outstanding, at any time from and after the Bridge Loan Conversion, the Issuers shall not, and shall not permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, including, without limitation, by way of assumption or acquisition in a business combination (each event, an “incurrence”) any Indebtedness other than (x) the Notes, (y) Senior Indebtedness in an aggregate principal amount outstanding not to exceed $18 million (which amount shall be increased by an amount equal to the cash proceeds (net of any broker, finder’s or transaction fees or commissions incurred in connection therewith, if any) of any cash equity contribution to the Company by Parent, the aggregate amount of which equity contributions shall in no event exceed $7 million), at least $10 million principal amount of which Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan; provided however, that the incurrence of any Indebtedness pursuant hereto shall not cause the Consolidated Senior Leverage Ratio to exceed 2.00 to 1.00 for the most recently ended four full Fiscal Quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is incurred determined on a pro forma basis (including pro a forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred and the application of proceeds therefrom had occurred at the beginning of such four Fiscal Quarter period, and (z) Subordinated Indebtedness. Notwithstanding anything contained in the foregoing to the contrary, the Issuers shall be permitted to incur a minimum of $15 million in Senior Indebtedness, provided that at least $10 million principal amount of such Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan.

               (iii) Notwithstanding any provision of this Section 6(c) to the contrary, as long as any Obligations (as such term is defined in the Credit Agreement) (or any extensions, modifications, refinancings, renewals and refundings thereof in accordance with the

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Intercreditor Agreement) are outstanding under the Credit Agreement and the Credit Agreement has not been terminated, the Issuers shall be permitted, and shall be allowed to permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, Senior Indebtedness under the Credit Agreement (including any extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) in the principal amount of $17,000,000 and the provisions of clauses (i) and (ii) above shall not be applicable to any of such Senior Indebtedness unless and until ComVest, Parent or any of their Affiliates becomes the holder of such Indebtedness under the Credit Agreement, whether as a result of the purchase of such Senior Indebtedness pursuant to their exercise of the purchase option under Section 22 of the ComVest Senior Subordination Agreement or otherwise. The limitation on the principal amount of Senior Indebtedness set forth in this clause (iii) shall not limit or otherwise affect the right of the holder of any such Senior Indebtedness to accrue and receive payment of interest (including at the default rate and including postpetition interest), fees, expenses or other charges. Upon the purchase of Senior Indebtedness under the Credit Agreement by ComVest, Parent or any of their Affiliates, this clause (iii) shall be null and void and the limitation on Senior Indebtedness shall be determined pursuant to clauses (i) and (ii) above.

               (iv) If on any date the Issuers incur Senior Indebtedness in breach of this Section 6(c) as a result of the aggregate principal amount of Senior Indebtedness exceeding the amount then permitted under subclause 6(c)(i)(y) or 6(c)(ii)(y) hereof, such breach shall not constitute an Event of Default if, and only if, the Issuers shall have concurrently with such incurrence prepaid to the Holder in respect of the outstanding principal amount of the Note an amount equal to 110% of the amount by which the Senior Indebtedness incurred, when aggregated with all such Senior Indebtedness then outstanding, exceeds the maximum aggregate principal amount of Senior Indebtedness then permitted under such subclause 6(c)(i)(y) or 6(c)(ii)(y). In connection with any payment to the Holder under this Section 6(c)(iv), the Issuers shall comply with the procedures applicable to redemption under Section 5(e) (including the giving of a notice to the Holder at least 30 days in advance of any prepayment) to the same extent as if such prepayment was being made as a redemption of the Notes pursuant to the provisions applicable to redemptions under Sections 5 (a) or (b) above.

          (d) Limitation on Liens. The Issuers and their Subsidiaries shall not create, incur, assume or suffer to exist any Lien upon, in or against, or pledge of, any of the Collateral or any of their properties or assets or any of their authorized but unissued or treasury shares, securities or other equity or ownership or partnership interests, whether now owned or hereafter acquired, except for Permitted Liens; provided further, if the Issuers and their Subsidiaries shall incur any Liens securing Senior Indebtedness, the Issuers and their Subsidiaries shall cause all Obligations to also be secured by a Lien in favor of the Collateral Agent for the benefit of the Holders, pursuant to a validly created and effective security interest, on a basis junior only to such Senior Indebtedness being so secured, in such manner as is consistent with the Credit Agreement and otherwise reasonably acceptable to the Holders of a majority of the principal amount and interest of the Notes outstanding.

          (e) Right to Cure Default of First Priority Lien Indebtedness. The Issuers agree that, upon any default, breach, violation, event, fact or circumstance under any First

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Priority Lien Indebtedness (including a Default or Event of Default under the Credit Agreement, as defined therein) which, with the giving of applicable notice or passage of time or both, would permit the holder of such Indebtedness to declare a default or otherwise accelerate amounts due thereunder, which the Issuers have not cured within the permitted time period and RGGPLS or an RGGPLS Permitted Assignee (as defined below) have not elected, within five (5) Business Days of any such event, to repay, refinance or replace such Indebtedness or otherwise cure or provide funding to the Company for the purposes of curing such default (the “RGGPLS Cure”), MHR Fund Management LLC, its Affiliates, and any Person, directly or indirectly, managed or controlled by MHR Fund Management LLC or its Affiliates, including without limitation, MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP and OTQ LLC (collectively “MHR”) shall have the right, but not the obligation, to fund the repayment of such Indebtedness (including, without limitation, by way of purchasing interests in the loans under the Credit Agreement) or otherwise cure such default within five (5) Business Days of the earlier of (i) the expiration of the RGGPLS Cure period above and (ii) the receipt of notice from RGGPLS or any RGGPLS Permitted Assignee that it has elected not to pursue an RGGPLS Cure. The Company shall give MHR written notice of any such default promptly after the occurrence thereof, but in no event later than two (2) Business Days after the occurrence of any such default. For purposes of the foregoing, an “RGGPLS Permitted Assignee” shall mean the surviving entity in a reorganization or recapitalization of RGGPLS, including without limitation, by way of merger or consolidation with or into another person or entity, if the percentage interest of the members or stockholders, as the case may be, in the equity interests of the surviving entity following consummation of such transaction is substantially the same (on a relative basis) as each such stockholder’s percentage interest in RGGPLS immediately prior to the consummation of such transaction. From and after the date of the Bridge Loan Conversion, all references to RGGPLS in this Section 6(e) shall be replaced by Parent, all references to RGGPLS Cure in this Section 6(e) shall be replaced by “ComVest Cure” and references to RGGPLS Permitted Assignee in this Section 6(e) shall be replaced by “Parent Permitted Assignee”.

          (f) Financial Statements, Financial Reports and Other Information.

               (i) Financial Reports. The Company shall furnish to the Holder (i) as soon as available and in any event within ninety (90) calendar days after the end of each fiscal year of the Company (or such earlier date required by the laws, regulations and rules of the Securities and Exchange Commission), audited annual consolidated financial statements of the Company, including the notes thereto, consisting of a consolidated balance sheet at the end of such completed fiscal year and the related consolidated statements of income, retained earnings, cash flows and owners’ equity for such completed fiscal year, which financial statements shall be prepared and certified without qualification by an independent certified public accounting firm satisfactory to the Holder and accompanied by related management letters, if available, and (ii) as soon as available and in any event within thirty (30) calendar days after the end of each calendar month, unaudited consolidated financial statements of the Company consisting of a balance sheet and statements of income, retained earnings, cash flows and owners’ equity as of the end of the immediately preceding calendar month. All such financial statements shall be prepared in accordance with GAAP consistently applied with prior periods. With each such financial statement, the Company shall also deliver a certificate of its chief financial officer in substantially the form of Exhibit D hereto (a “Compliance Certificate”) stating that (A) such person has reviewed the relevant terms of the Notes Documents and the condition of the

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Company, and (B) no Default or Event of Default has occurred or is continuing, or, if any of the foregoing has occurred or is continuing, specifying the nature and status and period of existence thereof and the steps taken or proposed to be taken with respect thereto.

               (ii) Other Materials. The Issuers shall furnish to the Holder as soon as available, and in any event within ten (10) calendar days after the preparation or issuance thereof or at such other time as set forth below: (1) copies of such financial statements (other than those required to be delivered pursuant to Section 6.1(f)(i) prepared by, for or on behalf of the Company and any other notes, reports and other materials related thereto, including, without limitation, any pro forma financial statements, (2) any reports, returns, information, notices and other materials that the Company shall send to its stockholders, members, partners or other equity owners at any time, (3) all Medicare and Medicaid cost reports and other documents and materials filed by the Company and any other reports, materials or other information regarding or otherwise relating to Medicaid or Medicare prepared by, for or on behalf of the Company, including, without limitation, (A) copies of licenses and Permits required by any applicable Law or Governmental Authority for the operation of its business, (B) Medicare and Medicaid provider numbers and agreements, (C) state surveys pertaining to any healthcare facility operated, owned or leased by the Company and any of its Affiliates or Subsidiaries, and (D) within ten (10) calendar days following the request of the Holder, participating agreements relating to medical plans, (4) (A) within fifteen (15) calendar days following the request of the Holder, a summary report of the status of all payments, denials and appeals of all Medicare and/or Medicaid Accounts and accounts receivable and account payable aging schedule and (B), within thirty (30) calendar days following the request of the Holder, a sales and collection report, including a report of sales, credits issued and collections received, all such reports showing a reconciliation to the amounts reported in the monthly financial statements, (5) promptly upon receipt thereof, copies of any reports submitted to the Company by its independent accountants in connection with any interim audit of the books of such Person or any of its Affiliates and copies of each management control letter provided by such independent accountants, (6) within fifteen (15) calendar days after the execution thereof, a copy of any contracts with the federal government or with a Governmental Authority in the State of New York, Vermont or Washington, and (7) such additional information, documents, statements, reports and other materials as the Holder may reasonably request from a credit or security perspective or otherwise from time to time.

               (iii) Operating Budget. The Company shall furnish to the Holder on or prior to the Effective Date and for each fiscal year of the Company thereafter not later than the earlier of (1) thirty (30) calendar days after the end of each fiscal year or (2) thirty (30) calendar days after the same is available, consolidated month by month projected operating budgets, annual projections, profit and loss statements, balance sheets and cash flow reports of and for the Company for such upcoming fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), in each case prepared in accordance with GAAP consistently applied with prior periods.

          (g) Books and Records; Inspection Rights.

               (i) Each of the Issuers and the Subsidiaries shall (i) keep true, complete and accurate books of record and account in accordance with commercially reasonable business practices in which true and correct entries are made of all of its and their dealings and

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transactions in all material respects; and (ii) set up and maintain on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business, and include such reserves in its quarterly as well as year end financial statements.

               (ii) Each of the Issuers shall permit the representatives of the Holder, at the expense of the Company, from time to time during normal business hours upon reasonable notice, to (i) visit and inspect any of its offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and other papers (but not more often than four (4) times per year so long as no Default or Event of Default exists), (ii) make copies and extracts therefrom, and (iii) discuss its business, operations, prospects, properties, assets, liabilities, condition and/or Accounts and Inventory with its officers and independent public accountants (and by this provision such officers and accountants are authorized to discuss the foregoing).

          (h) Active Diabetes Customers. As of the last day of each calendar month commencing as of the last day of the calendar month in which the Effective Date occurs and continuing through the Term Loan Maturity Date (as defined in the Credit Agreement), the Company shall have not less than 35,000 Active Diabetes Customers; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(h) shall be replaced by the covenant in Schedule 6(h) attached hereto.

          (i) Transfer of Assets. Notwithstanding any other provision of this Note or any other Notes Documents, each of the Issuers shall not and shall cause their Subsidiaries not to sell, lease, transfer, assign or otherwise dispose of any interest in any properties or assets (other than obsolete equipment or excess equipment no longer needed in the conduct of the business in the ordinary course of business and sales of Inventory in the ordinary course of business), or agree to do any of the foregoing at any future time, unless permitted by the terms of the Credit Agreement; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(i) shall be replaced by the covenant in Schedule 6(i) attached hereto.

          (j) Transactions With Affiliates. Each of the Issuers shall not and shall cause their Subsidiaries not to enter into or consummate any transaction of any kind with (i) any of its Affiliates or (ii) any Subsidiary Guarantor or any of their respective Affiliates other than: (a) salary, bonus, severance, employee stock option and other compensation and employment arrangements with directors or officers in the ordinary course of business (including employment arrangements with Mark Lama on customary terms consistent with the Company’s prior employment arrangements and agreements in connection with his participation in the Bridge Loan and the conversion of his participation in the Bridge Loan into Preferred Stock pursuant to the terms of the Bridge Loan), (b) Distributions and dividends permitted pursuant to Section 6(m), (c) transactions with the Holders or any Affiliate of the Holders, (d) payments permitted under and pursuant to written agreements entered into by and between any Issuer or any Subsidiary and one or more of its Affiliates that (A) reflect and constitute transactions on overall terms at least as favorable to such Issuer or Subsidiary as would be the case in an arm’s-

36

length transaction between unrelated parties of equal bargaining power and (B) in the event that the total consideration with respect to any such agreement together with any related agreements exceeds $375,000, has been approved by an independent appraisal or valuation firm; provided that, from and after the date of the Bridge Loan Conversion, any Subordinated Indebtedness issued to an Affiliate in compliance with this subclause (d) shall not be subject to any maximum cash interest rate; provided further, that notwithstanding the foregoing clauses (A) and (B) above such Issuer or Subsidiary shall not enter into or consummate any transaction or agreement pursuant to which it becomes a party to any mortgage, note, indenture or guarantee evidencing any Indebtedness of any of its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant to agreement for any Indebtedness of any such Affiliate, and (e) from and after the date of the Bridge Loan Conversion, transactions with ComVest and its Affiliates in connection with equity investments and contributions by ComVest or its Affiliates to an Issuer or a Subsidiary. Notwithstanding anything to the contrary herein, it shall be a condition precedent to any issuance of Subordinated Indebtedness permitted under subclause (d) above and any equity investment or contribution permitted under subclause (e) above, that the Holders or any of their Affiliates shall have been given the prior notice of and opportunity to participate ratably (based on the relative ownership of Common Stock on a fully diluted and as-converted basis of ComVest and all the Holders and their respective Affiliates) in providing such equity investments (including equity equivalents and equity linked securities), contributions and Subordinated Indebtedness on no less favorable terms and conditions as those applicable to ComVest and its Affiliates.

          (k) Investments; New Facilities or Collateral; Subsidiaries. Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to (i) purchase, own, hold, invest in or otherwise acquire obligations or Capital Stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person, or any joint venture, that is not in the healthcare industry, including without limitation insurance related services to Medicare and managed care end users, so long as the equity and assets so acquired shall constitute Collateral under the Notes Documents, or (ii) make or permit to exist any loans, advances or guarantees to or for the benefit of any Person or assume, guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of any other Person (other than those created by the Notes Documents and Indebtedness permitted to be incurred under Section 6(c) and other than (A) trade credit extended in the ordinary course of business, (B) advances for business travel and similar temporary advances made in the ordinary course of business to officers, directors and employees, and (C) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business). Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the locations set forth on Schedule 6(k) unless the Company shall provide to the Holder at least thirty (30) Business Days prior written notice. Notwithstanding any provision of this Section 6(k) to the contrary, the Issuers may make Acquisitions to the extent permitted by the Credit Agreement so long as the equity and assets so acquired shall constitute Collateral under the Notes Documents; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(k) shall be replaced by the covenant in Schedule 6(k) attached hereto.

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          (l) Subsidiaries. Any Subsidiary of the Company that is not an Issuer as of the date hereof and any newly acquired or created Subsidiary shall promptly execute a Subsidiary Guaranty and a Subsidiary Security Agreement, and such other documents and such other documents and instruments as the Holder may reasonably require.

          (m) Restricted Payments. Each of the Issuers shall not and shall cause their Subsidiaries not to (i) declare, pay or make any dividend or Distribution on any shares of capital stock or other securities or interests (other than dividends or Distributions payable in its stock, or split-ups or reclassifications of its stock), (ii) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital stock or other securities or interests or of any options to purchase or acquire any of the foregoing (provided, however, that such Issuer or Subsidiary may redeem its capital stock from terminated employees pursuant to, but only to the extent required under, the terms of the related employment agreements as long as no Default or Event of Default has occurred and is continuing or would be caused by or result from the payment thereof and as long as the aggregate amount of payments made to such terminating employees in any fiscal year does not exceed $100,000), (iii) otherwise make any payments or Distributions to any stockholder, member, partner or other equity owner in such Person’s capacity as such, or (iv) make any payment of any management or service fee other than pursuant to arrangements that are reasonably acceptable to the Holders and provided that such payments are subject to the execution of a subordination agreement with the Holders in form and substance reasonably acceptable to the Holders (“Management Fee Payments”).

     Except as permitted by the subordination agreement between such lender and the Holders relating to such Subordinated Debt, the Issuers shall not (i) make any prepayment of any part or all of any Subordinated Debt, (ii) repurchase, redeem or retire any instrument evidencing any such Subordinated Debt prior to maturity, or (iii) enter into any agreement (oral or written) which could in any way be construed to amend, modify, alter or terminate any one or more instruments or agreements evidencing or relating to any Subordinated Debt in a manner adverse to Holder, as determined by the Holders of a majority of the principal amount and interest of the Notes outstanding.

          (n) Amendments of Documents Relating to Subordinated Indebtedness. Each of the Issuers shall not, and shall not permit any of their Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to have such Subordinated Indebtedness provide for (1) the payment, prepayment, redemption, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon before ninety-one (91) days after the Maturity Date or later or (2) total cash interest at a rate in excess of the prevailing market rate for subordinated debt at the time of issuance, except to the extent permitted by the terms of any written subordination agreement acceptable to the Holders.

          (o) Charter Documents; Fiscal Year; Dissolution; Use of Proceeds; Accounting Methods. Each of the Issuers shall not, and shall not permit any of their Subsidiaries to, (i) amend, modify, restate or change its certificate of incorporation (including the terms of the Preferred Stock issued pursuant to the Bridge Loan Conversion) or certificate of formation or bylaws or similar organizational documents in a manner that would be adverse to any Issuer or

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any Subsidiary or the Holders or inconsistent with the rights granted to the Holders in connection with the Notes Documents, provided, however, that any such amendment, modification, restatement, or change shall be permitted in connection with any additional equity contributions to Issuer or a Subsidiary, (ii) amend, alter or suspend or terminate or make provisional in any material way, any material Permit without the prior written consent of the Holders of a majority of the principal amount and interest of the Notes outstanding, which consent shall not be unreasonably withheld, (iii) wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking or that would result in any of the foregoing, or (iv) make any material changes in financial or tax accounting methods, principles or practices (or change an annual accounting period), except insofar as may be required by a change in GAAP, applicable Law or any applicable Governmental Authority.

     7. Transfer of Note. Upon due presentment for registration of transfer of this Note, the Company will execute, register and deliver in exchange a new Note equal in aggregate principal amount to the then unpaid principal amount of this Note, dated the date to which interest has been paid and registered in the name of the transferee.

     8. Governing Law. This Note shall be governed by and construed in accordance with the domestic substantive Laws of the State of New York, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

     9. Jurisdiction. The Issuers irrevocably consent to the exclusive jurisdiction of the United States federal courts and the state courts located in the County of New York, State of New York in any suit or proceeding based on or arising under this Note and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Issuers irrevocably waive the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Issuers further agree that service of process upon the Issuers mailed by first class mail shall be deemed in every respect effective service of process upon the Issuers in any such suit or proceeding. The Issuers agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. Nothing herein shall affect the right of the Holder to institute suit and conduct an action in any other appropriate manner, jurisdiction or court or to serve process in any other manner permitted by Law.

     10. Notices. All notices and other communications given to any party hereto pursuant to this Note shall be in writing and shall be delivered, or mailed first class postage prepaid, registered or certified mail, addressed as follows:

(a) If to the Issuers, to:

NationsHealth, Inc.
13650 N.W. 8th Street
Suite 109
Sunrise, FL 33325

Fax number: (954) 903-5005
Attention: Chief Executive Officer

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with a copy to:

McDermott Will & Emery LLP
201 South Biscayne Blvd.
Miami, Florida 33131
Fax number: (305) 347-6500
Attention: Ira J. Coleman, Esq.

Fred Levenson, Esq.
Michael Boykins, Esq.

with a copy to:

Foley & Lardner LLP
100 N. Tampa St., Suite 2700
Tampa, Florida 33602
Fax number: (813) 221-4210
Attention: Steven Vazquez, Esq.

(b) If to the Holder, to:

MHR Fund Management LLC
40 West 57th Street, 24th Floor,
New York, NY 10019

Fax number: (212) 262-9356
Attention: Hal Goldstein and

Emily Fine

with a copy to:

O’Melveny & Myers LLP
7 Times Square
Times Square Tower
New York, NY 10036
Fax number: (212) 408-2419
Attention: Patricia M. Perez, Esq.

Each such notice or other communication shall for all purposes be treated as being effective or having been given when delivered, if delivered personally, by e-mail or facsimile with confirmation of receipt or by overnight courier or, if sent by mail, at the earlier of its actual receipt or three (3) days after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid. The Company shall use commercially reasonable efforts to provide Holder with notices that the Company provides under the Credit Agreement concurrently with the giving of such notices under the Credit Agreement and shall provide Holder with copies of such notices upon written request of such Holder no later than five business days following receipt of such written request.

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     11. Company’s Waivers. The Issuers, to the extent permitted by Law, waive and agree not to assert or take advantage of any of the following: (a) any defense based upon an election of remedies by the Holder which may destroy or otherwise impair any subrogation or other rights of the Issuers or any guarantor or endorser of this Note; (b) any duty on the part of the Holder to disclose any facts or other data the Holder may now or hereafter know; (c) acceptance or notice of acceptance of this Note by the Issuers; (d) presentment and/or demand for payment of this Note or any other Obligations; and (e) protest and notice of dishonor with respect to this Note or other Obligations or performance of obligations arising under the Notes Documents.

     12. Amendment; Waiver. All amendments or waivers of any of the terms hereof (including, without limitation, any waiver of acceleration of the Maturity Date) and any payment of this Note with any consideration other than cash, shall be made or effected only with the written consent of the Holders of a majority of the principal amount and interest of the Notes outstanding. No failure or delay on the part of any Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

     13. Replacement of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Note by the Holder, the Company shall issue a replacement instrument, at the Company’s expense, representing such Note in lieu of such lost, stolen, destroyed, or mutilated instrument, provided that the Holder agrees to indemnify the Company for any losses incurred by the Company with respect to such lost instrument (other than the cost of issuing the new instrument).

     14. Headings. The headings of the sections of this Note are inserted for convenience only and do not constitute a part of this Note.

     15. Ranking. The Notes shall rank senior in right of payment to any Indebtedness and future Indebtedness of the Issuers and their Subsidiaries other than the Senior Indebtedness permitted by Section 6(c) and in the Intercreditor Agreement and the ComVest Subordination Agreement.

     16. Assignability. This Note shall be binding upon the Issuers and their successors and assigns and shall inure to the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary contained herein or in the Notes Documents, this Note may be pledged and all rights of the Holder under this Note may be assigned to any Affiliate or to any other person or entity without the consent of the Issuers, subject to the Securities Act of 1933.

     17. Cost of Collection. If default is made in the payment of this Note, the Issuers shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

     18. Remedies Cumulative. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at Law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein

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shall limit a Holder’s right to pursue actual damages for any failure by the Issuers to comply with the terms of this Note. The Issuers acknowledge that a breach by them of their obligations hereunder will cause irreparable harm to the Holder of the Note and that the remedy at Law for any such breach may be inadequate. The Issuers therefore agree, in the event of any such breach or threatened breach, that the Holder of the Note shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

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     IN WITNESS WHEREOF, the Company has caused this Note to be signed and to be dated the day and year first above written.

NATIONSHEALTH, INC.
By:	/s/ Glenn Parker
	Name: Glenn Parker
	Title: CEO
NATIONSHEALTH HOLDINGS, L.L.C.
By:	/s/ Glenn Parker
	Name: Glenn Parker
	Title: CEO
UNITED STATES PHARMACEUTICAL GROUP, L.L.C.
By:	/s/ Glenn Parker
	Name: Glenn Parker
	Title: CEO
DIABETES CARE & EDUCATION, INC.
By:	/s/ Glenn Parker
	Name: Glenn Parker
	Title: CEO
NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC
By:	/s/ Glenn Parker
	Name: Glenn Parker
	Title: CEO

EX-4.22

Exhibit 4.22

First Amended and Restated 7 ^3/4% Convertible Secured Note in favor of OTQ LLC, dated as of April 30, 2009,
issued by NationsHealth, Inc., NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C.,
Diabetes Care & Education, Inc., and National Pharmaceuticals and Medical Products (USA), LLC

EXECUTION VERSION

FIRST AMENDED AND RESTATED
7 3/4% CONVERTIBLE SECURED NOTE

$6,440,000	April 30, 2009 (the “Effective Date”)
	Original Issue Date: February 28, 2005

N-3

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW WITH RESPECT THERETO, (II) PURSUANT TO RULE 144 OF THE SECURITIES ACT OR (III) UPON THE ADVICE OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.

THIS PROMISSORY NOTE IS SUBORDINATED TO CERTAIN SENIOR INDEBTEDNESS OF THE ISSUERS IN THE MANNER AND TO THE EXTENT SET FORTH IN THE INTERCREDITOR AGREEMENT (AS DEFINED BELOW) AND THE COMVEST SUBORDINATION AGREEMENT (AS DEFINED BELOW) AND ALL RIGHTS, REMEDIES AND OBLIGATIONS UNDER THIS NOTE AND THE OTHER NOTES DOCUMENTS ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR AGREEMENT AND THE COMVEST SUBORDINATION AGREEMENT.

     FOR VALUE RECEIVED, NATIONSHEALTH, INC., a Delaware corporation (the “Company”), NATIONSHEALTH HOLDINGS, L.L.C., a Florida limited liability company and a wholly-owned subsidiary of the Company (“NH LLC”), UNITED STATES PHARMACEUTICAL GROUP, L.L.C., a Delaware limited liability company and an indirect wholly-owned subsidiary of the Company (“USPG”), DIABETES CARE & EDUCATION, INC., a South Carolina corporation (“Diabetes”) and NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC, a Florida limited liability company (“National” and jointly and severally with the Company, NH LLC, USPG and Diabetes, the “Issuers”), hereby promise to pay to the order of OTQ LLC, a Delaware limited liability company (the “Holder”), at c/o MHR Fund Management LLC, 40 West 57th Street, 24th Floor, New York, New York 10019, the principal amount of Six Million Four Hundred Forty Thousand Dollars ($6,440,000) in lawful money of the United States of America, on the terms set forth in Section 2 hereof. This First Amended and Restated Promissory Note (this “Note”) amends and restates that certain Promissory Note, dated as of February 28, 2005, issued by the Company, NH LLC and USPG (the “Initial Issuers”) to the Holder in the aggregate principal amount of $6,440,000 (the “Original Note,” and collectively with such other convertible notes issued pursuant to the Purchase Agreement (defined herein), the “Original Notes”) and is being issued by the Issuers

along with substantially identical convertible notes also designated as First Amended and Restated 7 3/4% Convertible Secured Notes (the “Other Notes,” and together with this Note, the “Notes”) in an original aggregate principal amount of $15,000,000. The Notes are being issued pursuant to that certain Consent and Waiver to the Convertible Notes, dated April 30, 2009 among the Issuers and the holders thereto (together with the Holder, the “Holders”), pursuant to which, inter alia, the Holders have agreed to waive the Change of Control in Section 5(b) hereof upon the conversion of the Bridge Loans (as defined herein) subject to the terms and conditions of the Bridge Notes (as defined herein) and the Consent and Waiver (the “Bridge Loan Conversion”). Pursuant to the Original Notes, the Initial Issuers granted a security interest to the Collateral Agent (defined herein) for the benefit of the Holders pursuant to Section 4 of the Original Notes and each of the Initial Issuers acknowledges, confirms and reaffirms the perfected security interest of the Collateral Agent, as amended and restated hereby. The Obligations are secured by a security interest in the assets of the Issuers pursuant to Section 4 of the Notes and will also be secured by a security interest in the assets of any future Subsidiaries pursuant to Section 6(l) of the Notes for the benefit of the Holders.

     1. Definitions. The following terms shall have the meanings ascribed to them below:

     “Acquisition” shall mean the acquisition by the Company of obligations or stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person or any joint venture.

     “Active Diabetes Customer” shall mean, as of the end of any calendar month, a Diabetes Customer of the Issuers who has purchased diabetes medicines or supplies within the 180 day period ending on the last day of such calendar month.

     “Additional Shares of Common Stock” shall have the meaning specified in Section 3(d)(iv).

     “Affiliate” shall mean, as to any Person, any other Person (a) that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, (b) who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect to such Person, or (c) which, directly or indirectly through one or more intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, as the same is in effect on the date hereof) of ten percent (10%) or more of any class of the outstanding voting stock, securities or other equity or ownership interests of such Person. For purposes of this definition, the term “control” (and the correlative terms, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies, whether through ownership of securities or other interests, by Contract or otherwise. “Affiliate” shall include any Subsidiary.

     “Bridge Loan Agreement” shall mean that certain Bridge Loan Agreement by and between Parent, the Company, USPG, NH LLC, Diabetes and National dated as of April 30, 2009, as amended or modified in effect from time to time in accordance with the ComVest Subordination Agreement and the ComVest Senior Subordination Agreement.

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     “Bridge Loan Documents” shall mean the Bridge Loan Documents as defined in the Bridge Loan Agreement.

     “Bridge Loans” shall mean the loans made by Parent under the Bridge Loan Agreement.

     “Bridge Notes” shall mean the 10% Secured Convertible Subordinated Promissory Notes issued pursuant to the Bridge Loan Agreement.

     “Business Day” shall mean any day, other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by Law, regulation or executive order to close.

     “Capital Lease” shall mean, as to any Person, a lease of any interest in any kind of property or asset by that Person as lessee that is, should be or should have been recorded as a “capital lease” in accordance with GAAP.

     “Capital Stock” shall mean the capital stock of or other equity interests in a Person.

     “Closing Date” shall mean the date of the closing of the Merger.

     “Collateral” shall mean, collectively, all of the real, personal and mixed property in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations.

     “Collateral Agent” means MHR Capital Partners (500) LP.

     “Collateral Documents” means the Notes, the Subsidiary Security Agreements and all other instruments or documents delivered by any of the Issuers or their Subsidiaries pursuant to the Notes or any of the other Notes Documents in order to grant to the Collateral Agent, on behalf of the Holders, a Lien on any real, personal or mixed property of such Person as security for the Obligations.

     “ComVest” shall mean ComVest Investment Partners III, L.P.

     “ComVest Cure” shall have the meaning specified in Section 6(e).

     “ComVest Senior Subordination Agreement” shall mean, that certain Senior Subordination Agreement dated as of April 30, 2009 by and between Parent and CapitalSource Finance LLC, as amended or modified and in effect from time to time.

     “ComVest Subordination Agreement” shall mean, that certain Subordination Agreement dated as of April 30, 2009 among Parent, the Holders, the Collateral Agent and the Issuers, as amended or modified and in effect from time to time.

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     “Consolidated Senior Leverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (i) Senior Indebtedness as at such day to (ii) EBITDA for the consecutive four Fiscal Quarters ending on such day.

     “Contract” means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, license, commitment or other arrangement, understanding or undertaking, commitment or obligation, whether written or oral.

     “Conversion Amount” shall mean the portion of the principal amount of this Note being converted plus any accrued and unpaid interest thereon through the Conversion Date each as specified in the notice of conversion in the form attached as Exhibit A hereto (the “Notice of Conversion”).

     “Conversion Date” shall mean, for any conversion, the date specified in the Notice of Conversion so long as the copy of the Notice of Conversion is faxed (or delivered by other means resulting in notice) to the Company at or before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion; provided, however, that if the Notice of Conversion is not so faxed or otherwise delivered before such time, then the Conversion Date shall be the date the Holder faxes or otherwise delivers the Notice of Conversion to the Company.

     “Conversion Price” shall mean $3.40 per share of common stock, par value $.0001 per share of the Company (“Common Stock”), subject to adjustment as set forth herein.

     “Conversion Shares” shall have the meaning specified in Section 3(a).

     “Convertible Securities” shall mean any Capital Stock or security convertible into or exchangeable for Common Stock.

     “Customer Acquisition and Related Costs” shall mean costs incurred by the Company in the development of its customer base related to marketing activities, which costs include, without limitation, advertising, promotion, call center and data collection expenses.

     “Credit Agreement” shall mean the Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of April 30, 2009 among the Issuers and CapitalSource Finance LLC, as it may be amended, modified, replaced or refinanced from time to time in accordance with the Intercreditor Agreement.

     “Daily Market Price” shall mean, as of any date of determination, the closing sale price for the Common Stock (or such other applicable subject security), for the Trading Day of such date of determination (subject to equitable adjustment for any stock splits, stock dividends, reclassifications or similar events during such Trading Day and further subject to adjustment as provided herein) on the principal United States securities exchange or trading market where the Common Stock (or such other applicable subject security) is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the closing sale price for the Common Stock (or such other applicable subject security) in the OTC Bulletin Board for such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the closing sale price as reported in the “pink sheets” by the Pink Sheets LLC, in each case for such date or, if such date was not a Trading Day for such security, on the next preceding date which was a

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Trading Day. If the Daily Market Price cannot be calculated for such security as of either of such dates on any of the foregoing bases, the Daily Market Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Holders of a majority of the principal amount and interest of the Notes outstanding and reasonably acceptable to the Company, with the costs of such appraisal to be borne by the Company.

     “Default” shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both, would constitute or be or result in an Event of Default.

     “Deferred Purchase Price Obligations” means any and all obligations of the Company incurred as permitted under the Notes for amounts deferred, financed or withheld in respect of the purchase price for any Diabetes Business Acquisition, including Indebtedness which consists of purchase money financing by the seller and amounts withheld or escrowed as potential set-offs against customer terminations, purchase price adjustments or otherwise.

     “Delivery Period” shall have the meaning specified in Section 3(c).

     “Diabetes Business Acquisition” shall mean the acquisition by the Company of Diabetes Customer lists.

     “Diabetes Customers” shall mean any and all customers and patients of the Company for the purchase of diabetes medicines, supplies and other products, whether now existing or hereinafter acquired or arising.

     “Distribution” shall mean any fee, payment, bonus or other remuneration of any kind, and any repayment of or debt service on loans or other Indebtedness.

     “Dollars” and the sign “$” mean the lawful money of the United States of America.

     “DTC” shall have the meaning specified in Section 3(c).

     “DTC Transfer” shall have the meaning specified in Section 3(c).

     “EBITDA” shall mean, the sum for any period, without duplication, of the following for the Issuers and each Subsidiary, on a consolidated basis: Net Income, (I) plus (a) Interest Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation expense, (d) amortization expense, (e) all other non-cash, non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business, (f) loss from any sale of assets, other than sales in the ordinary course of business, (g) one-time, non-recurring charges and expenses incurred by the Company in connection with the Transactions (“Merger Expenses”), provided that such non-recurring charges and expenses shall not exceed $1,500,000 during the term of this Note, and (h) severance expenses incurred by the Company in an amount not to exceed $1,000,000 for any twelve month period and an aggregate of $2,000,000 during the term of this Note, and in the case of (a) through (h) above, all of the foregoing determined without duplication and in accordance with GAAP (II) minus (a) gains from any sale of assets,

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other than sales in the ordinary course of business, (b) other extraordinary or non-recurring gains and (c) non-cash items added in the calculation of Net Income.

     “Equity Contribution” shall mean, in connection with the consummation of the Merger, the contribution by the Senior Management and MHR, directly or indirectly, of rollover equity to or of the Company on the Closing Date pursuant to the Rollover Documents (assuming the conversion into Common Stock of all Options and Convertible Securities outstanding on the Closing Date other than convertible debt instruments) and the purchase or contribution by ComVest and its Affiliates, directly or indirectly, of cash equity and the Bridge Loan to the Company pursuant to the Merger Agreement, the Bridge Note and the Series A Preferred Stock Purchase Agreement, by and between Parent and the Company, dated as of the April 30, 2009 (assuming the conversion into Common Stock of all Options and Convertible Securities outstanding on the Closing Date other than convertible debt instruments).

     “Event of Default” shall have the meaning specified in Section 2(d).

     “Extraordinary Event” shall have the meaning specified in Section 3(d)(iii).

     “Fiscal Quarter” shall mean a fiscal quarter of any fiscal year.

     “First Priority Lien Indebtedness” shall mean Senior Indebtedness of the Issuers and their Subsidiaries secured by a first priority Lien on any assets or property of the Issuers or any such Subsidiaries, including the Indebtedness of the Issuers under the Credit Agreement permitted to be incurred by the Company under Section 6(c).

     “GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time as applied by nationally recognized accounting firms.

     “Governmental Authority” shall mean any federal, state, municipal, national, local or other governmental department, court, commission, board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative, or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case, whether of the United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District of Columbia.

     “Hedge Agreement” means any and all transactions, agreements or documents now existing or hereafter entered into by the Company or its Subsidiaries, which provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

     “Indebtedness” of any Person shall mean, without duplication, (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes or other similar instruments and all reimbursement or other obligations in respect of letter of credit, bankers acceptances, interest rate swaps, hedges, derivatives or other financial products, (c) all obligations as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by

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a Lien on any asset of a Person or its Subsidiaries, irrespective of whether such obligation or liability is assumed, (e) all obligations to pay the deferred purchase price of assets (other than Deferred Purchase Price Obligations not to exceed $250,000 outstanding at any time), (f) all obligations owing under Hedge Agreements, (g) all notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, and (h) all obligations or liabilities of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock, equity or other ownership interest purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. For the avoidance of any doubt, Indebtedness does not include trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and any obligations as a lessee under leases that are not Capital Leases.

     “Intercreditor Agreement” shall have the meaning specified in Section 4(f).

     “Interest Expense” shall mean, for any period, total interest expense and fees (including attributable to Capital Leases in accordance with GAAP and capitalized interest) of the Issuers and their Subsidiaries on a consolidated basis with, with respect to all outstanding Indebtedness but excluding all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements.

     “Interest Rate Agreement” shall mean any interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to hedge the position with respect to interest rates.

     “Inventory” shall mean all “inventory” (as defined in the UCC) of the Issuers and the Subsidiaries (or, if referring to another Person, of such other Person), now owned or hereafter acquired, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.

     “Investor Rights Agreement” shall mean the Investor Rights Agreement dated as of April 30, 2009 by and among Parent, Mark Lama, RGGPLS, LLC, MHR and the Senior Management.

     “Landlord Waiver and Consent” shall mean a waiver/consent in form and substance satisfactory to the Holders from the owner/lessor of any premises not owned by the Issuers or their Subsidiaries at which any of the Collateral is now or hereafter located for the purpose of providing the Collateral Agent (for the benefit of the Holders) access to such Collateral, in each case as such may be modified, amended or supplemented from time to time.

     “Law” means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation, Order or other similar requirement.

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     “Leasehold Property” means any leasehold interest of any of the Company or its Subsidiaries as lessee under any lease of real property, other than any such leasehold interest designated from time to time by the Collateral Agent in its sole discretion as not being required to be included in the Collateral.

     “Lien” shall mean any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, civil law, statute, or Contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien, hypothecation or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment from security purposes and also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property.

     “Maturity Date” shall have the meaning specified in Section 2(b).

     “Merger Agreement” shall mean the Agreement and Plan of Merger, dated as of April 30, 2009, by and among Parent, Merger Sub and the Company as amended or supplemented pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving, and upon the closing of which Merger, Parent, the members of Senior Management and MHR shall own shares of the Company Capital Stock.

     “Merger Documents” shall mean the collective reference to the Merger Agreement, all material exhibits and schedules thereto and all agreements expressly contemplated thereby.

     “Merger Sub” shall mean NationsHealth Acquisition Corp., a Delaware corporation.

     “MHR” shall have the meaning specified in Section 6(e).

     “MHR Warrants” shall mean the warrants to purchase Common Stock issued to MHR on the Closing Date pursuant to the Transactions.

     “Mortgage” means a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by the Company or any Subsidiary pursuant to Section 4(i), in such form as may be approved by the Collateral Agent in its sole discretion, in each case with such changes thereto as may be recommended by the Collateral Agent’s local counsel based on local laws or customary local mortgage or deed of trust practices.

     “Net Income” shall mean, for any period, the net income (or loss) of the Issuers and their Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP (and, with respect to expensing of Customer Acquisition and Related Costs, as currently applied by the Company consistent with past practice), provided that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of the

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Issuers) in which any other Person (other than the Issuers or any of their Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to an Issuer by such Person, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of an Issuer or is merged into or consolidated with an Issuer or any of its Subsidiaries or that Person’s assets are acquired by an Issuer or any of its Subsidiaries, (iii) the income of any Subsidiary of the Issuers to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, Order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) compensation expense resulting from the issuance of Capital Stock, stock options or stock appreciation rights issued to former or current employees, including officers, of an Issuer or any Subsidiary, or the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by an Issuer or such Subsidiary or any Affiliate thereof, and (v) compensation expense resulting from the repurchase of Capital Stock, options and rights described in clause (iv) of this definition of Net Income.

     “Notes Documents” shall mean the Notes, the Transaction Documents as defined in the Purchase Agreement, the Consent and Waiver, dated as of April 30, 2009, the Waiver Warrants, the Subsidiary Security Agreements, the Subsidiary Guaranties, and the other Collateral Documents.

     “Obligations” shall mean all obligations of every nature of the Issuers and Subsidiaries from time to time owed to the Holders, the Collateral Agent or any of them, in each case, under the Notes Documents, whether for principal, interest, fees, expenses, indemnification or otherwise (including, without limitation, interest and other amounts that, but for the filing of a petition in bankruptcy with respect to any Issuer or any Subsidiary, would accrue on such obligations, whether or not a claim is allowed against such Issuer or Subsidiary for such amounts in the related bankruptcy proceeding), including to the extent all or any part of such payment is avoided or recovered directly or indirectly from any Holder or the Collateral Agent as a preference, fraudulent transfer or otherwise.

     “Officer’s Certificate” as applied to any Person that is a corporation, partnership, trust or limited liability company, means a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company.

     “Options” shall mean warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock.

     “Order” means any order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of a Governmental Authority.

     “Original Issue Date” shall mean February 28, 2005.

     “Par Redemption Price” shall have the meaning specified in Section 5(a)(ii).

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     “Parent” shall mean ComVest NationsHealth Holdings, LLC.

     “Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Authority.

     “Permitted Liens” means the following: (i) Liens with respect to the Notes and the other Obligations, (ii) Liens with respect to Senior Indebtedness allowed to be incurred under Section 6(c), (iii) Liens imposed by Law for taxes (other than payroll taxes), assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of the Holders of a majority of the principal and interest of the Notes outstanding, in their sole discretion, (iv) (A) statutory Liens of landlords (provided that any such landlord has executed a Landlord Waiver and Consent in form and substance satisfactory to the Holders of a majority of the principal and interest of the Notes outstanding) and of carriers, warehousemen (provided that any such warehousemen have executed a Warehouse Waiver and Consent in form and substance satisfactory to the Holders of a majority of the principal and interest of the Notes outstanding), mechanics, materialmen, and (B) other Liens imposed by Law or that arise by operation of Law in the ordinary course of business from the date of creation thereof, in each case only for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of the Holders of a majority of the principal and interest of the Notes outstanding, in their sole discretion, (v) Liens (A) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, Contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations, or (B) arising as a result of progress payments under government contracts, (vi) purchase money Liens, including, without limitation, UCC-1 notice filings by equipment lessors and the like, in connection with the purchase by such Person of equipment in the normal course of business, (vii) Liens securing Subordinated Indebtedness allowed to be incurred under Section 6(c) junior to the Lien under the Notes and (viii) Liens described on Schedule I to this Note.

     “Person” shall mean an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture, or any other entity of whatever nature.

     “Preferred Stock” shall mean with respect to any Person, any and all preferred or preference stock or other preferred equity interests (however designated) of such Person whether no outstanding or issued after the date hereof.

     “Premium Redemption Price” shall have the meaning specified in Section 5(a)(ii).

     “Purchase Agreement” shall mean that certain Investment Unit Purchase Agreement, dated February 28, 2005, among the Issuers and the Holders.

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     “Redemption Warrant” shall have the meaning specified in Section 5(a)(ii).

     “Right of First Refusal and Tag and Co-Sale Agreement” shall mean the Right of First Refusal and Tag and Co-Sale Agreement dated as of April 30, 2009 by and among Parent, Mark Lama, RGGPLS, LLC, MHR and the Senior Management.

     “Rollover Documents” shall mean the Exchange and Rollover Agreement dated as of April 30, 2009 by and among the Company, MHR and the Senior Management.

     “RGGPLS Cure” shall have the meaning specified in Section 6(e).

     “Senior Indebtedness” means, as of any date of determination, the aggregate stated balance sheet amount of all Indebtedness of the Issuers and their Subsidiaries, other than (i) the Notes and (ii) Subordinated Indebtedness, determined on a consolidated basis in accordance with GAAP and incurred in compliance with Section 6(c) hereof, which Senior Indebtedness shall (x) include (A) Indebtedness under the Credit Agreement (including extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) and (B) the Bridge Loans but not any refinancings or replacements thereof (other than refinancings or replacements thereof with Senior Indebtedness due to CapitalSource Finance LLC under the Credit Agreement and which, when aggregated with all other Indebtedness outstanding under the Credit Agreement, does not exceed the principal amount permitted under Section 6(c)(iii)) and (y) otherwise be in the form of credit extensions or other obligations on terms and conditions customarily provided at such time by senior secured lenders, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Obligations. For the avoidance of doubt, Senior Indebtedness (other then the Bridge Loans but not any refinancings or replacement thereof) shall not include any financing arrangements in the form of convertible debt or that would customarily be considered “mezzanine”, “sub debt” or similar financing arrangements.

     “Senior Management” shall mean Glenn Parker, Lewis Stone, Timothy Fairbanks and such other executives party to the Rollover Documents.

     “Subordinated Indebtedness” means Indebtedness (secured or unsecured) incurred by the Company and/or its Subsidiaries that is made expressly subordinated in right to payment to the Obligations, as reflected in a written subordination agreement acceptable to the Holders and approved by the Holders in writing; provided that no such Indebtedness shall provide at any time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (2) total cash interest at a rate in excess of the prevailing market rate for subordinated debt at the time of issuance, except to the extent permitted by the terms of such written subordination agreement.

     “Subsidiary” shall mean, (i) as to the Issuers, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by an Issuer or one or more of its Subsidiaries, and (ii) as to any other Person, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by such Person or by one or more of such Person’s Subsidiaries.

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     “Subsidiary Guaranty” means a guaranty agreement executed by a Subsidiary pursuant to Section 6(l), in form and substance satisfactory to the Holders, the Company and such Subsidiary, guaranteeing payment of the Obligations and providing, without limitation, that such Subsidiary shall be bound by the covenants set forth in this Note, and shall make such representations and warranties as the Holders may reasonably require.

     “Subsidiary Security Agreement” means a pledge and security agreement executed by a Subsidiary pursuant to Section 6(l), containing provisions substantially similar to the grant of security in Section 4 hereof, and in form and substance satisfactory to the Holders, the Company and such Subsidiary, securing payment of the Obligations.

     “Tax Put Right” shall have the meaning specified in Section 5(f).

     “Trading Day” shall mean any day on which the principal United States securities exchange or trading market where the Common Stock (or such other applicable subject security) is then listed or traded, is open for trading.

     “Transaction Documents” shall mean the Merger Documents, the Bridge Loan Documents, the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement), the Notes Documents, the Rollover Documents, the Investor Rights Agreement, the Right of First Refusal and Tag and Co-Sale Agreement, the Voting Agreement and all documents executed and delivered in connection herewith and therewith.

     “Transactions” shall mean, collectively, the transactions to occur pursuant to or in connection with the Transaction Documents, including (a) the consummation of the Merger; (b) the Equity Contribution; (c) the execution and delivery of the Bridge Loan Documents and the borrowings thereunder; (d) the execution and delivery and issuance of the Notes and execution and delivery of the Notes Documents; (e) the issuance of the MHR Warrants, (f) the refinancing of the Credit Agreement, and (g) the payment of all fees and expenses to be paid in connection with the foregoing.

     “UCC” means the Uniform Commercial Code, as it exists on the date of this Note or as it may hereafter be amended, in the State of New York.

     “Voting Agreement” means the Voting Agreement dated as of April 30, 2009, by and among the Company, Parent, Mark Lama, RGGPLS, LLC, MHR and Senior Management.

     “Waiver Warrants” shall mean the warrants to purchase Common Stock issued to MHR on the Effective Date.

     “Warehouse Waiver and Consent” shall mean a waiver/consent in form and substance satisfactory to the Holders from any warehouseman, fulfillment house or other person owning a facility not owned by the Issuers at which any inventory is now or hereafter located for the purpose of providing the Collateral Agent (for the benefit of the Holders) access to such inventory, in each case as such may be modified, amended or supplemented from time to time.

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     2. Payments of Interest and Principal. Subject to the provisions of Section 3 below, payments of principal plus interest on the unpaid principal balance of this Note outstanding from time to time shall be payable in accordance with the following:

          (a) Interest. During the period commencing on the Original Issue Date and terminating on the Maturity Date, interest on the unpaid principal amount of this Note shall accrue at a rate equal to 7 3/4% per annum, compounded monthly, computed on the basis of actual days elapsed over a 360-day year, and shall be payable monthly (commencing on February 28, 2005 and thereafter on the 28th of each month) in cash up to and including the Maturity Date, subject to a ten (10) day grace period; provided that if a required interest payment is not paid within such ten (10) day grace period, interest shall be compounded from the date that such interest was due and payable without regard to such grace period.

          (b) Principal. The principal balance outstanding on this Note, and any accrued and unpaid interest thereon, shall be due and payable to the Holder on February 28, 2012 (the “Maturity Date”). Contemporaneously with the repayment of this Note, the Holder shall surrender this Note, duly endorsed, at the office of the Company.

          (c) Payments. All payments of principal, interest, fees and other amounts due hereunder shall be made by the Issuers in lawful money of the United States of America by wire transfer or by any other method approved in advance by the Holder to the account of the Holder at the address of the Holder set forth in Section 10 hereof or at such other place designated by the Holder in writing to the Company.

          (d) Acceleration of the Maturity Date. Notwithstanding anything to the contrary contained herein, this Note and all other Obligations shall become due and payable together with all accrued interest due on the outstanding principal amount hereunder, at the option of the Holders of at least 25% of the principal amount and interest outstanding exercised, by written notice to the Company, in the case of clauses (i) to (viii) below and without notice or any other action by such Holders in the case of clauses (ix) or (x) below, in the event (each an “Event of Default”) that (i) the Issuers fail to pay the principal of or interest on this Note as and when due, subject to a ten (10) day grace period; (ii) any of the Issuers or their Subsidiaries shall default in the performance of or otherwise breach any of its representations and warranties, covenants or other obligations set forth in this Note, the Purchase Agreement or any of the Notes Documents, and if such default is capable of cure, such default remains uncured beyond any applicable cure period; provided that with respect to any breach or default of the covenants in Section 6, there shall be a fifteen (15) calendar day cure period (to the extent such breach or default is capable of cure) commencing from the earlier of (i) receipt by the Company of written notice of such breach or default from the Holder and (ii) the time at which an authorized officer of the Company or any Subsidiary knew or became aware of such breach or default; provided further that with respect to the covenant set forth in Sections 6(a) there shall be no cure period with respect to any breach or default that adversely affects the Holder; (iii) the Collateral Agent (on behalf of the Holders) shall not have the right to enforce its remedies under Section 4 of this Note or under any Subsidiary Security Agreement; (iv) the Holder shall not have a perfected security interest in the Collateral pursuant to the terms set forth herein or in any Subsidiary Security Agreement other than Holder’s action or inaction; (v) the Company fails when required to remove any restrictive legend of any certificate relating to Conversion Shares, Redemption

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Warrants, Waiver Warrants or any other securities issuable in accordance with the terms of the Notes or the exercise or conversion of the Redemption Warrants, Waiver Warrants or any other convertible securities issuable in accordance with the terms of the Notes, issued to the Holders, and any such failure continues uncured for ten (10) Business Days after the Company has been notified of such failure in writing by the Holder; (vi) the Issuers or any of their Subsidiaries fail to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness of the Issuers or their Subsidiaries having an outstanding principal amount in excess of $250,000 (including, without limitation, any of the Other Notes), or otherwise is in breach or violation of any agreement for Indebtedness in an amount in excess of $250,000 which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder and which breach or violation is not waived or otherwise cured hereunder or under the documents evidencing such Indebtedness, including, without limitation, by exercise of the RGGPLS Cure or ComVest Cure, as applicable, pursuant to Section 6(e); (vii) the entry of a final judgment against any of the Issuers or their Subsidiaries not covered by insurance of a financially sound and reputable insurer that has not declined coverage, which is not subject to appeal by the Issuers or their Subsidiaries and is not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being entered, in an amount in excess of $250,000, or the attachment or seizure of or levy upon any property of the Issuers or their Subsidiaries valued in excess of $250,000 to satisfy an obligation of the Issuers or their Subsidiaries; (viii) the Company provides notice to any Holder of the Notes, including by way of public announcement, at any time, of its intention not to issue, or otherwise refuses to issue, Conversion Shares to any Holder of the Note upon conversion in accordance with the terms of the Notes or shares of Common Stock upon exercise of the Waiver Warrants; (ix) any of the Issuers or their Subsidiaries shall file a petition under bankruptcy, insolvency or debtor’s relief Law or make an assignment for the benefit of its creditors or (x) proceedings shall be instituted against any of the Issuers or their Subsidiaries before a court of competent jurisdiction under any federal or state bankruptcy Law that (X) is for relief against the Issuers or their Subsidiaries in an involuntary case brought with respect to the Issuers or their Subsidiaries in such court, (Y) seeks to appoint a custodian, receiver or other similar official for all or substantially all the Issuers’ property or of their Subsidiaries or (Z) seeks to liquidate the Issuers of their Subsidiaries, and such proceedings remain unstayed and in effect for sixty (60) days. In the event that the Obligations hereunder are accelerated pursuant to this Section 2(d), interest shall continue to accrue at 10 3/4% per annum as of the date of such acceleration until such date as the Holder is paid in full under this Note.

     3. Conversion.

          (a) Conversion at the Option of the Holder. The Holder may, at any time and from time to time on or after the Original Issue Date, convert all or any part of the outstanding principal amount of this Note, plus all accrued interest thereon through the Conversion Date, into a number of fully paid and nonassessable shares of Common Stock (“Conversion Shares”) upon surrender of the Note. The number of shares of Common Stock issuable upon surrender of the Note shall be determined in accordance with the following formula:

Conversion Amount
Conversion Price

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          (b) Mechanics of Conversion. In order to effect a conversion pursuant to this Section 3, the Holder shall: (a) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to the Company and (b) surrender or cause to be surrendered this Note, duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Company. Upon receipt by the Company of a facsimile copy of a Notice of Conversion from a Holder, the Company shall within two (2) business days send, via facsimile, a confirmation to such Holder stating that the Notice of Conversion has been received, advising the Holder of any additional documentation required by the transfer agent for the Common Stock to issue the Conversion Shares in the manner provided in the Notice of Conversion (the “Additional Documentation”) and the name and telephone number of a contact person at the Company regarding the conversion. The Company shall not be obligated to issue Conversion Shares upon a conversion unless either this Note is delivered to the Company as provided above, or the Holder notifies the Company that such certificates have been lost, stolen or destroyed and delivers the documentation to the Company required by Section 13. Such conversion shall be deemed to have been made effective as of the Conversion Date and the rights of the Holder of the Notes being converted shall cease as of the Conversion Date except for the rights to receive Conversion Shares, and the Person entitled to receive the Conversion Shares shall be treated for all purposes as having become the record holder of such Conversion Shares at such time and shall have all the rights and privileges of a holder of Common Stock with respect to such Conversion Shares.

          (c) Delivery of Conversion Shares Upon Conversion. Upon the surrender of this Note accompanied by a Notice of Conversion and any Additional Documentation, the Company shall, no later than the later of (a) the second Business Day following the Conversion Date and (b) the third Business Day following the date of such surrender (or, in the case of lost, stolen or destroyed certificates, after provision of indemnity pursuant to Section 13) (the “Delivery Period”), issue and deliver to the Holder or its nominee (x) that number of Conversion Shares issuable upon conversion of the portion of this Note being converted and (y) a new Note in the form hereof representing the balance of the principal amount hereof not being converted, if any. If the Company’s transfer agent is participating in the Depositary Trust Company (“DTC”) Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend and the Holder thereof is not then required to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Conversion Shares to the Holder by crediting the account of the Holder or its nominee with DTC, as specified in the Notice of Conversion, through its DTC Deposit Withdrawal Agent Commission System (“DTC Transfer”). If the aforementioned conditions to a DTC Transfer are not satisfied, the Company shall deliver to the Holder physical certificates representing the Conversion Shares. Further, the Holder may instruct the Company to deliver to the Holder physical certificates representing the Conversion Shares in lieu of delivering such shares by way of DTC Transfer.

          (d) Adjustment to Conversion Price. The Conversion Price in effect at any time shall be subject to adjustment from time to time upon the happening of certain events, as follows:

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               (i) Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits. If the Company, at any time while this Note is outstanding, (A) shall pay a stock dividend on its Common Stock, (B) subdivide outstanding shares of Common Stock into a larger number of shares, or (C) combine outstanding shares of Common Stock into a smaller number of shares, the Conversion Price shall be multiplied by a fraction the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(d)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

               (ii) Subscription Rights. If the Company, at any time while this Note is outstanding, shall fix a record date for the distribution to all of the holders of Common Stock evidence of its indebtedness or assets or rights, options, warrants or other securities entitling them to subscribe for, purchase, convert to, exchange for or to otherwise acquire any security (excluding those referred to in Section 3(d)(i) above), then in each such case the Conversion Price at which this Note shall thereafter be exercisable shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the average Daily Market Price of the Common Stock for the ten (10) Trading Days prior to the record date mentioned above, and the numerator of which shall be such average Daily Market Price of the Common Stock for the ten (10) Trading Days prior to such record date less the then fair market value at such record date of the portion of such evidence of indebtedness or assets or rights, options, warrants or other securities so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding twenty percent (20%) of the net assets of the Issuers, such fair market value shall be determined by an appraiser selected by the Holders of a majority of the principal amount and interest of the Notes outstanding and reasonably acceptable to the Company. The Company shall pay for all such appraisals. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

               (iii) Other Events. In case of (A) any reclassification of the Common Stock into other securities of the Company, (B) any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property or (C) any merger or consolidation with or into any persons, or any sale or other disposition of all or substantially all of the assets of the Issuers to any person (each of (A), (B) or (C), an “Extraordinary Event”), the Holder shall have the right thereafter to convert this Note into shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Extraordinary Event, that the Holder would have been entitled to receive had it converted this Note immediately prior to such Extraordinary Event (without taking into account any limitations or restrictions on the convertibility of the Notes). In the case of an Extraordinary Event, the terms of any such Extraordinary Event shall include such terms so as to continue to give to the Holder the right to receive the securities, cash or property set forth in this Section 3(d)(iii) upon any conversion following such Extraordinary Event. This provision shall similarly apply to successive Extraordinary Events. For the avoidance of doubt, nothing

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contained in this clause (iii) shall be construed to impair the Issuers’ or Holders’ rights under Section 5, including, without limitation, under Section 5(b).

               (iv) Partial Redemption of Notes Pursuant to Section 5(c). Upon the happening of a partial redemption of the Note pursuant to Section 5(c), the Conversion Price in effect immediately prior to such redemption shall be reduced to the price determined by multiplying the Conversion Price, in effect immediately prior to the redemption, by a fraction, the numerator of which shall be the principal amount of the Note outstanding immediately after the partial redemption and the denominator of which shall be the principal amount of the Note immediately prior to the partial redemption.

               (v) No Impairment. If any event shall occur as to which the provisions of this Section 3(d) are not strictly applicable but the failure to make any adjustment would adversely affect the conversion rights under the Notes in accordance with the essential intent and principles of such Section, then, in each such case, the Conversion Price of the Notes shall be adjusted in such manner as the Board of Directors of the Company shall in good faith determine to be equitable under the circumstances; provided, however, that no adjustment to the Conversion Price shall be made under this clause (v) as a result of any bona fide sale of the Company’s Capital Stock to a third party.

               The Issuers will not, by amendment of their organizational documents or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders hereunder against dilution of the type contemplated by the provisions of this Section 3(d) or other impairment.

          (e) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be, provided, however, that any such adjustment in the Conversion Price shall be reversed or shall not become effective, as applicable, if the Company abandons the action to which the record date pertains.

          (f) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned Subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of Section 5(d).

          (g) Fractional Shares. Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a

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share based on the closing bid price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

          (h) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 3, the Company, at its own expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

     4. Security; Remedies. Unless otherwise defined in this Note, each of the defined terms used in this Section 4 shall have the meanings ascribed to them in the Credit Agreement as of the date hereof.

          (a) To secure the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all the Obligations, each Issuer hereby grants and each Initial Issuer hereby confirms and continues to grant to the Collateral Agent (for the benefit of the Holders) a continuing security interest in and Lien upon, and pledges to the Collateral Agent (for the benefit of the Holders), all of its right, title and interest in and to the following Collateral, which security interest is intended to be a security interest, which is subordinate to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c):

               (i) all of such Issuer’s tangible personal property, including without limitation all present and future Inventory and Equipment (including items of equipment which are or become Fixtures), now owned or hereafter acquired;

               (ii) all of such Issuer’s intangible personal property, including without limitation all present and future Accounts, Contract rights, Permits, General Intangibles, Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Letter-of-Credit Rights, Supporting Obligations, rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing;

               (iii) all of such Issuer’s present and future Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such Issuer; provided, however, that the Holder shall not have a security interest in any rights under any Government Contract of such Issuer or in the related Government Account where the taking of such security interest is a violation of an express prohibition contained in the Government Contract (for purposes of this limitation, the fact that a Government Contract is subject to, or otherwise refers to, Title 31, §  203 or Title 41, § 15 of the United States Code shall not be deemed an express prohibition against assignment thereof) or is prohibited by applicable Law, unless in any case consent is otherwise validly obtained; and

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               (iv) any and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.

          (b) Notwithstanding the foregoing provisions of this Section 4, such grant of a security interest shall not extend to, and the term “Collateral” shall not include, any General Intangibles of Issuers to the extent that (i) such General Intangibles are not assignable or capable of being encumbered as a matter of Law or under the terms of any license or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable Law) without the consent of the licensor thereof or other applicable party thereto, and (ii) such consent has not been obtained; provided, however, that the foregoing grant of a security interest shall extend to, and the term “Collateral” shall include, each of the following: (a) any General Intangible which is in the nature of an Account or a right to the payment of money or a proceed of, or otherwise related to the enforcement or collection of, any Account or right to the payment of money, or goods which are the subject of any Account or right to the payment of money, (b) any and all proceeds of any General Intangible that is otherwise excluded to the extent that the assignment, pledge or encumbrance of such proceeds is not so restricted, and (c) upon obtaining the consent of any such licensor or other applicable party with respect to any such otherwise excluded General Intangible, such General Intangible as well as any and all proceeds thereof that might theretofore have been excluded from such grant of a security interest and from the term “Collateral.”

          (c) Representations and Warranties.

               (i) Upon the execution and delivery of the Original Notes on the Original Issue Date, and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, the Holder had as of such date, and as of the date hereof upon the execution and delivery of the Notes will continue to have, a good, valid and perfected Lien and security interest in the Collateral of the Initial Issuers, which is subordinate only to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c) and subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. Upon the execution and delivery of this Note (and in the case of any future Subsidiary, upon the execution and delivery of the Subsidiary Guaranty and Subsidiary Security Agreement), and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, the Holder will have, a good, valid and perfected Lien and security interest in the Collateral of Diabetes and National (and any future Subsidiary that executes and delivers a Subsidiary Guaranty and Subsidiary Security Agreement), which is subordinate only to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c) and subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. Except as expressly permitted by the Notes, each Issuer owns its interests in the Collateral free and clear of any Liens and no financing statement relating to any of the Collateral is on file in any public office except those (i) on behalf of the Holders, (ii) in connection with Permitted Liens and/or (iii) those being terminated.

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               (ii) No Issuer (or predecessor by merger or otherwise of such Issuer), has within the five-year period preceding the date hereof, had a different name from the name of such Issuer listed on the signature pages hereof, except the names set forth on Schedule 4(c).

               (iii) This Note shall create a continuing security interest in the Collateral and the security interest created herein shall (i) remain in full force and effect until the payment and performance in full of the Obligations, (ii) be binding upon Issuers and their respective successors and assigns, and (iii) inure, together with the rights and remedies of the Holders and the Collateral Agent hereunder, to the benefit of the Holders, the Collateral Agent and their successors, transferees and assigns.

          (d) Collateral Administration.

               (i) All Collateral (except Deposit Accounts) will at all times be kept by Issuer at the locations set forth on Schedule 4(d) and shall not, without thirty (30) calendar days prior written notice to the Collateral Agent, be moved therefrom unless the Collateral Agent has entered into the necessary documents to perfect and enforce its security interest therein at such new location, and in any case shall not be moved outside the continental United States.

               (ii) Each Issuer shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit such records to the Collateral Agent on such periodic basis as the Collateral Agent may request. Following the occurrence and during the continuance of an Event of Default, if requested by the Collateral Agent, such Issuer shall execute and deliver to the Collateral Agent formal written assignments (or, in the case of Medicaid/Medicare Account Debtors, documents necessary to comply with the Federal Assignment of Claims Act) of all of its Accounts weekly or daily as the Collateral Agent may request, including all Accounts created since the date of the last assignment, together with copies of claims, invoices and/or other information related thereto. To the extent that collections from such assigned accounts exceed the outstanding principal amount together with any accrued interest due on the Notes and all First Priority Lien Indebtedness, such excess amount shall not accrue interest in favor of such Issuer, but shall be available to such Issuer upon such Issuer’s written request.

               (iii) Following an occurrence or during the continuance of an Event of Default, any of the Collateral Agent’s officers, employees, representatives or agents shall have the right, at any time during normal business hours, in the name of the Collateral Agent, any designee of the Collateral Agent or Issuers, to verify the validity, amount or any other matter relating to any Accounts or Inventory of Issuer. Issuers shall cooperate fully with the Collateral Agent in an effort to facilitate and promptly conclude such verification process.

               (iv) To expedite collection, each Issuer shall endeavor in the first instance to make collection of its Accounts for the Collateral Agent. The Collateral Agent shall have the right at all times after the occurrence and during the continuance of an Event of Default to notify (a) Account Debtors owing Accounts to Issuer other than Medicaid/Medicare Account Debtors that their Accounts have been assigned to the Collateral Agent and to collect

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such Accounts directly in its own name and to charge collection costs and expenses, including reasonable attorney’s fees, to such Issuer, and (b) Medicaid/Medicare Account Debtors that such Issuer has waived any and all defenses and counterclaims it may have or could interpose in any such action or procedure brought by the Collateral Agent to obtain a court order recognizing the collateral assignment or security interest and lien of the Collateral Agent in and to any Account or other Collateral and that the Collateral Agent is seeking or may seek to obtain a court order recognizing the collateral assignment or security interest and lien of the Collateral Agent in and to all Accounts and other Collateral payable by Medicaid/Medicare Account Debtors.

               (v) As and when determined by the Collateral Agent in its sole discretion but not more often than four (4) times per year prior to the occurrence and continuance of an Event of Default, the Collateral Agent may perform the searches described in clauses (a), (b) and (c) below against Issuer, all at Issuer’s expense: (a) UCC searches with the Secretary of State of the jurisdiction of organization of each Issuer and the Secretary of State and local filing offices of each jurisdiction where Issuer maintain their respective executive offices, a place of business or assets; (b) lien searches with the United States Patent and Trademark Office and the United States Copyright Office; and (c) judgment, federal tax lien and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above.

               (vi) Each Issuer (a) shall provide prompt written notice to its current bank to transfer all items, collections and remittances to the Concentration Account, (b) shall provide prompt written notice to each Account Debtor (other than Medicaid/Medicare Account Debtors) that the Collateral Agent has been granted a lien and security interest in, upon and to all Accounts applicable to such Account Debtor and shall direct each Account Debtor to make payments to the appropriate Lockbox Account, and each Issuer hereby authorizes the Collateral Agent, upon any failure to send such notices and directions within ten (10) calendar days after the date hereof (or ten (10) calendar days after the Person becomes an Account Debtor), to send any and all similar notices and directions to such Account Debtors, and (c) shall do anything further that may be lawfully required by the Collateral Agent to create and perfect the Collateral Agent’s lien on any collateral and effectuate the intentions of the Collateral Documents. At the Collateral Agent’s request, each Issuer shall immediately deliver or make arrangements to deliver to the Collateral Agent all items for which the Collateral Agent must receive possession to obtain a perfected security interest and all notes, certificates, and documents of title, Chattel Paper, warehouse receipts, Instruments, and any other similar instruments constituting Collateral.

               (vii) Each Issuer shall give the Collateral Agent at least 30 days’ prior written notice of (i) any change in such Issuer’s name, identity or corporate structure and (ii) any reincorporation, reorganization or other action that results in a change of the jurisdiction of organization of such Issuer.

               (viii) If any Event of Default shall have occurred and be continuing, the Collateral Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (i) require each Issuer to, and each Issuer hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the

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Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Collateral Agent deems appropriate, (iv) take possession of any Issuer’s premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of such Issuer’s equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii), and collecting any Obligation, (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable, and (vi)  provide entitlement orders with respect to Security Entitlements (as defined in Section 8-102 of the UCC) and other Investment Property constituting a part of the Collateral and, without notice to any Issuer, transfer to or register in the name of the Collateral Agent or any of its nominees any or all of the Securities Collateral (defined below). The Collateral Agent or any Holder may be the purchaser of any or all of the Collateral at any such sale and the Collateral Agent, as agent for and representative of the Holders (but not any Holder in its individual capacity unless Holders of a majority of the principal amount and interest of the Notes shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Issuer, and each Issuer hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Issuer agrees that, to the extent notice of sale shall be required by law, at least ten days’ notice to such Issuer of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Issuer hereby waives any claims against the Collateral Agent and the Holders arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Agent and the Holders accept the first offer received and do not offer such Collateral to more than one offeree; provided that nothing contained herein shall be deemed to be a waiver by any Issuer or any Subsidiary that such sale must be conducted in a commercially reasonable manner and otherwise in accordance with applicable Law. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Obligations, Issuers shall be jointly and severally liable for the deficiency and the fees of any attorneys employed by the Collateral Agent to collect such deficiency. Each Issuer further agrees that a breach of any of the covenants contained in this Section 4(d)(viii) will cause irreparable injury to the Collateral Agent and the Holders, that the Collateral Agent and the Holders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this

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Section shall be specifically enforceable against such Issuer, and each Issuer hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Obligations becoming due and payable prior to their stated maturities.

          (e) Power of Attorney. The Collateral Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Issuer (without requiring the Collateral Agent to act as such, but to be exercised after the occurrence and during the continuance of an Event of Default) with full power of substitution to do the following: (i) endorse the name of any such Person upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to such Person and constitute collections on its or their Accounts; (ii) execute in the name of such Person any financing statements, schedules, assignments, instruments, documents, and statements that it is or they are obligated to give the Collateral Agent under any of the Notes Documents; and (iii) do such other and further acts and deeds in the name of such Person that the Collateral Agent may deem necessary or desirable to enforce any Account or other Collateral or to perfect the Collateral Agent’s security interest or Lien in any Collateral (including any additional Collateral pursuant to Sections 6(d) and 6(l)). In addition, if any such Person breaches its obligation hereunder to direct payments of Accounts or the proceeds of any other Collateral to the appropriate Lockbox Account, the Collateral Agent, as the irrevocably made, constituted and appointed true and lawful attorney for such Person pursuant to this paragraph, may, by the signature or other act of any of the Collateral Agent’s officers or authorized signatories (without requiring any of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral to the appropriate Lockbox Account.

          (f) Intercreditor Agreement. This Note and the other Notes Documents and all rights, remedies and obligations under this Note and the other Notes Documents are subject to the Amended and Restated Senior Subordination Agreement, dated as of April 30, 2009, by and among the Holders, the Collateral Agent and CapitalSource Finance LLC in the form attached hereto as Exhibit B, as it may be amended or modified from time to time in accordance with the terms thereof (the “Intercreditor Agreement”) and the ComVest Subordination Agreement. The parties to this Note and the other Notes Documents and all Persons claiming any right under or in respect of this Note and the other Notes Documents are bound by and (to the extent provided in the Intercreditor Agreement and the ComVest Subordination Agreement) entitled to the benefit of the Intercreditor Agreement and the ComVest Subordination Agreement.

          (g) Acknowledgement of Joint and Several Liability; Additional Subsidiaries.

               (i) Each Issuer acknowledges that it is jointly and severally liable for all of the Obligations. Each Issuer expressly understands, agrees and acknowledges that (i) Issuers are all Affiliated entities by common ownership, (ii) each Issuer desires to have the availability of one common issuance of Notes instead of separate issuances, (iii) each Issuer has requested that the Holder purchase the Note on the terms herein provided, (iv) Holders will be relying on a Lien upon, all of Issuers’ assets even though the proceeds of any particular Note may not be advanced directly to a particular Issuer, (v) each Issuer will nonetheless benefit by

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the issuance of the Notes to the Holders, and (vi) all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in the Notes Documents shall be applicable to and shall be binding upon each Issuer.

               (ii) From time to time subsequent to the date hereof, additional Subsidiaries may guarantee the Obligations and pledge additional Collateral by entering into a Subsidiary Guaranty and Subsidiary Security Agreement in accordance with Section 6(l). Each Issuer expressly agrees that its Obligations shall not be affected or diminished by the addition or release of any Issuer or Subsidiary hereunder, nor by any election of the Holders (in their sole discretion) not to cause any Subsidiary to comply with Section 6(l). The grant of security interest hereunder shall be fully effective as to any Issuer that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be an Issuer hereunder or party to a Subsidiary Guaranty and Subsidiary Security Agreement.

          (h) Further Assurances. Each Issuer agrees that from time to time, at the expense of the Issuers, such Issuer will promptly execute, obtain, deliver, file, register and/or record all financing statements, continuation statements, stock powers, further instruments and other documents, or cause the execution, filing, registration, recording or delivery of any of the foregoing and take all further action, that may be necessary or desirable, or that the Collateral Agent may request, to be executed, filed, registered, obtained, delivered or recorded, in order to create, maintain, perfect, preserve, validate or otherwise protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral, including any additional Collateral pursuant to Sections 6(d) and 6(l). Without limiting the generality of the foregoing, each Issuer will: (i) notify the Collateral Agent in writing of receipt by such Issuer of any interest in Chattel Paper and, at the request of the Collateral Agent, mark conspicuously each item of Chattel Paper and each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such Collateral is subject to the security interest granted hereby, (ii) deliver to the Collateral Agent all promissory notes and other Instruments and, at the request of the Collateral Agent, all original counterparts of Chattel Paper, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (iii) (A) execute (if necessary) and file such financing or continuation statements, or amendments thereto, (B) deliver such documents, instruments, notices, records and consents and take such other actions necessary to establish that the Collateral Agent has control over electronic Chattel Paper and Letter-of-Credit Rights of such Issuer and (C) deliver such other instruments or notices, in each case, as may be necessary or desirable, or as the Collateral Agent may request, in order to perfect and preserve the security interests granted or purported to be granted hereby, (iv) within two business days of learning thereof, report to the Collateral Agent any reclamation, return or repossession of goods in excess of $10,000 (individually or in the aggregate), (v) furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail, (vi) defend the Collateral and the Collateral Agent’s perfected Lien thereon against any claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent, and pay all reasonable costs and expenses in connection with such defense, which at the Collateral Agent’s discretion may be added to the Obligations; and (vii) use commercially reasonable efforts to obtain any necessary consents of third parties to

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the creation and perfection of a security interest in favor of the Collateral Agent with respect to any Collateral. Each Issuer hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral (including any financing statement indicating that it covers “all assets” or “all personal property” of such Issuer) without the signature of any Issuer.

          (i) Acquired Mortgaged Property Etc. Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the locations set forth on Schedule 4(i) unless the Company shall provide to the Holders at least thirty (30) Business Days prior written notice. From and after the Effective Date, in the event that (i) any Issuer or any Subsidiary acquires any fee interest in real property or any Leasehold Property or (ii) at the time any Person becomes a Subsidiary and following compliance with Section 6(l), such Person owns or holds any fee interest in real property or any Leasehold Property, (any such interest in real property or Leasehold Property described in the foregoing clause (i) or (ii) being a “Acquired Mortgaged Property”), if a mortgage is being granted in favor of any Senior Indebtedness, the Company or such Subsidiary shall deliver to Collateral Agent, as soon as practicable after such Person acquires such Acquired Mortgaged Property or becomes a Subsidiary and following compliance with Section 6(l), as the case may be, a fully executed and notarized Mortgage junior only to the mortgage securing the Senior Indebtedness, in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Person in such Acquired Mortgaged Property; and such opinions, appraisal, documents, title insurance, environmental reports that may be reasonably required by the Collateral Agent.

          (j) Application of Proceeds of Collateral. Except as expressly provided elsewhere in the Notes, all proceeds received by the Collateral Agent and the Holders in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in the following order of priority, subject to the Intercreditor Agreement and the ComVest Subordination Agreement.

               FIRST: To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Agent, the Holders and their agents and counsel, and all other expenses, liabilities and advances made or incurred by the Collateral Agent and the Holders in connection therewith, and all amounts for which the Collateral Agent and the Holders are entitled to indemnification hereunder and all advances made by the Collateral Agent and the Holders hereunder for the account of Issuers, and to the payment of all costs and expenses paid or incurred by the Collateral Agent and the Holders in connection with the exercise of any right or remedy hereunder;

               SECOND: To the payment of amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively;

               THIRD: To the payment of other all other Obligations; and

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               FOURTH: To the payment to, or upon the order of, the Issuers, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.

     5. Redemption.

          (a) Optional Redemption.

               (i) Intentionally Deleted.

               (ii) At any time after the first anniversary of the Original Issue Date, and in accordance with the procedures set forth in Section 5(e), the Issuers shall have the option to redeem the Note. If the Issuers elect to redeem the Note pursuant to this Section 5(a)(ii), then the Issuers shall at the option of the Holder (delivered by notice to the Issuers at least two (2) Business Days prior to the redemption date) (a) pay to the Holder the outstanding principal amount of the Note, plus accrued and unpaid interest thereon, through the redemption date (the “Par Redemption Price”) and issue to the Holder a warrant to purchase the number of shares of Common Stock equal to the number of Conversion Shares that the Holder would have been entitled to receive had it converted the Note immediately prior to such redemption date (without taking into account any limitations or restrictions on the convertibility of the Note), which shall have an exercise price equal to the applicable Conversion Price and shall be exercisable until the Maturity Date, substantially in the form attached as Exhibit C (the “Redemption Warrant”), or (b) pay to the Holder an amount equal to 110% of the aggregate outstanding principal amount of the Notes, plus accrued and unpaid interest thereon, if any, through the redemption date (the “Premium Redemption Price”). The Issuers and Holders agree that the letter dated as of the Original Issue Date among MHR, the Company, NH LLC and USPG regarding Procedures with Respect to Redemption shall be terminated as of the Effective Date and shall be of no further force and effect.

          (b) Redemption upon Change of Control. Notwithstanding anything to the contrary contained herein, prior to the occurrence of a Change of Control or in anticipation of a Change of Control, the Issuers shall notify the Holders thereof. Upon the occurrence of or in anticipation of a Change of Control (1) prior to the Bridge Loan Conversion contemplated by clauses (i), (ii), (iii), (iv) or (v) in the applicable definition of Change of Control below, and (2) following the date of the Bridge Loan Conversion, contemplated by clauses (i), (ii) (iii), (iv), (v) or (vi) in the applicable definition of Change of Control below, the Issuers shall have the option to redeem all, or any portion, of the outstanding Notes by paying to the Holder the Premium Redemption Price. Upon the occurrence of or in anticipation of any Change of Control, in the event that the Issuers had the option, but do not elect such option, or in the event that the Holder has the sole option, the Holder shall have the option to cause the Issuers (or the surviving corporation) to (a) redeem all, or any portion, of the outstanding Notes by paying to the Holder the Premium Redemption Price and/or (b) have the surviving corporation (which shall be a corporation, partnership, trust or limited liability company organized and existing under the Laws of the United States of America, any state thereof or the District of the Columbia) in such Change of Control expressly assume, by documents in form and substance satisfactory to the Holders, all the Obligations of the Company under the Notes and the Notes Documents.

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     Prior to the Bridge Loan Conversion, a “Change of Control” shall mean the occurrence of any of the following events:

     (i) any person or group (as such terms are defined in Section 13(d) or Section 14(d) of the Exchange Act or any successor provision to either of the foregoing) of persons, other than a person who as of the Original Issue Date beneficially owns 25% or more of the combined voting power of all Capital Stock of the Company, becomes the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) directly or indirectly, of more than 50% of the combined voting power of all Capital Stock of the Company or any successor thereto;

     (ii) the failure of RGGPLS Holding, Inc. or any successor thereto (“RGGPLS”) to (A) beneficially own and control, directly or indirectly, at least fifty one percent (51%) of the combined voting power of all Capital Stock of the Company or any successor thereto prior to December 31, 2010 and (B) beneficially own and control, directly or indirectly, at least forty (40%) of the combined voting power of all Capital Stock of the Company or any successor thereto on or after December 31, 2010;

     (iii) the failure of the Company to own and control, directly or indirectly, one hundred percent of the combined voting power of all Capital Stock and the economic interests of USPG, NH LLC and Diabetes and 66-2/3% of National or any successor thereof or transferee of substantially all the assets of any of the foregoing;

     (iv) during any calendar year, individuals who at the beginning of such period constituted the Company’s board of directors (and any new members of such board of directors whose election by the Company’s board of directors or whose nomination for election by the Company’s stockholders was approved by a vote of a majority of the members of such board of directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of the Company’s board of directors;

     (v) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, including by way of merger, consolidation, amalgamation or other business combination by any Issuer of all or substantially all of such Issuer’s assets on a consolidated basis;

     (vi) any “change in/of control” or “sale” or “disposition” or similar event as defined in any document governing indebtedness or Preferred Stock of Parent or any Issuer or other Subsidiary in excess of $ 100,000 which gives the holder of such indebtedness or equity securities the right to accelerate or otherwise require payment, repurchase or redemption of such indebtedness or Preferred Stock prior to the maturity date or term thereof; or

     (viii) the liquidation, dissolution, or the winding up of the affairs of the Company.

     From and after the Bridge Loan Conversion, a “Change of Control” shall mean the occurrence of any of the following events:

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     (i) the failure of ComVest (which for purposes of this Section 5(b) shall include any successor thereof) or any person or group (as such terms are defined in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, the “Exchange Act”) of persons holding the majority of the voting power of or otherwise controlling ComVest, at any time, to maintain sole (A) beneficial ownership (as defined in Rule 13d-3 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934), (B) control, directly or indirectly, in either case, of, the aggregate voting power of all Capital Stock of Parent and the Company (which for purposes of this Section 5(b) shall include any successor thereof) representing at least fifty one percent of the combined voting power of all Capital Stock of each of Parent and the Company and (C) the majority and controlling economic interests of Parent and the Company;

     (ii) any person or group (as such terms are defined in Section 13(d) or Section 14(d) of the Exchange Act or any successor provision to either of the foregoing) of persons, other than a person who as of immediately following the effective time of the Merger beneficially owns 25% or more of the combined voting power of all Capital Stock of the Company, becomes the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) directly or indirectly, of more than 50% of the combined voting power of all Capital Stock of the Company, Parent or ComVest (as applicable) or any successor thereto;

     (iii) the failure of Parent to own and control, directly or indirectly, at least fifty one percent of the combined voting power of all Capital Stock of the Company or any successor thereto;

     (iv) the failure of the Company to own and control, directly or indirectly, one hundred percent of the combined voting power of all Capital Stock and the economic interests of USPG, NH LLC and Diabetes and 66-2/3% of National or any successor thereof or transferee of substantially all the assets of any of the foregoing;

     (v) the failure of ComVest or Parent to maintain voting control, directly or indirectly, of the election of a majority of the Board of Directors (or similar governing body) of each of Parent, the Company and any other Issuer and any of their successors;

     (vi) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, including by way of merger, consolidation, amalgamation or other business combination by any Issuer of all or substantially all of such Issuer’s assets on a consolidated basis;

     (vii) any “change in/of control” or “sale” or “disposition” or similar event as defined in any document governing indebtedness of Parent or any Issuer or other Subsidiary in excess of $ 100,000 which gives the holder of such indebtedness or equity securities the right to accelerate or otherwise require payment, repurchase or redemption of such indebtedness prior to the maturity date or term thereof; or

     (viii) the liquidation, dissolution, or the winding up of the affairs of the Company.

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          (c) Partial Redemption.

               (i) On February 28, 2010, and from time to time thereafter, the Issuers shall redeem that portion of the Notes as is necessary to ensure that the Notes shall not be considered an “applicable high yield discount obligation” within the meaning of Sections 163(e)(5) and 163(i) of the Internal Revenue Code of 1986, as amended or any successor provisions thereof.

               (ii) The Notes shall be redeemed on a pro-rata basis and in portions of the principal of Notes that have denominations of $1,000 principal amount or multiples thereof. Notes in denominations larger than $1,000 principal amount may be redeemed in part but only in whole multiples of $1,000.

               (iii) Upon the partial redemption of the Note, the Issuers shall (i) pay to the Holder a percentage of the Par Redemption Price equal to the Par Redemption Price multiplied by a fraction, the numerator of which shall be the principal amount of the Note being redeemed and the denominator of which shall be the principal amount of the Note immediately prior to the redemption date, and (ii) issue a new Note in the form hereof representing the balance of the principal amount hereof not redeemed and change the Conversion Price in accordance with Section 3(d)(iv) such that such new Note will be convertible into the number of shares of Common Stock equal to the number of Conversion Shares that the Holder would have been entitled to receive had it converted the Note immediately prior to such redemption.

          (d) Intentionally Deleted.

          (e) Redemption Procedures.

               (i) Notice to Holders Upon Redemption. In the case of a redemption pursuant to Sections 5(a), 5(b) or 5(c) at least 30 days prior to a redemption date of Notes, except in the case of Section 5(c) for which at least 60 days prior to such redemption date of the Notes, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes at such Holder’s registered address.

     The notice shall identify the amount Notes to be redeemed and shall state:

     (A) the redemption date;

     (B) the applicable subsection of Section 5 pursuant to which the redemption will occur;

     (C) if applicable, the Redemption Price and the number of shares into which the Redemption Warrant will be exercisable, on the redemption date;

     (D) if applicable, the Premium Redemption Price on the redemption date;

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     (E) if redemption will occur pursuant to Section 5(c), the Notes or portions of Notes to be redeemed, the Redemption Price and the new Conversion Price that will be in effect for each of the remaining Notes.

     (F) that Notes called for redemption must be surrendered to the Company to collect the consideration (or if to an agent of the Company, the name and address of the agent where the Notes must be surrendered); and

     (G) that, unless the Company defaults in making such redemption payment interest on the Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date.

               (ii) Such notice shall be accompanied by an Officer’s Certificate and a written opinion from legal counsel from the Company to the effect that such redemption will comply with the conditions herein.

               (iii) Once notice of redemption is mailed, Notes called for redemption become due and payable on the redemption date. Upon surrender to the Company, the consideration shall be delivered as stated in the notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

               (iv) Holders shall be required to surrender the Notes being purchased by the Company, with an appropriate form duly completed, to the Company at the address specified in the notice of redemption. Holders whose Notes are purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Securities surrendered.

               (v) If any Note surrendered for redemption in the manner provided herein shall not be so paid on the redemption date due to the failure of the Company to deliver the required consideration, interest shall continue to accrue from the redemption date until such consideration is delivered, with such consideration being based on the unpaid principal and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the date and in the manner provided in the Notes which were to be redeemed.

               (vi) Any redemption shall be conditioned upon and occur either concurrently with or immediately prior to or after the consummation of the transaction, including without limitation a Change of Control, related to such redemption.

               (vii) Holders shall have the right to convert the Notes or any portion thereof in accordance with Section 3 at any time prior to the actual redemption of the Notes or applicable portion of the Notes, including without limitation, during the thirty (30) day (or, in the case of Section 5(c), sixty (60) day) notice period under this Section 5(e).

          (f) Tax Put Right.

               (i) For 30 days following a redemption in which the Holder receives Redemption Warrants, (A) the Holder shall have a right (the “Tax Put Right”) by written notice to the Company (which such notice shall include the number of shares of Common

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Stock desired to be put to the Company and the value thereof as of the date of such notice) to require the Issuers to purchase an amount of shares of Common Stock from the Holder, based on the average Daily Market Price during the ten (10) Trading Days prior to such redemption, that is equal to an amount of up to $5,000,000 in the aggregate for all such redemptions for all Holders of all Notes and (B) if the amount received by the Holder after exercising its rights up to the maximum aggregate amount pursuant to clause (A) is, when combined with the consideration received by the Holder upon redemption of the Convertible Notes, still insufficient to pay the income taxes relating to the redemption, the receipt of the Redemption Warrants and the exercise of the Tax Put Right, then, upon receipt of written notice from the Holder (or any other Holder of Notes) of such insufficiency, the Company shall use commercially reasonable efforts to file one registration statement for all Holders of Notes (regardless of the number of redemptions) as soon as reasonably practicable after such redemption but in any event within thirty (30) days after such redemption and cause such registration statement to be declared effective as soon as practicable after such filing but in any event within sixty (60) days after such filing, failing which the Holders of all Notes shall have an additional Tax Put Right in the amount of up to $2,500,000 in the aggregate for all such redemptions.

               (ii) Upon the receipt of notice from a Holder that such Holder has elected to exercise its Tax Put Right, the Company shall promptly, but in no event later than two (2) business days after the receipt thereof, deliver a copy of such notice to the other Holders. For a period of five (5) Business Days following its receipt of a Tax Put Right notice, each other Holder shall have the right and option (but not the obligation) to also exercise a Tax Put Right by delivering written notice thereof (which such notice shall include the number of shares of Common Stock desired to be put to the Company and the value thereof as of the date of such notice). If the Holders electing to exercise their Tax Put Right elect to put more than the aggregate amount of shares that the Company is required to repurchase pursuant to Section 5(f)(i), then each Holder delivering a Tax Put Right notice shall be entitled to require the Company to repurchase that number of shares of Common Stock calculated by multiplying the aggregate number of shares of Common Stock that the Company is required to repurchase pursuant to Section 5(f)(i) by a fraction the numerator of which is equal to the number of shares of Common Stock elected to be repurchased from such Holder and the denominator of which is equal to the total number of shares of Common Stock elected to be repurchased by all Holders that elect to exercise their Tax Put Right.

     6. Covenants.

          (a) Reservation of Conversion Shares and Common Stock Underlying Waiver Warrants. The Company agrees that it will at all times reserve and keep available out of its authorized shares of Common Stock, free from preemptive rights, solely for the purpose of the issue upon conversion of the Notes, issue upon the exercise of the Waiver Warrants and issuances of shares of Common Stock in accordance with the terms hereof. The Company agrees that the Conversion Shares and shares of Common Stock issued upon the exercise of the Waiver Warrants shall, when issued, be duly and validly issued and fully paid and non-assessable.

          (b) Required Registration. The Company agrees that if any Conversion Shares or shares issued upon the exercise of the Waiver Warrants require registration with or approval of any governmental authority under any Federal or state Law, or any national

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securities exchange, before such shares may be issued upon conversion, the Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be.

          (c) Limitation on Senior Indebtedness.

               (i) The Issuers covenant and agree that so long as any Notes shall remain outstanding, at any time prior to the Bridge Loan Conversion, the Issuers shall not, and shall not permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, including, without limitation, by way of assumption or acquisition in a business combination (each event, an “incurrence”) any Indebtedness other than (x) the Notes, (y) Senior Indebtedness in an aggregate principal amount outstanding not to exceed (1) $15 million of which at least $10 million principal amount of such Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan plus (2) $3 million principal amount under the Bridge Loan; provided, however that the Issuers may incur additional Senior Indebtedness up to $4 million the proceeds of which shall be used for the sole purpose of paying off the Bridge Loan, and (z) Subordinated Indebtedness.

               (ii) The Issuers covenant and agree that so long as any Notes shall remain outstanding, at any time from and after the Bridge Loan Conversion, the Issuers shall not, and shall not permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, including, without limitation, by way of assumption or acquisition in a business combination (each event, an “incurrence”) any Indebtedness other than (x) the Notes, (y) Senior Indebtedness in an aggregate principal amount outstanding not to exceed $18 million (which amount shall be increased by an amount equal to the cash proceeds (net of any broker, finder’s or transaction fees or commissions incurred in connection therewith, if any) of any cash equity contribution to the Company by Parent, the aggregate amount of which equity contributions shall in no event exceed $7 million), at least $10 million principal amount of which Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan; provided however, that the incurrence of any Indebtedness pursuant hereto shall not cause the Consolidated Senior Leverage Ratio to exceed 2.00 to 1.00 for the most recently ended four full Fiscal Quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is incurred determined on a pro forma basis (including pro a forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred and the application of proceeds therefrom had occurred at the beginning of such four Fiscal Quarter period, and (z) Subordinated Indebtedness. Notwithstanding anything contained in the foregoing to the contrary, the Issuers shall be permitted to incur a minimum of $15 million in Senior Indebtedness, provided that at least $10 million principal amount of such Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan.

               (iii) Notwithstanding any provision of this Section 6(c) to the contrary, as long as any Obligations (as such term is defined in the Credit Agreement) (or any extensions, modifications, refinancings, renewals and refundings thereof in accordance with the

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Intercreditor Agreement) are outstanding under the Credit Agreement and the Credit Agreement has not been terminated, the Issuers shall be permitted, and shall be allowed to permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, Senior Indebtedness under the Credit Agreement (including any extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) in the principal amount of $17,000,000 and the provisions of clauses (i) and (ii) above shall not be applicable to any of such Senior Indebtedness unless and until ComVest, Parent or any of their Affiliates becomes the holder of such Indebtedness under the Credit Agreement, whether as a result of the purchase of such Senior Indebtedness pursuant to their exercise of the purchase option under Section 22 of the ComVest Senior Subordination Agreement or otherwise. The limitation on the principal amount of Senior Indebtedness set forth in this clause (iii) shall not limit or otherwise affect the right of the holder of any such Senior Indebtedness to accrue and receive payment of interest (including at the default rate and including postpetition interest), fees, expenses or other charges. Upon the purchase of Senior Indebtedness under the Credit Agreement by ComVest, Parent or any of their Affiliates, this clause (iii) shall be null and void and the limitation on Senior Indebtedness shall be determined pursuant to clauses (i) and (ii) above.

               (iv) If on any date the Issuers incur Senior Indebtedness in breach of this Section 6(c) as a result of the aggregate principal amount of Senior Indebtedness exceeding the amount then permitted under subclause 6(c)(i)(y) or 6(c)(ii)(y) hereof, such breach shall not constitute an Event of Default if, and only if, the Issuers shall have concurrently with such incurrence prepaid to the Holder in respect of the outstanding principal amount of the Note an amount equal to 110% of the amount by which the Senior Indebtedness incurred, when aggregated with all such Senior Indebtedness then outstanding, exceeds the maximum aggregate principal amount of Senior Indebtedness then permitted under such subclause 6(c)(i)(y) or 6(c)(ii)(y). In connection with any payment to the Holder under this Section 6(c)(iv), the Issuers shall comply with the procedures applicable to redemption under Section 5(e) (including the giving of a notice to the Holder at least 30 days in advance of any prepayment) to the same extent as if such prepayment was being made as a redemption of the Notes pursuant to the provisions applicable to redemptions under Sections 5 (a) or (b) above.

          (d) Limitation on Liens. The Issuers and their Subsidiaries shall not create, incur, assume or suffer to exist any Lien upon, in or against, or pledge of, any of the Collateral or any of their properties or assets or any of their authorized but unissued or treasury shares, securities or other equity or ownership or partnership interests, whether now owned or hereafter acquired, except for Permitted Liens; provided further, if the Issuers and their Subsidiaries shall incur any Liens securing Senior Indebtedness, the Issuers and their Subsidiaries shall cause all Obligations to also be secured by a Lien in favor of the Collateral Agent for the benefit of the Holders, pursuant to a validly created and effective security interest, on a basis junior only to such Senior Indebtedness being so secured, in such manner as is consistent with the Credit Agreement and otherwise reasonably acceptable to the Holders of a majority of the principal amount and interest of the Notes outstanding.

          (e) Right to Cure Default of First Priority Lien Indebtedness. The Issuers agree that, upon any default, breach, violation, event, fact or circumstance under any First

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Priority Lien Indebtedness (including a Default or Event of Default under the Credit Agreement, as defined therein) which, with the giving of applicable notice or passage of time or both, would permit the holder of such Indebtedness to declare a default or otherwise accelerate amounts due thereunder, which the Issuers have not cured within the permitted time period and RGGPLS or an RGGPLS Permitted Assignee (as defined below) have not elected, within five (5) Business Days of any such event, to repay, refinance or replace such Indebtedness or otherwise cure or provide funding to the Company for the purposes of curing such default (the “RGGPLS Cure”), MHR Fund Management LLC, its Affiliates, and any Person, directly or indirectly, managed or controlled by MHR Fund Management LLC or its Affiliates, including without limitation, MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP and OTQ LLC (collectively “MHR”) shall have the right, but not the obligation, to fund the repayment of such Indebtedness (including, without limitation, by way of purchasing interests in the loans under the Credit Agreement) or otherwise cure such default within five (5) Business Days of the earlier of (i) the expiration of the RGGPLS Cure period above and (ii) the receipt of notice from RGGPLS or any RGGPLS Permitted Assignee that it has elected not to pursue an RGGPLS Cure. The Company shall give MHR written notice of any such default promptly after the occurrence thereof, but in no event later than two (2) Business Days after the occurrence of any such default. For purposes of the foregoing, an “RGGPLS Permitted Assignee” shall mean the surviving entity in a reorganization or recapitalization of RGGPLS, including without limitation, by way of merger or consolidation with or into another person or entity, if the percentage interest of the members or stockholders, as the case may be, in the equity interests of the surviving entity following consummation of such transaction is substantially the same (on a relative basis) as each such stockholder’s percentage interest in RGGPLS immediately prior to the consummation of such transaction. From and after the date of the Bridge Loan Conversion, all references to RGGPLS in this Section 6(e) shall be replaced by Parent, all references to RGGPLS Cure in this Section 6(e) shall be replaced by “ComVest Cure” and references to RGGPLS Permitted Assignee in this Section 6(e) shall be replaced by “Parent Permitted Assignee”.

          (f) Financial Statements, Financial Reports and Other Information.

               (i) Financial Reports. The Company shall furnish to the Holder (i) as soon as available and in any event within ninety (90) calendar days after the end of each fiscal year of the Company (or such earlier date required by the laws, regulations and rules of the Securities and Exchange Commission), audited annual consolidated financial statements of the Company, including the notes thereto, consisting of a consolidated balance sheet at the end of such completed fiscal year and the related consolidated statements of income, retained earnings, cash flows and owners’ equity for such completed fiscal year, which financial statements shall be prepared and certified without qualification by an independent certified public accounting firm satisfactory to the Holder and accompanied by related management letters, if available, and (ii) as soon as available and in any event within thirty (30) calendar days after the end of each calendar month, unaudited consolidated financial statements of the Company consisting of a balance sheet and statements of income, retained earnings, cash flows and owners’ equity as of the end of the immediately preceding calendar month. All such financial statements shall be prepared in accordance with GAAP consistently applied with prior periods. With each such financial statement, the Company shall also deliver a certificate of its chief financial officer in substantially the form of Exhibit D hereto (a “Compliance Certificate”) stating that (A) such person has reviewed the relevant terms of the Notes Documents and the condition of the

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Company, and (B) no Default or Event of Default has occurred or is continuing, or, if any of the foregoing has occurred or is continuing, specifying the nature and status and period of existence thereof and the steps taken or proposed to be taken with respect thereto.

               (ii) Other Materials. The Issuers shall furnish to the Holder as soon as available, and in any event within ten (10) calendar days after the preparation or issuance thereof or at such other time as set forth below: (1) copies of such financial statements (other than those required to be delivered pursuant to Section 6.1(f)(i) prepared by, for or on behalf of the Company and any other notes, reports and other materials related thereto, including, without limitation, any pro forma financial statements, (2) any reports, returns, information, notices and other materials that the Company shall send to its stockholders, members, partners or other equity owners at any time, (3) all Medicare and Medicaid cost reports and other documents and materials filed by the Company and any other reports, materials or other information regarding or otherwise relating to Medicaid or Medicare prepared by, for or on behalf of the Company, including, without limitation, (A) copies of licenses and Permits required by any applicable Law or Governmental Authority for the operation of its business, (B) Medicare and Medicaid provider numbers and agreements, (C) state surveys pertaining to any healthcare facility operated, owned or leased by the Company and any of its Affiliates or Subsidiaries, and (D) within ten (10) calendar days following the request of the Holder, participating agreements relating to medical plans, (4) (A) within fifteen (15) calendar days following the request of the Holder, a summary report of the status of all payments, denials and appeals of all Medicare and/or Medicaid Accounts and accounts receivable and account payable aging schedule and (B), within thirty (30) calendar days following the request of the Holder, a sales and collection report, including a report of sales, credits issued and collections received, all such reports showing a reconciliation to the amounts reported in the monthly financial statements, (5) promptly upon receipt thereof, copies of any reports submitted to the Company by its independent accountants in connection with any interim audit of the books of such Person or any of its Affiliates and copies of each management control letter provided by such independent accountants, (6) within fifteen (15) calendar days after the execution thereof, a copy of any contracts with the federal government or with a Governmental Authority in the State of New York, Vermont or Washington, and (7) such additional information, documents, statements, reports and other materials as the Holder may reasonably request from a credit or security perspective or otherwise from time to time.

               (iii) Operating Budget. The Company shall furnish to the Holder on or prior to the Effective Date and for each fiscal year of the Company thereafter not later than the earlier of (1) thirty (30) calendar days after the end of each fiscal year or (2) thirty (30) calendar days after the same is available, consolidated month by month projected operating budgets, annual projections, profit and loss statements, balance sheets and cash flow reports of and for the Company for such upcoming fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), in each case prepared in accordance with GAAP consistently applied with prior periods.

          (g) Books and Records; Inspection Rights.

               (i) Each of the Issuers and the Subsidiaries shall (i) keep true, complete and accurate books of record and account in accordance with commercially reasonable business practices in which true and correct entries are made of all of its and their dealings and

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transactions in all material respects; and (ii) set up and maintain on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business, and include such reserves in its quarterly as well as year end financial statements.

               (ii) Each of the Issuers shall permit the representatives of the Holder, at the expense of the Company, from time to time during normal business hours upon reasonable notice, to (i) visit and inspect any of its offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and other papers (but not more often than four (4) times per year so long as no Default or Event of Default exists), (ii) make copies and extracts therefrom, and (iii) discuss its business, operations, prospects, properties, assets, liabilities, condition and/or Accounts and Inventory with its officers and independent public accountants (and by this provision such officers and accountants are authorized to discuss the foregoing).

          (h) Active Diabetes Customers. As of the last day of each calendar month commencing as of the last day of the calendar month in which the Effective Date occurs and continuing through the Term Loan Maturity Date (as defined in the Credit Agreement), the Company shall have not less than 35,000 Active Diabetes Customers; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(h) shall be replaced by the covenant in Schedule 6(h) attached hereto.

          (i) Transfer of Assets. Notwithstanding any other provision of this Note or any other Notes Documents, each of the Issuers shall not and shall cause their Subsidiaries not to sell, lease, transfer, assign or otherwise dispose of any interest in any properties or assets (other than obsolete equipment or excess equipment no longer needed in the conduct of the business in the ordinary course of business and sales of Inventory in the ordinary course of business), or agree to do any of the foregoing at any future time, unless permitted by the terms of the Credit Agreement; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(i) shall be replaced by the covenant in Schedule 6(i) attached hereto.

          (j) Transactions With Affiliates. Each of the Issuers shall not and shall cause their Subsidiaries not to enter into or consummate any transaction of any kind with (i) any of its Affiliates or (ii) any Subsidiary Guarantor or any of their respective Affiliates other than: (a) salary, bonus, severance, employee stock option and other compensation and employment arrangements with directors or officers in the ordinary course of business (including employment arrangements with Mark Lama on customary terms consistent with the Company’s prior employment arrangements and agreements in connection with his participation in the Bridge Loan and the conversion of his participation in the Bridge Loan into Preferred Stock pursuant to the terms of the Bridge Loan), (b) Distributions and dividends permitted pursuant to Section 6(m), (c) transactions with the Holders or any Affiliate of the Holders, (d) payments permitted under and pursuant to written agreements entered into by and between any Issuer or any Subsidiary and one or more of its Affiliates that (A) reflect and constitute transactions on overall terms at least as favorable to such Issuer or Subsidiary as would be the case in an arm’s-

36

length transaction between unrelated parties of equal bargaining power and (B) in the event that the total consideration with respect to any such agreement together with any related agreements exceeds $375,000, has been approved by an independent appraisal or valuation firm; provided that, from and after the date of the Bridge Loan Conversion, any Subordinated Indebtedness issued to an Affiliate in compliance with this subclause (d) shall not be subject to any maximum cash interest rate; provided further, that notwithstanding the foregoing clauses (A) and (B) above such Issuer or Subsidiary shall not enter into or consummate any transaction or agreement pursuant to which it becomes a party to any mortgage, note, indenture or guarantee evidencing any Indebtedness of any of its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant to agreement for any Indebtedness of any such Affiliate, and (e) from and after the date of the Bridge Loan Conversion, transactions with ComVest and its Affiliates in connection with equity investments and contributions by ComVest or its Affiliates to an Issuer or a Subsidiary. Notwithstanding anything to the contrary herein, it shall be a condition precedent to any issuance of Subordinated Indebtedness permitted under subclause (d) above and any equity investment or contribution permitted under subclause (e) above, that the Holders or any of their Affiliates shall have been given the prior notice of and opportunity to participate ratably (based on the relative ownership of Common Stock on a fully diluted and as-converted basis of ComVest and all the Holders and their respective Affiliates) in providing such equity investments (including equity equivalents and equity linked securities), contributions and Subordinated Indebtedness on no less favorable terms and conditions as those applicable to ComVest and its Affiliates.

          (k) Investments; New Facilities or Collateral; Subsidiaries. Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to (i) purchase, own, hold, invest in or otherwise acquire obligations or Capital Stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person, or any joint venture, that is not in the healthcare industry, including without limitation insurance related services to Medicare and managed care end users, so long as the equity and assets so acquired shall constitute Collateral under the Notes Documents, or (ii) make or permit to exist any loans, advances or guarantees to or for the benefit of any Person or assume, guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of any other Person (other than those created by the Notes Documents and Indebtedness permitted to be incurred under Section 6(c) and other than (A) trade credit extended in the ordinary course of business, (B) advances for business travel and similar temporary advances made in the ordinary course of business to officers, directors and employees, and (C) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business). Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the locations set forth on Schedule 6(k) unless the Company shall provide to the Holder at least thirty (30) Business Days prior written notice. Notwithstanding any provision of this Section 6(k) to the contrary, the Issuers may make Acquisitions to the extent permitted by the Credit Agreement so long as the equity and assets so acquired shall constitute Collateral under the Notes Documents; provided that from and after the date of the Bridge Loan Conversion, upon the acquisition (whether by purchase, assignment, participation or otherwise) of ComVest or its Affiliates of any Senior Indebtedness, this Section 6(k) shall be replaced by the covenant in Schedule 6(k) attached hereto.

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          (l) Subsidiaries. Any Subsidiary of the Company that is not an Issuer as of the date hereof and any newly acquired or created Subsidiary shall promptly execute a Subsidiary Guaranty and a Subsidiary Security Agreement, and such other documents and such other documents and instruments as the Holder may reasonably require.

          (m) Restricted Payments. Each of the Issuers shall not and shall cause their Subsidiaries not to (i) declare, pay or make any dividend or Distribution on any shares of capital stock or other securities or interests (other than dividends or Distributions payable in its stock, or split-ups or reclassifications of its stock), (ii) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital stock or other securities or interests or of any options to purchase or acquire any of the foregoing (provided, however, that such Issuer or Subsidiary may redeem its capital stock from terminated employees pursuant to, but only to the extent required under, the terms of the related employment agreements as long as no Default or Event of Default has occurred and is continuing or would be caused by or result from the payment thereof and as long as the aggregate amount of payments made to such terminating employees in any fiscal year does not exceed $100,000), (iii) otherwise make any payments or Distributions to any stockholder, member, partner or other equity owner in such Person’s capacity as such, or (iv) make any payment of any management or service fee other than pursuant to arrangements that are reasonably acceptable to the Holders and provided that such payments are subject to the execution of a subordination agreement with the Holders in form and substance reasonably acceptable to the Holders (“Management Fee Payments”).

     Except as permitted by the subordination agreement between such lender and the Holders relating to such Subordinated Debt, the Issuers shall not (i) make any prepayment of any part or all of any Subordinated Debt, (ii) repurchase, redeem or retire any instrument evidencing any such Subordinated Debt prior to maturity, or (iii) enter into any agreement (oral or written) which could in any way be construed to amend, modify, alter or terminate any one or more instruments or agreements evidencing or relating to any Subordinated Debt in a manner adverse to Holder, as determined by the Holders of a majority of the principal amount and interest of the Notes outstanding.

          (n) Amendments of Documents Relating to Subordinated Indebtedness. Each of the Issuers shall not, and shall not permit any of their Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to have such Subordinated Indebtedness provide for (1) the payment, prepayment, redemption, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon before ninety-one (91) days after the Maturity Date or later or (2) total cash interest at a rate in excess of the prevailing market rate for subordinated debt at the time of issuance, except to the extent permitted by the terms of any written subordination agreement acceptable to the Holders.

          (o) Charter Documents; Fiscal Year; Dissolution; Use of Proceeds; Accounting Methods. Each of the Issuers shall not, and shall not permit any of their Subsidiaries to, (i) amend, modify, restate or change its certificate of incorporation (including the terms of the Preferred Stock issued pursuant to the Bridge Loan Conversion) or certificate of formation or bylaws or similar organizational documents in a manner that would be adverse to any Issuer or

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any Subsidiary or the Holders or inconsistent with the rights granted to the Holders in connection with the Notes Documents, provided, however, that any such amendment, modification, restatement, or change shall be permitted in connection with any additional equity contributions to Issuer or a Subsidiary, (ii) amend, alter or suspend or terminate or make provisional in any material way, any material Permit without the prior written consent of the Holders of a majority of the principal amount and interest of the Notes outstanding, which consent shall not be unreasonably withheld, (iii) wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking or that would result in any of the foregoing, or (iv) make any material changes in financial or tax accounting methods, principles or practices (or change an annual accounting period), except insofar as may be required by a change in GAAP, applicable Law or any applicable Governmental Authority.

     7. Transfer of Note. Upon due presentment for registration of transfer of this Note, the Company will execute, register and deliver in exchange a new Note equal in aggregate principal amount to the then unpaid principal amount of this Note, dated the date to which interest has been paid and registered in the name of the transferee.

     8. Governing Law. This Note shall be governed by and construed in accordance with the domestic substantive Laws of the State of New York, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

     9. Jurisdiction. The Issuers irrevocably consent to the exclusive jurisdiction of the United States federal courts and the state courts located in the County of New York, State of New York in any suit or proceeding based on or arising under this Note and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Issuers irrevocably waive the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Issuers further agree that service of process upon the Issuers mailed by first class mail shall be deemed in every respect effective service of process upon the Issuers in any such suit or proceeding. The Issuers agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. Nothing herein shall affect the right of the Holder to institute suit and conduct an action in any other appropriate manner, jurisdiction or court or to serve process in any other manner permitted by Law.

     10. Notices. All notices and other communications given to any party hereto pursuant to this Note shall be in writing and shall be delivered, or mailed first class postage prepaid, registered or certified mail, addressed as follows:

          (a) If to the Issuers, to:

NationsHealth, Inc.
13650 N.W. 8th Street
Suite 109
Sunrise, FL 33325
Fax number: (954) 903-5005
Attention: Chief Executive Officer

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with a copy to:

McDermott Will & Emery LLP
201 South Biscayne Blvd.
Miami, Florida 33131
Fax number: (305) 347-6500
Attention: Ira J. Coleman, Esq.
                   Fred Levenson, Esq.
                   Michael Boykins, Esq.

with a copy to:

Foley & Lardner LLP
100 N. Tampa St., Suite 2700
Tampa, Florida 33602
Fax number: (813) 221-4210
Attention: Steven Vazquez, Esq.

          (b) If to the Holder, to:

MHR Fund Management LLC
40 West 57th Street, 24th Floor,
New York, NY 10019
Fax number: (212) 262-9356
Attention: Hal Goldstein and
                   Emily Fine

with a copy to:

O’Melveny & Myers LLP
7 Times Square
Times Square Tower
New York, NY 10036
Fax number: (212) 408-2419
Attention: Patricia M. Perez, Esq.

Each such notice or other communication shall for all purposes be treated as being effective or having been given when delivered, if delivered personally, by e-mail or facsimile with confirmation of receipt or by overnight courier or, if sent by mail, at the earlier of its actual receipt or three (3) days after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid. The Company shall use commercially reasonable efforts to provide Holder with notices that the Company provides under the Credit Agreement concurrently with the giving of such notices under the Credit Agreement and shall provide Holder with copies of such notices upon written request of such Holder no later than five business days following receipt of such written request.

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     11. Company’s Waivers. The Issuers, to the extent permitted by Law, waive and agree not to assert or take advantage of any of the following: (a) any defense based upon an election of remedies by the Holder which may destroy or otherwise impair any subrogation or other rights of the Issuers or any guarantor or endorser of this Note; (b) any duty on the part of the Holder to disclose any facts or other data the Holder may now or hereafter know; (c) acceptance or notice of acceptance of this Note by the Issuers; (d) presentment and/or demand for payment of this Note or any other Obligations; and (e) protest and notice of dishonor with respect to this Note or other Obligations or performance of obligations arising under the Notes Documents.

     12. Amendment; Waiver. All amendments or waivers of any of the terms hereof (including, without limitation, any waiver of acceleration of the Maturity Date) and any payment of this Note with any consideration other than cash, shall be made or effected only with the written consent of the Holders of a majority of the principal amount and interest of the Notes outstanding. No failure or delay on the part of any Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

     13. Replacement of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Note by the Holder, the Company shall issue a replacement instrument, at the Company’s expense, representing such Note in lieu of such lost, stolen, destroyed, or mutilated instrument, provided that the Holder agrees to indemnify the Company for any losses incurred by the Company with respect to such lost instrument (other than the cost of issuing the new instrument).

     14. Headings. The headings of the sections of this Note are inserted for convenience only and do not constitute a part of this Note.

     15. Ranking. The Notes shall rank senior in right of payment to any Indebtedness and future Indebtedness of the Issuers and their Subsidiaries other than the Senior Indebtedness permitted by Section 6(c) and in the Intercreditor Agreement and the ComVest Subordination Agreement.

     16. Assignability. This Note shall be binding upon the Issuers and their successors and assigns and shall inure to the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary contained herein or in the Notes Documents, this Note may be pledged and all rights of the Holder under this Note may be assigned to any Affiliate or to any other person or entity without the consent of the Issuers, subject to the Securities Act of 1933.

     17. Cost of Collection. If default is made in the payment of this Note, the Issuers shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

     18. Remedies Cumulative. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at Law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein

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shall limit a Holder’s right to pursue actual damages for any failure by the Issuers to comply with the terms of this Note. The Issuers acknowledge that a breach by them of their obligations hereunder will cause irreparable harm to the Holder of the Note and that the remedy at Law for any such breach may be inadequate. The Issuers therefore agree, in the event of any such breach or threatened breach, that the Holder of the Note shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

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     IN WITNESS WHEREOF, the Company has caused this Note to be signed and to be dated the day and year first above written.

NATIONSHEALTH, INC.
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO

NATIONSHEALTH HOLDINGS, L.L.C.
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO

UNITED STATES PHARMACEUTICAL GROUP, L.L.C.
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO

DIABETES CARE & EDUCATION, INC.
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO

NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC
By:	/s/ Glenn Parker
	Name:	Glenn Parker
	Title:	CEO

EX-4.28

Exhibit 4.28

Form of Second Amended and Restated 7 ³/₄% Convertible Secured Note issued by NationsHealth, Inc.,
NationsHealth Holdings, L.L.C., United States Pharmaceutical Group, L.L.C., Diabetes Care & Education, Inc., and
National Pharmaceuticals and Medical Products (USA), LLC

SECOND AMENDED AND RESTATED
7 3/4% CONVERTIBLE SECURED NOTE

$[                    ]	, 2009 (the “Effective Date”)
	Original Issue Date: February 28, 2005

N-1

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW WITH RESPECT THERETO, (II) PURSUANT TO RULE 144 OF THE SECURITIES ACT OR (III) UPON THE ADVICE OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.

THIS PROMISSORY NOTE IS SUBORDINATED TO CERTAIN SENIOR INDEBTEDNESS OF THE ISSUERS IN THE MANNER AND TO THE EXTENT SET FORTH IN THE INTERCREDITOR AGREEMENT (AS DEFINED BELOW) AND ALL RIGHTS, REMEDIES AND OBLIGATIONS UNDER THIS NOTE AND THE OTHER NOTES DOCUMENTS ARE SUBJECT TO THE TERMS OF THE INTERCREDITOR AGREEMENT.

          FOR VALUE RECEIVED, NATIONSHEALTH, INC., a Delaware corporation (the “Company”), NATIONSHEALTH HOLDINGS, L.L.C., a Florida limited liability company and a wholly-owned subsidiary of the Company (“NH LLC”), UNITED STATES PHARMACEUTICAL GROUP, L.L.C., a Delaware limited liability company and an indirect wholly-owned subsidiary of the Company (“USPG”), DIABETES CARE & EDUCATION, INC., a South Carolina corporation (“Diabetes”) and NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC, a Florida limited liability company (“National” and jointly and severally with the Company, NH LLC, USPG and Diabetes, the “Issuers”), hereby promise to pay to the order of [                    ] (the “Holder”), at c/o MHR Fund Management LLC, 40 West 57th Street, 24th Floor, New York, New York 10019, the principal amount of [                    ] Dollars ($[          ]) in lawful money of the United States of America, on the terms set forth in Section 2 hereof. This Second Amended and Restated Promissory Note (this “Note”) amends and restates that certain First Amended and Restated Promissory Note, dated as of April 30, 2009 (the “First Amended Notes Issue Date”), issued by the Company, NH LLC, USPG, Diabetes and National to the Holder in the aggregate principal amount of $[                    ] (the “First Amended Note,” and collectively with such other convertible notes issued concurrently therewith, the “First Amended Notes”) which amended and restated that certain Promissory Note, dated as of February 28, 2005, issued by the Company, NH LLC and USPG

(the “Initial Issuers”) to the Holder in the aggregate principal amount of $[___] (the “Original Note,” and collectively with such other convertible notes issued pursuant to the Purchase Agreement (defined herein), the “Original Notes”) and is being issued by the Issuers along with substantially identical convertible notes also designated as Second Amended and Restated 7 3/4% Convertible Secured Notes (the “Other Notes,” and together with this Note, the “Notes”) in an original aggregate principal amount of $15,000,000. The Notes are being issued pursuant to that certain Consent and Waiver to the Convertible Notes, dated April 30, 2009 among the Issuers and the holders thereto (together with the Holder, the “Holders”), pursuant to which the Holders have agreed to amend and restate the Original Notes and waive certain provisions of the Original Notes and the Notes, subject to the terms and conditions therein. Pursuant to the Original Notes, the Initial Issuers granted a security interest to the Collateral Agent (defined herein) for the benefit of the Holders pursuant to Section 4 of the Original Notes, and pursuant to the First Amended Notes, Diabetes and National granted a security interest to the Collateral Agent for the benefit of the Holders pursuant to Section 4 of the First Amended Notes and each of the Issuers acknowledges, confirms and reaffirms the perfected security interest of the Collateral Agent, as amended and restated hereby. The Obligations are secured by a security interest in the assets of the Issuers pursuant to Section 4 of the Notes and will also be secured by a security interest in the assets of any future Subsidiaries pursuant to Section 6(l) of the Notes for the benefit of the Holders.

          1. Definitions. The following terms shall have the meanings ascribed to them below:

          “Acquisition” shall mean the acquisition by the Company of obligations or stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person or any joint venture.

          “Active Diabetes Customer” shall mean, as of the end of any calendar month, a Diabetes Customer of the Issuers who has purchased diabetes medicines or supplies within the 180 day period ending on the last day of such calendar month.

          “Additional Shares of Common Stock” shall have the meaning specified in Section 3(d)(iv).

          “Affiliate” shall mean, as to any Person, any other Person (a) that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, (b) who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect to such Person, or (c) which, directly or indirectly through one or more intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, as the same is in effect on the date hereof) of ten percent (10%) or more of any class of the outstanding voting stock, securities or other equity or ownership interests of such Person. For purposes of this definition, the term “control” (and the correlative terms, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies, whether through ownership of securities or other interests, by Contract or otherwise. “Affiliate” shall include any Subsidiary.

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          “Bridge Loan Agreement” shall mean that certain Bridge Loan Agreement by and between Parent, the Company, USPG, NH LLC, Diabetes and National dated as of April 30, 2009, as amended or modified in effect from time to time in accordance with the ComVest Subordination Agreement and the ComVest Senior Subordination Agreement.

          “Bridge Loan Documents” shall mean the Bridge Loan Documents as defined in the Bridge Loan Agreement.

          “Bridge Loans” shall mean the loans made by Parent under the Bridge Loan Agreement.

          “Business Day” shall mean any day, other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by Law, regulation or executive order to close.

          “Capital Lease” shall mean, as to any Person, a lease of any interest in any kind of property or asset by that Person as lessee that is, should be or should have been recorded as a “capital lease” in accordance with GAAP.

          “Capital Stock” shall mean the capital stock of or other equity interests in a Person.

          “Change of Control Redemption Price” shall have the meaning specified in Section 5(b).

          “Closing Date” shall mean the date of the closing of the Merger.

          “Collateral” shall mean, collectively, all of the real, personal and mixed property in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations.

          “Collateral Agent” means MHR Capital Partners (500) LP.

          “Collateral Documents” means the Notes, the Subsidiary Security Agreements and all other instruments or documents delivered by any of the Issuers or their Subsidiaries pursuant to the Notes or any of the other Notes Documents in order to grant to the Collateral Agent, on behalf of the Holders, a Lien on any real, personal or mixed property of such Person as security for the Obligations.

          “ComVest” shall mean ComVest Investment Partners III, L.P.

          “ComVest Cure” shall have the meaning specified in Section 6(e).

          “ComVest Senior Subordination Agreement” shall mean, that certain Senior Subordination Agreement dated as of April 30, 2009 by and between Parent and CapitalSource Finance LLC, as amended or modified and in effect from time to time.

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          “ComVest Subordination Agreement” shall mean, that certain Subordination Agreement dated as of April 30, 2009 among Parent, the Holders, the Collateral Agent and the Issuers, as amended or modified and in effect from time to time.

          “Consolidated Senior Leverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (i) Senior Indebtedness as at such day to (ii) EBITDA for the consecutive four Fiscal Quarters ending on such day.

          “Contract” means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, license, commitment or other arrangement, understanding or undertaking, commitment or obligation, whether written or oral.

          “Conversion Amount” shall mean the portion of the principal amount of this Note being converted plus any accrued and unpaid interest thereon through the Conversion Date each as specified in the notice of conversion in the form attached as Exhibit A hereto (the “Notice of Conversion”).

          “Conversion Date” shall mean, for any conversion, the date specified in the Notice of Conversion so long as the copy of the Notice of Conversion is faxed (or delivered by other means resulting in notice) to the Company at or before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion; provided, however, that if the Notice of Conversion is not so faxed or otherwise delivered before such time, then the Conversion Date shall be the date the Holder faxes or otherwise delivers the Notice of Conversion to the Company.

          “Conversion Price” shall mean $3.40 per share of common stock, par value $.0001 per share of the Company (“Common Stock”).

          “Conversion Shares” shall have the meaning specified in Section 3(a).

          “Convertible Securities” shall mean any Capital Stock or security convertible into or exchangeable for Common Stock.

          “Customer Acquisition and Related Costs” shall mean costs incurred by the Company in the development of its customer base related to marketing activities, which costs include, without limitation, advertising, promotion, call center and data collection expenses.

          “Credit Agreement” shall mean the Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of April 30, 2009 among the Issuers and CapitalSource Finance LLC, as it may be amended, modified, replaced or refinanced from time to time in accordance with the Intercreditor Agreement.

          “Daily Market Price” shall mean, as of any date of determination, the closing sale price for the Common Stock (or such other applicable subject security), for the Trading Day of such date of determination (subject to equitable adjustment for any stock splits, stock dividends, reclassifications or similar events during such Trading Day and further subject to adjustment as provided herein) on the principal United States securities exchange or trading market where the Common Stock (or such other applicable subject security) is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the closing sale price for the Common Stock (or

4

such other applicable subject security) in the OTC Bulletin Board for such security as reported by Bloomberg, or, if no sale price is reported for such security by Bloomberg, the closing sale price as reported in the “pink sheets” by the Pink Sheets LLC, in each case for such date or, if such date was not a Trading Day for such security, on the next preceding date which was a Trading Day. If the Daily Market Price cannot be calculated for such security as of either of such dates on any of the foregoing bases, the Daily Market Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Holders of a majority of the principal amount and interest of the Notes outstanding and reasonably acceptable to the Company, with the costs of such appraisal to be borne by the Company.

          “Default” shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both, would constitute or be or result in an Event of Default.

          “Deferred Purchase Price Obligations” means any and all obligations of the Company incurred as permitted under the Notes for amounts deferred, financed or withheld in respect of the purchase price for any Diabetes Business Acquisition, including Indebtedness which consists of purchase money financing by the seller and amounts withheld or escrowed as potential set-offs against customer terminations, purchase price adjustments or otherwise.

          “Delivery Period” shall have the meaning specified in Section 3(c).

          “Diabetes Business Acquisition” shall mean the acquisition by the Company of Diabetes Customer lists.

          “Diabetes Customers” shall mean any and all customers and patients of the Company for the purchase of diabetes medicines, supplies and other products, whether now existing or hereinafter acquired or arising.

          “Distribution” shall mean any fee, payment, bonus or other remuneration of any kind, and any repayment of or debt service on loans or other Indebtedness.

          “Dollars” and the sign “$” mean the lawful money of the United States of America.

          “DTC” shall have the meaning specified in Section 3(c).

          “DTC Transfer” shall have the meaning specified in Section 3(c).

          “EBITDA” shall mean, the sum for any period, without duplication, of the following for the Issuers and each Subsidiary, on a consolidated basis: Net Income, (I) plus (a) Interest Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation expense, (d) amortization expense, (e) all other non-cash, non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business, (f) loss from any sale of assets, other than sales in the ordinary course of business, (g) one-time, non-recurring charges and expenses incurred by the Company in connection with the Transactions (“Merger Expenses”), provided that such non-recurring charges and expenses shall not exceed $1,500,000

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during the term of this Note, and (h) severance expenses incurred by the Company in an amount not to exceed $1,000,000 for any twelve month period and an aggregate of $2,000,000 during the term of this Note, and in the case of (a) through (h) above, all of the foregoing determined without duplication and in accordance with GAAP (II) minus (a) gains from any sale of assets, other than sales in the ordinary course of business, (b) other extraordinary or non-recurring gains and (c) non-cash items added in the calculation of Net Income.

          “Equity Contribution” shall mean, in connection with the consummation of the Merger, the contribution by the Senior Management and MHR, directly or indirectly, of rollover equity to or of the Company on the Closing Date pursuant to the Rollover Documents (assuming the conversion into Common Stock of all Options and Convertible Securities outstanding on the Closing Date other than convertible debt instruments) and the purchase or contribution by ComVest and its Affiliates, directly or indirectly, of cash equity and the Bridge Loan to the Company pursuant to the Merger Agreement, the Bridge Note and the Series A Preferred Stock Purchase Agreement, by and between Parent and the Company, dated as of the April 30, 2009 (assuming the conversion into Common Stock of all Options and Convertible Securities outstanding on the Closing Date other than convertible debt instruments).

          “Event of Default” shall have the meaning specified in Section 2(d).

          “Extraordinary Event” shall have the meaning specified in Section 3(d)(iii).

          “Fiscal Quarter” shall mean a fiscal quarter of any fiscal year.

          “First Priority Lien Indebtedness” shall mean Senior Indebtedness of the Issuers and their Subsidiaries secured by a first priority Lien on any assets or property of the Issuers or any such Subsidiaries, including the Indebtedness of the Issuers under the Credit Agreement permitted to be incurred by the Company under Section 6(c).

          “GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time as applied by nationally recognized accounting firms.

          “Governmental Authority” shall mean any federal, state, municipal, national, local or other governmental department, court, commission, board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative, or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case, whether of the United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District of Columbia.

          “Hedge Agreement” means any and all transactions, agreements or documents now existing or hereafter entered into by the Company or its Subsidiaries, which provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

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          “Indebtedness” of any Person shall mean, without duplication, (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes or other similar instruments and all reimbursement or other obligations in respect of letter of credit, bankers acceptances, interest rate swaps, hedges, derivatives or other financial products, (c) all obligations as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of a Person or its Subsidiaries, irrespective of whether such obligation or liability is assumed, (e) all obligations to pay the deferred purchase price of assets (other than Deferred Purchase Price Obligations not to exceed $250,000 outstanding at any time), (f) all obligations owing under Hedge Agreements, (g) all notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, and (h) all obligations or liabilities of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock, equity or other ownership interest purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. For the avoidance of any doubt, Indebtedness does not include trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and any obligations as a lessee under leases that are not Capital Leases.

          “Intercreditor Agreement” shall have the meaning specified in Section 4(f).

          “Interest Expense” shall mean, for any period, total interest expense and fees (including attributable to Capital Leases in accordance with GAAP and capitalized interest) of the Issuers and their Subsidiaries on a consolidated basis with, with respect to all outstanding Indebtedness but excluding all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements.

          “Interest Rate Agreement” shall mean any interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to hedge the position with respect to interest rates.

          “Inventory” shall mean all “inventory” (as defined in the UCC) of the Issuers and the Subsidiaries (or, if referring to another Person, of such other Person), now owned or hereafter acquired, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.

          “Investment Option Preferred Stock” shall mean the Preferred Stock issued by the Company to Parent during the period commencing on the execution date of the Merger Agreement and ending on the first anniversary of the Closing Date pursuant to an investment by Parent of up to $2 million at the same price and on the same terms and conditions as the Investment Preferred Stock.

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          “Investment Preferred Stock” shall mean the Preferred Stock issued by the Company to Parent on the Closing Date pursuant to the Merger Agreement in respect of the obligations of Parent thereunder.

          “Investor Rights Agreement” shall mean the Investor Rights Agreement dated as of April 30, 2009 by and among Parent, Mark Lama, RGGPLS, LLC, MHR and the Senior Management.

          “Landlord Waiver and Consent” shall mean a waiver/consent in form and substance satisfactory to the Holders from the owner/lessor of any premises not owned by the Issuers or their Subsidiaries at which any of the Collateral is now or hereafter located for the purpose of providing the Collateral Agent (for the benefit of the Holders) access to such Collateral, in each case as such may be modified, amended or supplemented from time to time.

          “Law” means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation, Order or other similar requirement.

          “Leasehold Property” means any leasehold interest of any of the Company or its Subsidiaries as lessee under any lease of real property, other than any such leasehold interest designated from time to time by the Collateral Agent in its sole discretion as not being required to be included in the Collateral.

          “Lien” shall mean any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, civil law, statute, or Contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien, hypothecation or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment from security purposes and also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property.

          “Maturity Date” shall have the meaning specified in Section 2(b).

          “Merger Agreement” shall mean the Agreement and Plan of Merger, dated as of April 30, 2009, by and among Parent, Merger Sub and the Company as amended or supplemented pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving, and upon the closing of which Merger, Parent, the members of Senior Management and MHR shall own shares of the Company Capital Stock.

          “Merger Documents” shall mean the collective reference to the Merger Agreement, all material exhibits and schedules thereto and all agreements expressly contemplated thereby.

          “Merger Sub” shall mean NationsHealth Acquisition Corp., a Delaware corporation.

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          “MHR” shall have the meaning specified in Section 6(e).

          “MHR Warrants” shall mean the warrants to purchase Common Stock issued to MHR on the Closing Date pursuant to the Transactions.

          “Mortgage” means a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by the Company or any Subsidiary pursuant to Section 4(i), in such form as may be approved by the Collateral Agent in its sole discretion, in each case with such changes thereto as may be recommended by the Collateral Agent’s local counsel based on local laws or customary local mortgage or deed of trust practices.

          “Net Income” shall mean, for any period, the net income (or loss) of the Issuers and their Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP (and, with respect to expensing of Customer Acquisition and Related Costs, as currently applied by the Company consistent with past practice), provided that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of the Issuers) in which any other Person (other than the Issuers or any of their Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to an Issuer by such Person, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of an Issuer or is merged into or consolidated with an Issuer or any of its Subsidiaries or that Person’s assets are acquired by an Issuer or any of its Subsidiaries, (iii) the income of any Subsidiary of the Issuers to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, Order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) compensation expense resulting from the issuance of Capital Stock, stock options or stock appreciation rights issued to former or current employees, including officers, of an Issuer or any Subsidiary, or the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by an Issuer or such Subsidiary or any Affiliate thereof, and (v) compensation expense resulting from the repurchase of Capital Stock, options and rights described in clause (iv) of this definition of Net Income.

          “Notes Documents” shall mean the Notes, the Transaction Documents as defined in the Purchase Agreement, the Consent and Waiver, dated as of April 30, 2009, the MHR Warrants, the Subsidiary Security Agreements, the Subsidiary Guaranties, and the other Collateral Documents.

          “Obligations” shall mean all obligations of every nature of the Issuers and Subsidiaries from time to time owed to the Holders, the Collateral Agent or any of them, in each case, under the Notes Documents, whether for principal, interest, fees, expenses, indemnification or otherwise (including, without limitation, interest and other amounts that, but for the filing of a petition in bankruptcy with respect to any Issuer or any Subsidiary, would accrue on such obligations, whether or not a claim is allowed against such Issuer or Subsidiary for such amounts in the related bankruptcy proceeding), including to the extent all or any part of such payment is avoided or recovered directly or indirectly from any Holder or the Collateral Agent as a preference, fraudulent transfer or otherwise.

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          “Officer’s Certificate” as applied to any Person that is a corporation, partnership, trust or limited liability company, means a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company.

          “Options” shall mean warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock.

          “Order” means any order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of a Governmental Authority.

          “Original Issue Date” shall mean February 28, 2005.

          “Par Redemption Price” shall have the meaning specified in Section 5(a)(ii).

          “Parent” shall mean ComVest NationsHealth Holdings, LLC.

          “Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Authority.

          “Permitted Liens” means the following: (i) Liens with respect to the Notes and the other Obligations, (ii) Liens with respect to Senior Indebtedness allowed to be incurred under Section 6(c), (iii) Liens imposed by Law for taxes (other than payroll taxes), assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of the Holders of a majority of the principal and interest of the Notes outstanding, in their sole discretion, (iv) (A) statutory Liens of landlords (provided that any such landlord has executed a Landlord Waiver and Consent in form and substance satisfactory to the Holders of a majority of the principal and interest of the Notes outstanding) and of carriers, warehousemen (provided that any such warehousemen have executed a Warehouse Waiver and Consent in form and substance satisfactory to the Holders of a majority of the principal and interest of the Notes outstanding), mechanics, materialmen, and (B) other Liens imposed by Law or that arise by operation of Law in the ordinary course of business from the date of creation thereof, in each case only for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of the Holders of a majority of the principal and interest of the Notes outstanding, in their sole discretion, (v) Liens (A) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, Contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations, or (B) arising as a result of progress payments under government contracts, (vi) purchase money Liens, including, without limitation, UCC-1 notice filings by equipment lessors and the like, in connection with the purchase by such Person of equipment in the normal

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course of business, (vii) Liens securing Subordinated Indebtedness allowed to be incurred under Section 6(c) junior to the Lien under the Notes and (viii) Liens described on Schedule I to this Note.

          “Person” shall mean an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture, or any other entity of whatever nature.

          “Preferred Stock” shall mean with respect to any Person, any and all preferred or preference stock or other preferred equity interests (however designated) of such Person whether no outstanding or issued after the date hereof.

          “Premium Redemption Price” shall have the meaning specified in Section 5(a)(ii).

          “Purchase Agreement” shall mean that certain Investment Unit Purchase Agreement, dated February 28, 2005, among the Issuers and the Holders.

          “Redemption Warrant” shall have the meaning specified in Section 5(a)(ii).

          “Right of First Refusal and Tag and Co-Sale Agreement” shall mean the Right of First Refusal and Tag and Co-Sale Agreement dated as of April 30, 2009 by and among Parent, Mark Lama, RGGPLS, LLC, MHR and the Senior Management.

          “Rollover Documents” shall mean the Exchange and Rollover Agreement dated as of April 30, 2009 by and among the Company, MHR and the Senior Management.

          “Senior Indebtedness” means, as of any date of determination, the aggregate stated balance sheet amount of all Indebtedness of the Issuers and their Subsidiaries, other than (i) the Notes and (ii) Subordinated Indebtedness, determined on a consolidated basis in accordance with GAAP and incurred in compliance with Section 6(c) hereof, which Senior Indebtedness shall (x) include (A) Indebtedness under the Credit Agreement (including extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) and (B) the Bridge Loans but not any refinancings or replacements thereof (other than refinancings or replacements thereof with Senior Indebtedness due to CapitalSource Finance LLC under the Credit Agreement and which, when aggregated with all other Indebtedness outstanding under the Credit Agreement, does not exceed the principal amount permitted under Section 6(c)(iii)) and (y) otherwise be in the form of credit extensions or other obligations on terms and conditions customarily provided at such time by senior secured lenders, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Obligations. For the avoidance of doubt, Senior Indebtedness (other then the Bridge Loans but not any refinancings or replacement thereof) shall not include any financing arrangements in the form of convertible debt or that would customarily be considered “mezzanine”, “sub debt” or similar financing arrangements.

          “Senior Management” shall mean Glenn Parker, Lewis Stone, Timothy Fairbanks and such other executives party to the Rollover Documents.

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          “Subordinated Indebtedness” means Indebtedness (secured or unsecured) incurred by the Company and/or its Subsidiaries that is made expressly subordinated in right to payment to the Obligations, as reflected in a written subordination agreement acceptable to the Holders and approved by the Holders in writing; provided that no such Indebtedness shall provide at any time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (2) total cash interest at a rate in excess of the prevailing market rate for subordinated debt at the time of issuance, except to the extent permitted by the terms of such written subordination agreement.

          “Subsidiary” shall mean, (i) as to the Issuers, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by an Issuer or one or more of its Subsidiaries, and (ii) as to any other Person, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by such Person or by one or more of such Person’s Subsidiaries.

          “Subsidiary Guaranty” means a guaranty agreement executed by a Subsidiary pursuant to Section 6(l), in form and substance satisfactory to the Holders, the Company and such Subsidiary, guaranteeing payment of the Obligations and providing, without limitation, that such Subsidiary shall be bound by the covenants set forth in this Note, and shall make such representations and warranties as the Holders may reasonably require.

          “Subsidiary Security Agreement” means a pledge and security agreement executed by a Subsidiary pursuant to Section 6(l), containing provisions substantially similar to the grant of security in Section 4 hereof, and in form and substance satisfactory to the Holders, the Company and such Subsidiary, securing payment of the Obligations.

          “Tax Put Right” shall have the meaning specified in Section 5(f).

          “Trading Day” shall mean any day on which the principal United States securities exchange or trading market where the Common Stock (or such other applicable subject security) is then listed or traded, is open for trading.

          “Transaction Documents” shall mean the Merger Documents, the Bridge Loan Documents, the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement), the Notes Documents, the Rollover Documents, the Investor Rights Agreement, the Right of First Refusal and Tag and Co-Sale Agreement, the Voting Agreement and all documents executed and delivered in connection herewith and therewith.

          “Transactions” shall mean, collectively, the transactions to occur pursuant to or in connection with the Transaction Documents, including (a) the consummation of the Merger; (b) the Equity Contribution; (c) the execution and delivery of the Bridge Loan Documents and the borrowings thereunder; (d) the execution and delivery and issuance of the Notes and execution and delivery of the Notes Documents; (e) the issuance of the MHR Warrants, (f) the refinancing of the Credit Agreement, and (g) the payment of all fees and expenses to be paid in connection with the foregoing.

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          “UCC” means the Uniform Commercial Code, as it exists on the date of this Note or as it may hereafter be amended, in the State of New York.

          “Voting Agreement” means the Voting Agreement dated as of April 30, 2009, by and among the Company, Parent, Mark Lama, RGGPLS, LLC, MHR and Senior Management.

          “Warehouse Waiver and Consent” shall mean a waiver/consent in form and substance satisfactory to the Holders from any warehouseman, fulfillment house or other person owning a facility not owned by the Issuers at which any inventory is now or hereafter located for the purpose of providing the Collateral Agent (for the benefit of the Holders) access to such inventory, in each case as such may be modified, amended or supplemented from time to time.

          2. Payments of Interest and Principal. Subject to the provisions of Section 3 below, payments of principal plus interest on the unpaid principal balance of this Note outstanding from time to time shall be payable in accordance with the following:

               (a) Interest. During the period commencing on the Original Issue Date and terminating on the Maturity Date, interest on the unpaid principal amount of this Note shall accrue at a rate equal to 7 3/4% per annum, compounded monthly, computed on the basis of actual days elapsed over a 360-day year, and shall be payable monthly (commencing on February 28, 2005 and thereafter on the 28th of each month) in cash up to and including the Maturity Date, subject to a ten (10) day grace period; provided that if a required interest payment is not paid within such ten (10) day grace period, interest shall be compounded from the date that such interest was due and payable without regard to such grace period.

               (b) Principal. The principal balance outstanding on this Note, and any accrued and unpaid interest thereon, shall be due and payable to the Holder on February 28, 2012 (the “Maturity Date”). Contemporaneously with the repayment of this Note, the Holder shall surrender this Note, duly endorsed, at the office of the Company.

               (c) Payments. All payments of principal, interest, fees and other amounts due hereunder shall be made by the Issuers in lawful money of the United States of America by wire transfer or by any other method approved in advance by the Holder to the account of the Holder at the address of the Holder set forth in Section 10 hereof or at such other place designated by the Holder in writing to the Company.

               (d) Acceleration of the Maturity Date. Notwithstanding anything to the contrary contained herein, this Note and all other Obligations shall become due and payable together with all accrued interest due on the outstanding principal amount hereunder, at the option of the Holders of at least 25% of the principal amount and interest outstanding exercised, by written notice to the Company, in the case of clauses (i) to (viii) below and without notice or any other action by such Holders in the case of clauses (ix) or (x) below, in the event (each an “Event of Default”) that (i) the Issuers fail to pay the principal of or interest on this Note as and when due, subject to a ten (10) day grace period; (ii) any of the Issuers or their Subsidiaries shall default in the performance of or otherwise breach any of its representations and warranties, covenants or other obligations set forth in this Note, the Purchase Agreement or any of the Notes Documents, and if such default is capable of cure, such default remains uncured beyond any

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applicable cure period; provided that with respect to any breach or default of the covenants in Section 6, there shall be a fifteen (15) calendar day cure period (to the extent such breach or default is capable of cure) commencing from the earlier of (i) receipt by the Company of written notice of such breach or default from the Holder and (ii) the time at which an authorized officer of the Company or any Subsidiary knew or became aware of such breach or default; provided further that with respect to the covenant set forth in Section 6(a), there shall be no cure period with respect to any breach or default that adversely affects the Holder; (iii) the Collateral Agent (on behalf of the Holders) shall not have the right to enforce its remedies under Section 4 of this Note or under any Subsidiary Security Agreement; (iv) the Holder shall not have a perfected security interest in the Collateral pursuant to the terms set forth herein or in any Subsidiary Security Agreement other than Holder’s action or inaction; (v) the Company fails when required to remove any restrictive legend of any certificate relating to Conversion Shares, Redemption Warrants, MHR Warrants or any other securities issuable in accordance with the terms of the Notes or the exercise or conversion of the Redemption Warrants, MHR Warrants or any other convertible securities issuable in accordance with the terms of the Notes, issued to the Holders, and any such failure continues uncured for ten (10) Business Days after the Company has been notified of such failure in writing by the Holder; (vi) the Issuers or any of their Subsidiaries fail to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness of the Issuers or their Subsidiaries having an outstanding principal amount in excess of $250,000 (including, without limitation, any of the Other Notes), or otherwise is in breach or violation of any agreement for Indebtedness in an amount in excess of $250,000 which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder and which breach or violation is not waived or otherwise cured hereunder or under the documents evidencing such Indebtedness, including, without limitation, by exercise of the ComVest Cure pursuant to Section 6(e); (vii) the entry of a final judgment against any of the Issuers or their Subsidiaries not covered by insurance of a financially sound and reputable insurer that has not declined coverage, which is not subject to appeal by the Issuers or their Subsidiaries and is not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being entered, in an amount in excess of $250,000, or the attachment or seizure of or levy upon any property of the Issuers or their Subsidiaries valued in excess of $250,000 to satisfy an obligation of the Issuers or their Subsidiaries; (viii) the Company provides notice to any Holder of the Notes, including by way of public announcement, at any time, of its intention not to issue, or otherwise refuses to issue, Conversion Shares to any Holder of the Note upon conversion in accordance with the terms of the Notes or shares of Common Stock upon exercise of the MHR Warrants; (ix) any of the Issuers or their Subsidiaries shall file a petition under bankruptcy, insolvency or debtor’s relief Law or make an assignment for the benefit of its creditors or (x) proceedings shall be instituted against any of the Issuers or their Subsidiaries before a court of competent jurisdiction under any federal or state bankruptcy Law that (X) is for relief against the Issuers or their Subsidiaries in an involuntary case brought with respect to the Issuers or their Subsidiaries in such court, (Y) seeks to appoint a custodian, receiver or other similar official for all or substantially all the Issuers’ property or of their Subsidiaries or (Z) seeks to liquidate the Issuers of their Subsidiaries, and such proceedings remain unstayed and in effect for sixty (60) days. In the event that the Obligations hereunder are accelerated pursuant to this Section 2(d), interest shall continue to accrue at 10 3/4% per annum as of the date of such acceleration until such date as the Holder is paid in full under this Note.

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          3. Conversion.

               (a) Conversion at the Option of the Holder. The Holder may, at any time and from time to time on or after the Original Issue Date, convert all or any part of the outstanding principal amount of this Note, plus all accrued interest thereon through the Conversion Date, into a number of fully paid and nonassessable shares of Common Stock (“Conversion Shares”) upon surrender of the Note. The number of shares of Common Stock issuable upon surrender of the Note shall be determined in accordance with the following formula:

Conversion Amount
Conversion Price

               (b) Mechanics of Conversion. In order to effect a conversion pursuant to this Section 3, the Holder shall: (a) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to the Company and (b) surrender or cause to be surrendered this Note, duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Company. Upon receipt by the Company of a facsimile copy of a Notice of Conversion from a Holder, the Company shall within two (2) business days send, via facsimile, a confirmation to such Holder stating that the Notice of Conversion has been received, advising the Holder of any additional documentation required by the transfer agent for the Common Stock to issue the Conversion Shares in the manner provided in the Notice of Conversion (the “Additional Documentation”) and the name and telephone number of a contact person at the Company regarding the conversion. The Company shall not be obligated to issue Conversion Shares upon a conversion unless either this Note is delivered to the Company as provided above, or the Holder notifies the Company that such certificates have been lost, stolen or destroyed and delivers the documentation to the Company required by Section 13. Such conversion shall be deemed to have been made effective as of the Conversion Date and the rights of the Holder of the Notes being converted shall cease as of the Conversion Date except for the rights to receive Conversion Shares, and the Person entitled to receive the Conversion Shares shall be treated for all purposes as having become the record holder of such Conversion Shares at such time and shall have all the rights and privileges of a holder of Common Stock with respect to such Conversion Shares.

               (c) Delivery of Conversion Shares Upon Conversion. Upon the surrender of this Note accompanied by a Notice of Conversion and any Additional Documentation, the Company shall, no later than the later of (a) the second Business Day following the Conversion Date and (b) the third Business Day following the date of such surrender (or, in the case of lost, stolen or destroyed certificates, after provision of indemnity pursuant to Section 13) (the “Delivery Period”), issue and deliver to the Holder or its nominee (x) that number of Conversion Shares issuable upon conversion of the portion of this Note being converted and (y) a new Note in the form hereof representing the balance of the principal amount hereof not being converted, if any. If the Company’s transfer agent is participating in the Depositary Trust Company (“DTC”) Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend and the Holder thereof is not then required to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Conversion Shares to the Holder by crediting the account of the

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Holder or its nominee with DTC, as specified in the Notice of Conversion, through its DTC Deposit Withdrawal Agent Commission System (“DTC Transfer”). If the aforementioned conditions to a DTC Transfer are not satisfied, the Company shall deliver to the Holder physical certificates representing the Conversion Shares. Further, the Holder may instruct the Company to deliver to the Holder physical certificates representing the Conversion Shares in lieu of delivering such shares by way of DTC Transfer.

               (d) Adjustment to Conversion Price. The Conversion Price in effect at any time shall be subject to adjustment from time to time upon the happening of certain events, as follows:

                    (i) Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits. If the Company, at any time while this Note is outstanding, (A) shall pay a stock dividend on its Common Stock, (B) subdivide outstanding shares of Common Stock into a larger number of shares, or (C) combine outstanding shares of Common Stock into a smaller number of shares, the Conversion Price shall be multiplied by a fraction the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(d)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

                    (ii) Subscription Rights. If the Company, at any time while this Note is outstanding, shall fix a record date for the distribution to all of the holders of Common Stock evidence of its indebtedness or assets or rights, options, warrants or other securities entitling them to subscribe for, purchase, convert to, exchange for or to otherwise acquire any security (excluding those referred to in Section 3(d)(i) above), then in each such case the Conversion Price at which this Note shall thereafter be exercisable shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the average Daily Market Price of the Common Stock for the ten (10) Trading Days prior to the record date mentioned above, and the numerator of which shall be such average Daily Market Price of the Common Stock for the ten (10) Trading Days prior to such record date less the then fair market value at such record date of the portion of such evidence of indebtedness or assets or rights, options, warrants or other securities so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding twenty percent (20%) of the net assets of the Issuers, such fair market value shall be determined by an appraiser selected by the Holders of a majority of the principal amount and interest of the Notes outstanding and reasonably acceptable to the Company. The Company shall pay for all such appraisals. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

                    (iii) Other Events. In case of (A) any reclassification of the Common Stock into other securities of the Company, (B) any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property or (C)

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any merger or consolidation with or into any persons, or any sale or other disposition of all or substantially all of the assets of the Issuers to any person (each of (A), (B) or (C), an “Extraordinary Event”), the Holder shall have the right thereafter to convert this Note into shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Extraordinary Event, that the Holder would have been entitled to receive had it converted this Note immediately prior to such Extraordinary Event (without taking into account any limitations or restrictions on the convertibility of the Notes). In the case of an Extraordinary Event, the terms of any such Extraordinary Event shall include such terms so as to continue to give to the Holder the right to receive the securities, cash or property set forth in this Section 3(d)(iii) upon any conversion following such Extraordinary Event. This provision shall similarly apply to successive Extraordinary Events. For the avoidance of doubt, nothing contained in this clause (iii) shall be construed to impair the Issuers’ or Holders’ rights under Section 5, including, without limitation, under Section 5(b).

                    (iv) No Impairment. If any event shall occur as to which the provisions of this Section 3(d) are not strictly applicable but the failure to make any adjustment would adversely affect the conversion rights under the Notes in accordance with the essential intent and principles of such Section, then, in each such case, the Conversion Price of the Notes shall be adjusted in such manner as the Board of Directors of the Company shall in good faith determine to be equitable under the circumstances; provided, however, that no adjustment to the Conversion Price shall be made under this clause (iv) as a result of any bona fide sale of the Company’s Capital Stock to a third party.

                    The Issuers will not, by amendment of their organizational documents or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders hereunder against dilution of the type contemplated by the provisions of this Section 3(d) or other impairment.

               (e) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be, provided, however, that any such adjustment in the Conversion Price shall be reversed or shall not become effective, as applicable, if the Company abandons the action to which the record date pertains.

               (f) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned Subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of Section 5(d).

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               (g) Fractional Shares. Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the closing bid price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

               (h) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 3, the Company, at its own expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

          4. Security; Remedies. Unless otherwise defined in this Note, each of the defined terms used in this Section 4 shall have the meanings ascribed to them in the Credit Agreement as of the date hereof.

               (a) To secure the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all the Obligations, each Issuer hereby grants and each Initial Issuer hereby confirms and continues to grant to the Collateral Agent (for the benefit of the Holders) a continuing security interest in and Lien upon, and pledges to the Collateral Agent (for the benefit of the Holders), all of its right, title and interest in and to the following Collateral, which security interest is intended to be a security interest, which will be subordinate to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c):

                    (i) all of such Issuer’s tangible personal property, including without limitation all present and future Inventory and Equipment (including items of equipment which are or become Fixtures), now owned or hereafter acquired;

                    (ii) all of such Issuer’s intangible personal property, including without limitation all present and future Accounts, Contract rights, Permits, General Intangibles, Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Letter-of-Credit Rights, Supporting Obligations, rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing;

                    (iii) all of such Issuer’s present and future Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such Issuer; provided, however, that the Holder shall not have a security interest in any rights under any Government Contract of such Issuer or in the related Government Account where the taking of such security interest is a violation of an express prohibition contained in the Government Contract (for purposes of this limitation, the fact that a

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Government Contract is subject to, or otherwise refers to, Title 31, § 203 or Title 41, § 15 of the United States Code shall not be deemed an express prohibition against assignment thereof) or is prohibited by applicable Law, unless in any case consent is otherwise validly obtained; and

                    (iv) any and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.

               (b) Notwithstanding the foregoing provisions of this Section 4, such grant of a security interest shall not extend to, and the term “Collateral” shall not include, any General Intangibles of Issuers to the extent that (i) such General Intangibles are not assignable or capable of being encumbered as a matter of Law or under the terms of any license or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable Law) without the consent of the licensor thereof or other applicable party thereto, and (ii) such consent has not been obtained; provided, however, that the foregoing grant of a security interest shall extend to, and the term “Collateral” shall include, each of the following: (a) any General Intangible which is in the nature of an Account or a right to the payment of money or a proceed of, or otherwise related to the enforcement or collection of, any Account or right to the payment of money, or goods which are the subject of any Account or right to the payment of money, (b) any and all proceeds of any General Intangible that is otherwise excluded to the extent that the assignment, pledge or encumbrance of such proceeds is not so restricted, and (c) upon obtaining the consent of any such licensor or other applicable party with respect to any such otherwise excluded General Intangible, such General Intangible as well as any and all proceeds thereof that might theretofore have been excluded from such grant of a security interest and from the term “Collateral.”

               (c) Representations and Warranties.

                    (i) Upon the execution and delivery of the Original Notes on the Original Issue Date, and the First Amended Notes on the First Amended Notes Issue Date and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, the Holder had as of such dates, and as of the date hereof upon the execution and delivery of the Notes will continue to have, a good, valid and perfected Lien and security interest in the Collateral of the Issuers, which is subordinate only to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c) and subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. In the case of any future Subsidiary, upon the execution and delivery of the Subsidiary Guaranty and Subsidiary Security Agreement, and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, the Holder will have, a good, valid and perfected Lien and security interest in such future Subsidiary that executes and delivers a Subsidiary Guaranty and Subsidiary Security Agreement, which is subordinate only to any Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 6(c) and subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. Except as expressly permitted by the Notes, each Issuer owns its interests in the

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Collateral free and clear of any Liens and no financing statement relating to any of the Collateral is on file in any public office except those (i) on behalf of the Holders, (ii) in connection with Permitted Liens and/or (iii) those being terminated.

                    (ii) No Issuer (or predecessor by merger or otherwise of such Issuer), has within the five-year period preceding the date hereof, had a different name from the name of such Issuer listed on the signature pages hereof, except the names set forth on Schedule 4(c).

                    (iii) This Note shall create a continuing security interest in the Collateral and the security interest created herein shall (i) remain in full force and effect until the payment and performance in full of the Obligations, (ii) be binding upon Issuers and their respective successors and assigns, and (iii) inure, together with the rights and remedies of the Holders and the Collateral Agent hereunder, to the benefit of the Holders, the Collateral Agent and their successors, transferees and assigns.

               (d) Collateral Administration.

                    (i) All Collateral (except Deposit Accounts) will at all times be kept by Issuer at the locations set forth on Schedule 4(d) and shall not, without thirty (30) calendar days prior written notice to the Collateral Agent, be moved therefrom unless the Collateral Agent has entered into the necessary documents to perfect and enforce its security interest therein at such new location, and in any case shall not be moved outside the continental United States.

                    (ii) Each Issuer shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit such records to the Collateral Agent on such periodic basis as the Collateral Agent may request. Following the occurrence and during the continuance of an Event of Default, if requested by the Collateral Agent, such Issuer shall execute and deliver to the Collateral Agent formal written assignments (or, in the case of Medicaid/Medicare Account Debtors, documents necessary to comply with the Federal Assignment of Claims Act) of all of its Accounts weekly or daily as the Collateral Agent may request, including all Accounts created since the date of the last assignment, together with copies of claims, invoices and/or other information related thereto. To the extent that collections from such assigned accounts exceed the outstanding principal amount together with any accrued interest due on the Notes and all First Priority Lien Indebtedness, such excess amount shall not accrue interest in favor of such Issuer, but shall be available to such Issuer upon such Issuer’s written request.

                    (iii) Following an occurrence or during the continuance of an Event of Default, any of the Collateral Agent’s officers, employees, representatives or agents shall have the right, at any time during normal business hours, in the name of the Collateral Agent, any designee of the Collateral Agent or Issuers, to verify the validity, amount or any other matter relating to any Accounts or Inventory of Issuer. Issuers shall cooperate fully with the Collateral Agent in an effort to facilitate and promptly conclude such verification process.

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                    (iv) To expedite collection, each Issuer shall endeavor in the first instance to make collection of its Accounts for the Collateral Agent. The Collateral Agent shall have the right at all times after the occurrence and during the continuance of an Event of Default to notify (a) Account Debtors owing Accounts to Issuer other than Medicaid/Medicare Account Debtors that their Accounts have been assigned to the Collateral Agent and to collect such Accounts directly in its own name and to charge collection costs and expenses, including reasonable attorney’s fees, to such Issuer, and (b) Medicaid/Medicare Account Debtors that such Issuer has waived any and all defenses and counterclaims it may have or could interpose in any such action or procedure brought by the Collateral Agent to obtain a court order recognizing the collateral assignment or security interest and lien of the Collateral Agent in and to any Account or other Collateral and that the Collateral Agent is seeking or may seek to obtain a court order recognizing the collateral assignment or security interest and lien of the Collateral Agent in and to all Accounts and other Collateral payable by Medicaid/Medicare Account Debtors.

                    (v) As and when determined by the Collateral Agent in its sole discretion but not more often than four (4) times per year prior to the occurrence and continuance of an Event of Default, the Collateral Agent may perform the searches described in clauses (a), (b) and (c) below against Issuer, all at Issuer’s expense: (a) UCC searches with the Secretary of State of the jurisdiction of organization of each Issuer and the Secretary of State and local filing offices of each jurisdiction where Issuer maintain their respective executive offices, a place of business or assets; (b) lien searches with the United States Patent and Trademark Office and the United States Copyright Office; and (c) judgment, federal tax lien and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above.

                    (vi) Each Issuer (a) shall provide prompt written notice to its current bank to transfer all items, collections and remittances to the Concentration Account, (b) shall provide prompt written notice to each Account Debtor (other than Medicaid/Medicare Account Debtors) that the Collateral Agent has been granted a lien and security interest in, upon and to all Accounts applicable to such Account Debtor and shall direct each Account Debtor to make payments to the appropriate Lockbox Account, and each Issuer hereby authorizes the Collateral Agent, upon any failure to send such notices and directions within ten (10) calendar days after the date hereof (or ten (10) calendar days after the Person becomes an Account Debtor), to send any and all similar notices and directions to such Account Debtors, and (c) shall do anything further that may be lawfully required by the Collateral Agent to create and perfect the Collateral Agent’s lien on any collateral and effectuate the intentions of the Collateral Documents. At the Collateral Agent’s request, each Issuer shall immediately deliver or make arrangements to deliver to the Collateral Agent all items for which the Collateral Agent must receive possession to obtain a perfected security interest and all notes, certificates, and documents of title, Chattel Paper, warehouse receipts, Instruments, and any other similar instruments constituting Collateral.

                    (vii) Each Issuer shall give the Collateral Agent at least 30 days’ prior written notice of (i) any change in such Issuer’s name, identity or corporate structure and (ii) any reincorporation, reorganization or other action that results in a change of the jurisdiction of organization of such Issuer.

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                    (viii) If any Event of Default shall have occurred and be continuing, the Collateral Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (i) require each Issuer to, and each Issuer hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Collateral Agent deems appropriate, (iv) take possession of any Issuer’s premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of such Issuer’s equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii), and collecting any Obligation, (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable, and (vi) provide entitlement orders with respect to Security Entitlements (as defined in Section 8-102 of the UCC) and other Investment Property constituting a part of the Collateral and, without notice to any Issuer, transfer to or register in the name of the Collateral Agent or any of its nominees any or all of the Securities Collateral (defined below). The Collateral Agent or any Holder may be the purchaser of any or all of the Collateral at any such sale and the Collateral Agent, as agent for and representative of the Holders (but not any Holder in its individual capacity unless Holders of a majority of the principal amount and interest of the Notes shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Issuer, and each Issuer hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Issuer agrees that, to the extent notice of sale shall be required by law, at least ten days’ notice to such Issuer of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Issuer hereby waives any claims against the Collateral Agent and the Holders arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Agent and the Holders accept the first offer received and do not offer such Collateral to more than one offeree; provided that nothing contained herein shall be deemed to be a waiver by any Issuer or any Subsidiary that such sale must be conducted in a commercially reasonable manner and otherwise in accordance with applicable Law. If the proceeds of any sale

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or other disposition of the Collateral are insufficient to pay all the Obligations, Issuers shall be jointly and severally liable for the deficiency and the fees of any attorneys employed by the Collateral Agent to collect such deficiency. Each Issuer further agrees that a breach of any of the covenants contained in this Section 4(d)(viii) will cause irreparable injury to the Collateral Agent and the Holders, that the Collateral Agent and the Holders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Issuer, and each Issuer hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Obligations becoming due and payable prior to their stated maturities.

               (e) Power of Attorney. The Collateral Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Issuer (without requiring the Collateral Agent to act as such, but to be exercised after the occurrence and during the continuance of an Event of Default) with full power of substitution to do the following: (i) endorse the name of any such Person upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to such Person and constitute collections on its or their Accounts; (ii) execute in the name of such Person any financing statements, schedules, assignments, instruments, documents, and statements that it is or they are obligated to give the Collateral Agent under any of the Notes Documents; and (iii) do such other and further acts and deeds in the name of such Person that the Collateral Agent may deem necessary or desirable to enforce any Account or other Collateral or to perfect the Collateral Agent’s security interest or Lien in any Collateral (including any additional Collateral pursuant to Sections 6(d) and 6(l)). In addition, if any such Person breaches its obligation hereunder to direct payments of Accounts or the proceeds of any other Collateral to the appropriate Lockbox Account, the Collateral Agent, as the irrevocably made, constituted and appointed true and lawful attorney for such Person pursuant to this paragraph, may, by the signature or other act of any of the Collateral Agent’s officers or authorized signatories (without requiring any of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral to the appropriate Lockbox Account.

               (f) Intercreditor Agreement. This Note and the other Notes Documents and all rights, remedies and obligations under this Note and the other Notes Documents are subject to the Amended and Restated Senior Subordination Agreement, dated as of April 30, 2009 by and among the Holders, the Collateral Agent and CapitalSource Finance LLC (the “Intercreditor Agreement”). The parties to this Note and the other Notes Documents and all Persons claiming any right under or in respect of this Note and the other Notes Documents are bound by and (to the extent provided in the Intercreditor Agreement) entitled to the benefit of the Intercreditor Agreement.

               (g) Acknowledgement of Joint and Several Liability; Additional Subsidiaries.

                    (i) Each Issuer acknowledges that it is jointly and severally liable for all of the Obligations. Each Issuer expressly understands, agrees and acknowledges that (i) Issuers are all Affiliated entities by common ownership, (ii) each Issuer desires to have the availability of one common issuance of Notes instead of separate issuances, (iii) each Issuer has

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requested that the Holder purchase the Note on the terms herein provided, (iv) Holders will be relying on a Lien upon, all of Issuers’ assets even though the proceeds of any particular Note may not be advanced directly to a particular Issuer, (v) each Issuer will nonetheless benefit by the issuance of the Notes to the Holders, and (vi) all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in the Notes Documents shall be applicable to and shall be binding upon each Issuer.

                    (ii) From time to time subsequent to the date hereof, additional Subsidiaries may guarantee the Obligations and pledge additional Collateral by entering into a Subsidiary Guaranty and Subsidiary Security Agreement in accordance with Section 6(l). Each Issuer expressly agrees that its Obligations shall not be affected or diminished by the addition or release of any Issuer or Subsidiary hereunder, nor by any election of the Holders (in their sole discretion) not to cause any Subsidiary to comply with Section 6(l). The grant of security interest hereunder shall be fully effective as to any Issuer that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be an Issuer hereunder or party to a Subsidiary Guaranty and Subsidiary Security Agreement.

               (h) Further Assurances. Each Issuer agrees that from time to time, at the expense of the Issuers, such Issuer will promptly execute, obtain, deliver, file, register and/or record all financing statements, continuation statements, stock powers, further instruments and other documents, or cause the execution, filing, registration, recording or delivery of any of the foregoing and take all further action, that may be necessary or desirable, or that the Collateral Agent may request, to be executed, filed, registered, obtained, delivered or recorded, in order to create, maintain, perfect, preserve, validate or otherwise protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral, including any additional Collateral pursuant to Sections 6(d) and 6(l). Without limiting the generality of the foregoing, each Issuer will: (i) notify the Collateral Agent in writing of receipt by such Issuer of any interest in Chattel Paper and, at the request of the Collateral Agent, mark conspicuously each item of Chattel Paper and each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such Collateral is subject to the security interest granted hereby, (ii) deliver to the Collateral Agent all promissory notes and other Instruments and, at the request of the Collateral Agent, all original counterparts of Chattel Paper, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (iii) (A) execute (if necessary) and file such financing or continuation statements, or amendments thereto, (B) deliver such documents, instruments, notices, records and consents and take such other actions necessary to establish that the Collateral Agent has control over electronic Chattel Paper and Letter-of-Credit Rights of such Issuer and (C) deliver such other instruments or notices, in each case, as may be necessary or desirable, or as the Collateral Agent may request, in order to perfect and preserve the security interests granted or purported to be granted hereby, (iv) within two business days of learning thereof, report to the Collateral Agent any reclamation, return or repossession of goods in excess of $10,000 (individually or in the aggregate), (v) furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail, (vi) defend the Collateral and the Collateral Agent’s perfected Lien thereon against any claims and demands of all Persons at any time claiming the same or any interest

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therein adverse to the Collateral Agent, and pay all reasonable costs and expenses in connection with such defense, which at the Collateral Agent’s discretion may be added to the Obligations; and (vii) use commercially reasonable efforts to obtain any necessary consents of third parties to the creation and perfection of a security interest in favor of the Collateral Agent with respect to any Collateral. Each Issuer hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral (including any financing statement indicating that it covers “all assets” or “all personal property” of such Issuer) without the signature of any Issuer.

               (i) Acquired Mortgaged Property Etc. Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the locations set forth on Schedule 4(i) unless the Company shall provide to the Holders at least thirty (30) Business Days prior written notice. From and after the Closing Date, in the event that (i) any Issuer or any Subsidiary acquires any fee interest in real property or any Leasehold Property or (ii) at the time any Person becomes a Subsidiary and following compliance with Section 6(l), such Person owns or holds any fee interest in real property or any Leasehold Property, (any such interest in real property or Leasehold Property described in the foregoing clause (i) or (ii) being a “Acquired Mortgaged Property”), if a mortgage is being granted in favor of any Senior Indebtedness, the Company or such Subsidiary shall deliver to Collateral Agent, as soon as practicable after such Person acquires such Acquired Mortgaged Property or becomes a Subsidiary and following compliance with Section 6(l), as the case may be, a fully executed and notarized Mortgage junior only to the mortgage securing the Senior Indebtedness, in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering the interest of such Person in such Acquired Mortgaged Property; and such opinions, appraisal, documents, title insurance, environmental reports that may be reasonably required by the Collateral Agent.

               (j) Application of Proceeds of Collateral. Except as expressly provided elsewhere in the Notes, all proceeds received by the Collateral Agent and the Holders in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in the following order of priority, subject to the Intercreditor Agreement.

                    FIRST: To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Agent, the Holders and their agents and counsel, and all other expenses, liabilities and advances made or incurred by the Collateral Agent and the Holders in connection therewith, and all amounts for which the Collateral Agent and the Holders are entitled to indemnification hereunder and all advances made by the Collateral Agent and the Holders hereunder for the account of Issuers, and to the payment of all costs and expenses paid or incurred by the Collateral Agent and the Holders in connection with the exercise of any right or remedy hereunder;

                    SECOND: To the payment of amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively;

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                    THIRD: To the payment of other all other Obligations; and

                    FOURTH: To the payment to, or upon the order of, the Issuers, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.

          5. Redemption.

               (a) Optional Redemption.

                    (i) Intentionally Deleted.

                    (ii) At any time after the first anniversary of the Original Issue Date, and in accordance with the procedures set forth in Section 5(e), the Issuers shall have the option to redeem the Note. If the Issuers elect to redeem the Note pursuant to this Section 5(a)(ii), then the Issuers shall at the option of the Holder (delivered by notice to the Issuers at least two (2) Business Days prior to the redemption date) (a) pay to the Holder the outstanding principal amount of the Note, plus accrued and unpaid interest thereon, through the redemption date (the “Par Redemption Price”) and issue to the Holder a warrant to purchase the number of shares of Common Stock equal to the number of Conversion Shares that the Holder would have been entitled to receive had it converted the Note immediately prior to such redemption date (without taking into account any limitations or restrictions on the convertibility of the Note), which shall have an exercise price equal to the applicable Conversion Price and shall be exercisable until the Maturity Date, substantially in the form attached as Exhibit C (the “Redemption Warrant”), or (b) pay to the Holder an amount equal to 105% of the aggregate outstanding principal amount of the Notes, plus accrued and unpaid interest thereon, if any, through the redemption date (the “Premium Redemption Price”).

               (b) Redemption upon Change of Control. Notwithstanding anything to the contrary contained herein, prior to the occurrence of a Change of Control or in anticipation of a Change of Control, the Issuers shall notify the Holders thereof. Upon the occurrence of a Change of Control contemplated by clauses (i), (ii) (iii), (iv), (v) or (vi) in the definition of Change of Control below, the Issuers shall have the option to redeem all, or any portion, of the outstanding Notes by paying to the Holder an amount equal to 105% of the aggregate outstanding principal amount of the Notes, plus accrued and unpaid interest thereon, if any, through the redemption date (the “Change of Control Redemption Price”). Upon the occurrence of any Change of Control, in the event that the Issuers had the option, but do not elect such option, or in the event that the Holder has the sole option, the Holder shall have the option to cause the Issuers (or the surviving corporation) to (a) redeem all, or any portion, of the outstanding Notes by paying to the Holder the Change of Control Redemption Price and/or (b) have the surviving corporation (which shall be a corporation, partnership, trust or limited liability company organized and existing under the Laws of the United States of America, any state thereof or the District of the Columbia) in such Change of Control expressly assume, by documents in form and substance satisfactory to the Holders, all the Obligations of the Company under the Notes and the Notes Documents.

          A “Change of Control” shall mean the occurrence of any of the following events:

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          (i) the failure of ComVest (which for purposes of this Section 5(b) shall include any successor thereof) or any person or group (as such terms are defined in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, the “Exchange Act”) of persons holding the majority of the voting power of or otherwise controlling ComVest, at any time, to maintain sole (A) beneficial ownership (as defined in Rule 13d-3 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934), (B) control, directly or indirectly, in either case, of, the aggregate voting power of all Capital Stock of Parent and the Company (which for purposes of this Section 5(b) shall include any successor thereof) representing at least fifty one percent of the combined voting power of all Capital Stock of each of Parent and the Company and (C) the majority and controlling economic interests of Parent and the Company;

          (ii) any person or group (as such terms are defined in Section 13(d) or Section 14(d) of the Exchange Act or any successor provision to either of the foregoing) of persons, other than a person who as of immediately following the effective time of the Merger beneficially owns 25% or more of the combined voting power of all Capital Stock of the Company, becomes the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) directly or indirectly, of more than 50% of the combined voting power of all Capital Stock of the Company, Parent or ComVest (as applicable) or any successor thereto;

          (iii) the failure of Parent to own and control, directly or indirectly, at least fifty one percent of the combined voting power of all Capital Stock of the Company or any successor thereto;

          (iv) the failure of the Company to own and control, directly or indirectly, one hundred percent of the combined voting power of all Capital Stock and the economic interests of USPG, NH LLC and Diabetes and 66-2/3% of National or any successor thereof or transferee of substantially all the assets of any of the foregoing;

          (v) the failure of ComVest or Parent to maintain voting control, directly or indirectly, of the election of a majority of the Board of Directors (or similar governing body) of each of Parent, the Company and any other Issuer and any of their successors;

          (vi) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, including by way of merger, consolidation, amalgamation or other business combination by any Issuer of all or substantially all of such Issuer’s assets on a consolidated basis;

          (vii) any “change in/of control” or “sale” or “disposition” or similar event as defined in any document governing indebtedness of Parent or any Issuer or other Subsidiary in excess of $ 100,000 which gives the holder of such indebtedness or equity securities the right to accelerate or otherwise require payment, repurchase or redemption of such indebtedness prior to the maturity date or term thereof; or

          (viii) the liquidation, dissolution, or the winding up of the affairs of the Company.

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               (c) Intentionally Deleted.

               (d) Intentionally Deleted.

               (e) Redemption Procedures.

                    (i) Notice to Holders Upon Redemption. In the case of a redemption pursuant to Sections 5(a) or 5(b), at least 30 days prior to a redemption date of Notes, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes at such Holder’s registered address.

     The notice shall identify the amount Notes to be redeemed and shall state:

     (A) the redemption date;

     (B) the applicable subsection of Section 5 pursuant to which the redemption will occur;

     (C) if applicable, the Redemption Price and the number of shares into which the Redemption Warrant will be exercisable, on the redemption date;

     (D) if applicable, the Premium Redemption Price or the Change of Control Redemption Price on the redemption date;

     (E) that Notes called for redemption must be surrendered to the Company to collect the consideration (or if to an agent of the Company, the name and address of the agent where the Notes must be surrendered); and

     (F) that, unless the Company defaults in making such redemption payment interest on the Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date.

                    (ii) Such notice shall be accompanied by an Officer’s Certificate and a written opinion from legal counsel from the Company to the effect that such redemption will comply with the conditions herein.

                    (iii) Once notice of redemption is mailed, Notes called for redemption become due and payable on the redemption date. Upon surrender to the Company, the consideration shall be delivered as stated in the notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

                    (iv) Holders shall be required to surrender the Notes being purchased by the Company, with an appropriate form duly completed, to the Company at the address specified in the notice of redemption. Holders whose Notes are purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Securities surrendered.

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                    (v) If any Note surrendered for redemption in the manner provided herein shall not be so paid on the redemption date due to the failure of the Company to deliver the required consideration, interest shall continue to accrue from the redemption date until such consideration is delivered, with such consideration being based on the unpaid principal and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the date and in the manner provided in the Notes which were to be redeemed.

                    (vi) Any redemption shall be conditioned upon and occur either concurrently with or immediately prior to or after the consummation of the transaction, including without limitation a Change of Control, related to such redemption.

                    (vii) Holders shall have the right to convert the Notes or any portion thereof in accordance with Section 3 at any time prior to the actual redemption of the Notes or applicable portion of the Notes, including without limitation, during the thirty (30) day notice period under this Section 5(e).

               (f) Tax Put Right.

                    (i) For 30 days following a redemption in which the Holder receives Redemption Warrants, (A) the Holder shall have a right (the “Tax Put Right”) by written notice to the Company (which such notice shall include the number of shares of Common Stock desired to be put to the Company and the value thereof as of the date of such notice) to require the Issuers to purchase an amount of shares of Common Stock from the Holder, based on the average Daily Market Price during the ten (10) Trading Days prior to such redemption, that is equal to an amount of up to $5,000,000 in the aggregate for all such redemptions for all Holders of all Notes and (B) if the amount received by the Holder after exercising its rights up to the maximum aggregate amount pursuant to clause (A) is, when combined with the consideration received by the Holder upon redemption of the Convertible Notes, still insufficient to pay the income taxes relating to the redemption, the receipt of the Redemption Warrants and the exercise of the Tax Put Right, then, upon receipt of written notice from the Holder (or any other Holder of Notes) of such insufficiency, the Company shall use commercially reasonable efforts to file one registration statement for all Holders of Notes (regardless of the number of redemptions) as soon as reasonably practicable after such redemption but in any event within thirty (30) days after such redemption and cause such registration statement to be declared effective as soon as practicable after such filing but in any event within sixty (60) days after such filing, failing which the Holders of all Notes shall have an additional Tax Put Right in the amount of up to $2,500,000 in the aggregate for all such redemptions.

                    (ii) Upon the receipt of notice from a Holder that such Holder has elected to exercise its Tax Put Right, the Company shall promptly, but in no event later than two (2) business days after the receipt thereof, deliver a copy of such notice to the other Holders. For a period of five (5) Business Days following its receipt of a Tax Put Right notice, each other Holder shall have the right and option (but not the obligation) to also exercise a Tax Put Right by delivering written notice thereof (which such notice shall include the number of shares of Common Stock desired to be put to the Company and the value thereof as of the date of such notice). If the Holders electing to exercise their Tax Put Right elect to put more than the aggregate amount of shares that the Company is required to repurchase pursuant to Section

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5(f)(i), then each Holder delivering a Tax Put Right notice shall be entitled to require the Company to repurchase that number of shares of Common Stock calculated by multiplying the aggregate number of shares of Common Stock that the Company is required to repurchase pursuant to Section 5(f)(i) by a fraction the numerator of which is equal to the number of shares of Common Stock elected to be repurchased from such Holder and the denominator of which is equal to the total number of shares of Common Stock elected to be repurchased by all Holders that elect to exercise their Tax Put Right.

          6. Covenants.

               (a) Reservation of Conversion Shares and Common Stock Underlying MHR Warrants. The Company agrees that it will at all times reserve and keep available out of its authorized shares of Common Stock, free from preemptive rights, solely for the purpose of the issue upon conversion of the Notes, issue upon the exercise of the MHR Warrants and issuances of shares of Common Stock in accordance with the terms hereof. The Company agrees that the Conversion Shares and shares of Common Stock issued upon the exercise of the MHR Warrants shall, when issued, be duly and validly issued and fully paid and non-assessable.

               (b) Required Registration. The Company agrees that if any Conversion Shares or shares issued upon the exercise of the MHR Warrants require registration with or approval of any governmental authority under any Federal or state Law, or any national securities exchange, before such shares may be issued upon conversion, the Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be.

               (c) Limitation on Senior Indebtedness.

                    (i) The Issuers covenant and agree that so long as any Notes shall remain outstanding, the Issuers shall not, and shall not permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, including, without limitation, by way of assumption or acquisition in a business combination (each event, an “incurrence”) any Indebtedness other than (x) the Notes, (y) Senior Indebtedness in an aggregate principal amount outstanding not to exceed $23 million (which amount shall be increased by an amount equal to any cash equity contribution to the Company by Parent of the proceeds of any Investment Option Preferred Stock; but in no event shall such increase exceed $2 million); provided however that if Indebtedness is incurred under this subclause (c)(i)(y), at least $10 million principal amount of such Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan; and (z) Subordinated Indebtedness; provided further however, that the incurrence of such additional Indebtedness pursuant to subclause (c)(i)(y) shall not cause the Consolidated Senior Leverage Ratio to exceed 2.00 to 1.00 for the most recently ended four full Fiscal Quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred determined on a pro forma basis (including pro a forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred and the application of proceeds therefrom had occurred at the beginning of such four Fiscal Quarter period. Notwithstanding anything contained in the foregoing to the contrary, the Issuers shall be permitted to incur a minimum of $15 million in Senior Indebtedness, provided that at

30

least $10 million principal amount of such Indebtedness shall be in the form of a revolving loan facility secured by the Issuers’ accounts receivables or other similar asset-based loan.

                    (ii) Notwithstanding any provision of this Section 6(c) to the contrary, as long as any Obligations (as such term is defined in the Credit Agreement)(or any extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) are outstanding under the Credit Agreement and the Credit Agreement has not been terminated, the Issuers shall be permitted, and shall be allowed to permit any of their Subsidiaries, to directly or indirectly incur, create, assume, guarantee, become or remain liable, contingently or otherwise, with respect to, or otherwise become responsible for the payment of, Senior Indebtedness under the Credit Agreement (including any extensions, modifications, refinancings, renewals and refundings thereof in accordance with the Intercreditor Agreement) in the principal amount of $17,000,000 and the provisions of clause (i) above shall not be applicable to any of such Senior Indebtedness unless and until ComVest, Parent or any of their Affiliates becomes the holder of such Indebtedness under the Credit Agreement, whether as a result of the purchase of such Senior Indebtedness pursuant to their exercise of the purchase option under Section 22 of the ComVest Senior Subordination Agreement or otherwise. The limitation on the principal amount of Senior Indebtedness set forth in this clause (ii) shall not limit or otherwise affect the right of the holder of any such Senior Indebtedness to accrue and receive payment of interest (including at the default rate and including postpetition interest), fees, expenses or other charges. Upon the purchase of Senior Indebtedness under the Credit Agreement by ComVest, Parent or any of their Affiliates, this clause (ii) shall be null and void and the limitation on Senior Indebtedness shall be determined pursuant to clause (i) above.

                    (iii) If on any date the Issuers incur Senior Indebtedness in breach of this Section 6(c) as a result of the aggregate principal amount of Senior Indebtedness exceeding the amount then permitted under subclause 6(c)(i)(y) hereof, such breach shall not constitute an Event of Default if, and only if, the Issuers shall have concurrently with such incurrence prepaid to the Holder in respect of the outstanding principal amount of the Note an amount equal to 105% of the amount by which the Senior Indebtedness incurred, when aggregated with all such Senior Indebtedness then outstanding, exceeds the maximum aggregate principal amount of Senior Indebtedness then permitted under such subclause 6(c)(i)(y). In connection with any payment to the Holder under this Section 6(c)(iii), the Issuers shall comply with the procedures applicable to redemption under Section 5(e) (including the giving of a notice to the Holder at least 30 days in advance of any prepayment) to the same extent as if such prepayment was being made as a redemption of the Notes pursuant to the provisions applicable to redemptions under Sections 5 (a) or (b) above.

               (d) Limitation on Liens. The Issuers and their Subsidiaries shall not create, incur, assume or suffer to exist any Lien upon, in or against, or pledge of, any of the Collateral or any of their properties or assets or any of their authorized but unissued or treasury shares, securities or other equity or ownership or partnership interests, whether now owned or hereafter acquired, except for Permitted Liens; provided further, if the Issuers and their Subsidiaries shall incur any Liens securing Senior Indebtedness, the Issuers and their Subsidiaries shall cause all Obligations to also be secured by a Lien in favor of the Collateral Agent for the benefit of the Holders, pursuant to a validly created and effective security interest, on a basis junior only to such Senior Indebtedness being so secured, in such manner as is

31

consistent with the Credit Agreement and otherwise reasonably acceptable to the Holders of a majority of the principal amount and interest of the Notes outstanding.

               (e) Right to Cure Default of First Priority Lien Indebtedness. The Issuers agree that, upon any default, breach, violation, event, fact or circumstance under any First Priority Lien Indebtedness (including a Default or Event of Default under the Credit Agreement, as defined therein) which, with the giving of applicable notice or passage of time or both, would permit the holder of such Indebtedness to declare a default or otherwise accelerate amounts due thereunder, which the Issuers have not cured within the permitted time period and ComVest, Parent, or a Parent Permitted Assignee (as defined below) have not elected, within five (5) Business Days of any such event, to repay, refinance or replace such Indebtedness or otherwise cure or provide funding to the Company for the purposes of curing such default (the “ComVest Cure”), MHR Fund Management LLC, its Affiliates, and any Person, directly or indirectly, managed or controlled by MHR Fund Management LLC or its Affiliates, including without limitation, MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP and OTQ LLC (collectively “MHR”) shall have the right, but not the obligation, to fund the repayment of such Indebtedness (including, without limitation, by way of purchasing interests in the loans under the Credit Agreement) or otherwise cure such default within five (5) Business Days of the earlier of (i) the expiration of the ComVest Cure period above and (ii) the receipt of notice from ComVest, Parent, or any Parent Permitted Assignee that it has elected not to pursue an ComVest Cure. The Company shall give MHR written notice of any such default promptly after the occurrence thereof, but in no event later than two (2) Business Days after the occurrence of any such default. For purposes of the foregoing, a “Parent Permitted Assignee” shall mean the surviving entity in a reorganization or recapitalization of Parent, including without limitation, by way of merger or consolidation with or into another person or entity, if the percentage interest of the members or stockholders, as the case may be, in the equity interests of the surviving entity following consummation of such transaction is substantially the same (on a relative basis) as each such stockholder’s percentage interest in Parent immediately prior to the consummation of such transaction.

               (f) Financial Statements, Financial Reports and Other Information.

                    (i) Financial Reports. The Company shall furnish to the Holder (i) as soon as available and in any event within ninety (90) calendar days after the end of each fiscal year of the Company (or such earlier date required by the laws, regulations and rules of the Securities and Exchange Commission), audited annual consolidated financial statements of the Company, including the notes thereto, consisting of a consolidated balance sheet at the end of such completed fiscal year and the related consolidated statements of income, retained earnings, cash flows and owners’ equity for such completed fiscal year, which financial statements shall be prepared and certified without qualification by an independent certified public accounting firm satisfactory to the Holder and accompanied by related management letters, if available, and (ii) as soon as available and in any event within thirty (30) calendar days after the end of each calendar month, unaudited consolidated financial statements of the Company consisting of a balance sheet and statements of income, retained earnings, cash flows and owners’ equity as of the end of the immediately preceding calendar month. All such financial statements shall be prepared in accordance with GAAP consistently applied with prior periods. With each such financial statement, the Company shall also deliver a certificate of its chief financial officer in

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substantially the form of Exhibit D hereto (a “Compliance Certificate”) stating that (A) such person has reviewed the relevant terms of the Notes Documents and the condition of the Company, and (B) no Default or Event of Default has occurred or is continuing, or, if any of the foregoing has occurred or is continuing, specifying the nature and status and period of existence thereof and the steps taken or proposed to be taken with respect thereto.

                    (ii) Other Materials. The Issuers shall furnish to the Holder as soon as available, and in any event within ten (10) calendar days after the preparation or issuance thereof or at such other time as set forth below: (1) copies of such financial statements (other than those required to be delivered pursuant to Section 6.1(f)(i) prepared by, for or on behalf of the Company and any other notes, reports and other materials related thereto, including, without limitation, any pro forma financial statements, (2) any reports, returns, information, notices and other materials that the Company shall send to its stockholders, members, partners or other equity owners at any time, (3) all Medicare and Medicaid cost reports and other documents and materials filed by the Company and any other reports, materials or other information regarding or otherwise relating to Medicaid or Medicare prepared by, for or on behalf of the Company, including, without limitation, (A) copies of licenses and Permits required by any applicable Law or Governmental Authority for the operation of its business, (B) Medicare and Medicaid provider numbers and agreements, (C) state surveys pertaining to any healthcare facility operated, owned or leased by the Company and any of its Affiliates or Subsidiaries, and (D) within ten (10) calendar days following the request of the Holder, participating agreements relating to medical plans, (4) (A) within fifteen (15) calendar days following the request of the Holder, a summary report of the status of all payments, denials and appeals of all Medicare and/or Medicaid Accounts and accounts receivable and account payable aging schedule and (B), within thirty (30) calendar days following the request of the Holder, a sales and collection report, including a report of sales, credits issued and collections received, all such reports showing a reconciliation to the amounts reported in the monthly financial statements, (5) promptly upon receipt thereof, copies of any reports submitted to the Company by its independent accountants in connection with any interim audit of the books of such Person or any of its Affiliates and copies of each management control letter provided by such independent accountants, (6) within fifteen (15) calendar days after the execution thereof, a copy of any contracts with the federal government or with a Governmental Authority in the State of New York, Vermont or Washington, and (7) such additional information, documents, statements, reports and other materials as the Holder may reasonably request from a credit or security perspective or otherwise from time to time.

                    (iii) Operating Budget. The Company shall furnish to the Holder on or prior to the Effective Date and for each fiscal year of the Company thereafter not later than the earlier of (1) thirty (30) calendar days after the end of each fiscal year or (2) thirty (30) calendar days after the same is available, consolidated month by month projected operating budgets, annual projections, profit and loss statements, balance sheets and cash flow reports of and for the Company for such upcoming fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), in each case prepared in accordance with GAAP consistently applied with prior periods.

               (g) Books and Records; Inspection Rights.

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                    (i) Each of the Issuers and the Subsidiaries shall (i) keep true, complete and accurate books of record and account in accordance with commercially reasonable business practices in which true and correct entries are made of all of its and their dealings and transactions in all material respects; and (ii) set up and maintain on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business, and include such reserves in its quarterly as well as year end financial statements.

                    (ii) Each of the Issuers shall permit the representatives of the Holder, at the expense of the Company, from time to time during normal business hours upon reasonable notice, to (i) visit and inspect any of its offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and other papers (but not more often than four (4) times per year so long as no Default or Event of Default exists), (ii) make copies and extracts therefrom, and (iii) discuss its business, operations, prospects, properties, assets, liabilities, condition and/or Accounts and Inventory with its officers and independent public accountants (and by this provision such officers and accountants are authorized to discuss the foregoing).

               (h) Active Diabetes Customers. As of the last day of each calendar month commencing as of the last day of the calendar month in which the Effective Date occurs and continuing through the Term Loan Maturity Date (as defined in the Credit Agreement), the Company shall have not less than 35,000 Active Diabetes Customers.

               (i) Transfer of Assets. Notwithstanding any other provision of this Note or any other Notes Documents, each of the Issuers shall not and shall cause their Subsidiaries not to sell, lease, transfer, assign or otherwise dispose of any interest in any properties or assets (other than obsolete equipment or excess equipment no longer needed in the conduct of the business in the ordinary course of business and sales of Inventory in the ordinary course of business), or agree to do any of the foregoing at any future time, unless permitted by the terms of the Credit Agreement.

               (j) Transactions With Affiliates. Each of the Issuers shall not and shall cause their Subsidiaries not to enter into or consummate any transaction of any kind with (i) any of its Affiliates or (ii) any Subsidiary Guarantor or any of their respective Affiliates other than: (a) salary, bonus, severance, employee stock option and other compensation and employment arrangements with directors or officers in the ordinary course of business (including employment arrangements with Mark Lama on customary terms consistent with the Company’s prior employment arrangements and agreements in connection with his participation in the Bridge Loan and the conversion of his participation in the Bridge Loan into Preferred Stock pursuant to the terms of the Bridge Loan), (b) Distributions and dividends permitted pursuant to Section 6(m), (c) transactions with the Holders or any Affiliate of the Holders, (d) payments permitted under and pursuant to written agreements entered into by and between any Issuer or any Subsidiary and one or more of its Affiliates that (A) reflect and constitute transactions on overall terms at least as favorable to such Issuer or Subsidiary as would be the case in an arm’s-length transaction between unrelated parties of equal bargaining power and (B) in the event that the total consideration with respect to any such agreement, together with any related agreements exceeds $375,000, has been approved by an independent appraisal or valuation firm; provided

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that any Subordinated Indebtedness issued to an Affiliate in compliance with this subclause (d) shall not be subject to any maximum cash interest rate; provided further, that notwithstanding the foregoing clauses (A) and (B) above such Issuer or Subsidiary shall not enter into or consummate any transaction or agreement pursuant to which it becomes a party to any mortgage, note, indenture or guarantee evidencing any Indebtedness of any of its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant to agreement for any Indebtedness of any such Affiliate, and (e) transactions with ComVest and its Affiliates in connection with equity investments and contributions by ComVest or its Affiliates to an Issuer or a Subsidiary. Notwithstanding anything to the contrary herein, it shall be a condition precedent to any issuance of Subordinated Indebtedness permitted under subclause (d) above and any equity investment or contribution permitted under subclause (e) above, that the Holders or any of their Affiliates shall have been given the prior notice of and opportunity to participate ratably (based on the relative ownership of Common Stock on a fully diluted and as-converted basis of ComVest and all the Holders and their respective Affiliates) in providing such equity investments (including equity equivalents and equity linked securities), contributions and Subordinated Indebtedness on no less favorable terms and conditions as those applicable to ComVest and its Affiliates.

               (k) Investments; New Facilities or Collateral; Subsidiaries. Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to (i) purchase, own, hold, invest in or otherwise acquire obligations or Capital Stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person, or any joint venture, that is not in the healthcare industry, including without limitation insurance related services to Medicare and managed care end users, so long as the equity and assets so acquired shall constitute Collateral under the Notes Documents, or (ii) make or permit to exist any loans, advances or guarantees to or for the benefit of any Person or assume, guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of any other Person (other than those created by the Notes Documents and Indebtedness permitted to be incurred under Section 6(c) and other than (A) trade credit extended in the ordinary course of business, (B) advances for business travel and similar temporary advances made in the ordinary course of business to officers, directors and employees, and (C) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business). Each of the Issuers, directly or indirectly, shall not and shall cause their Subsidiaries not to purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the locations set forth on Schedule 6(k) unless the Company shall provide to the Holder at least thirty (30) Business Days prior written notice. Notwithstanding any provision of this Section 6(k) to the contrary, the Issuers may make Acquisitions to the extent permitted by the Credit Agreement so long as the equity and assets so acquired shall constitute Collateral under the Notes Documents.

               (l) Subsidiaries. Any Subsidiary of the Company that is not an Issuer as of the date hereof and any newly acquired or created Subsidiary shall promptly execute a Subsidiary Guaranty and a Subsidiary Security Agreement, and such other documents and such other documents and instruments as the Holder may reasonably require.

               (m) Restricted Payments. Each of the Issuers shall not and shall cause their Subsidiaries not to (i) declare, pay or make any dividend or Distribution on any shares of

35

capital stock or other securities or interests (other than dividends or Distributions payable in its stock, or split-ups or reclassifications of its stock), (ii) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital stock or other securities or interests or of any options to purchase or acquire any of the foregoing (provided, however, that such Issuer or Subsidiary may redeem its capital stock from terminated employees pursuant to, but only to the extent required under, the terms of the related employment agreements as long as no Default or Event of Default has occurred and is continuing or would be caused by or result from the payment thereof and as long as the aggregate amount of payments made to such terminating employees in any fiscal year does not exceed $100,000), (iii) otherwise make any payments or Distributions to any stockholder, member, partner or other equity owner in such Person’s capacity as such, or (iv) make any payment of any management or service fee, except as permitted under the Management Fee Subordination Agreement, dated as of April 30, 2009 by and between CapitalSource Finance LLC and Parent in effect as of the date hereof and the Management Fee Subordination Agreement, dated as of April 30, 2009 by and between the Holders and Parent in effect as of the date hereof (“Management Fee Payments”). In the event payment of any Management Fee Payment would be restricted by the foregoing provisions, such Management Fee Payment may be accrued during the period payment thereof is so restricted and such Management Fee Payment will be permitted to be paid when such restriction no longer exists, provided at the time of payment thereof no Event of Default would arise as a result of such payment.

          Except as permitted by the subordination agreement between such lender and the Holders relating to such Subordinated Debt, the Issuers shall not (i) make any prepayment of any part or all of any Subordinated Debt, (ii) repurchase, redeem or retire any instrument evidencing any such Subordinated Debt prior to maturity, or (iii) enter into any agreement (oral or written) which could in any way be construed to amend, modify, alter or terminate any one or more instruments or agreements evidencing or relating to any Subordinated Debt in a manner adverse to Holder, as determined by the Holders of a majority of the principal amount and interest of the Notes outstanding.

               (n) Amendments of Documents Relating to Subordinated Indebtedness. Each of the Issuers shall not, and shall not permit any of their Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to have such Subordinated Indebtedness provide for (1) the payment, prepayment, redemption, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon before ninety-one (91) days after the Maturity Date or later or (2) total cash interest at a rate in excess of the prevailing market rate for subordinated debt at the time of issuance, except to the extent permitted by the terms of any written subordination agreement acceptable to the Holders.

               (o) Charter Documents; Fiscal Year; Dissolution; Use of Proceeds; Accounting Methods. Each of the Issuers shall not, and shall not permit any of their Subsidiaries to, (i) amend, modify, restate or change its certificate of incorporation (including the terms of the Preferred Stock issued pursuant to the Merger Agreement or the Investment Preferred Stock) or certificate of formation or bylaws or similar organizational documents in a manner that would be adverse to any Issuer or any Subsidiary or the Holders or inconsistent with the rights granted to

36

the Holders in connection with the Transactions, provided, however, that any such amendment, modification, restatement, or change shall be permitted in connection with any additional equity contributions to Issuer or a Subsidiary, (ii) amend, alter or suspend or terminate or make provisional in any material way, any material Permit without the prior written consent of the Holders of a majority of the principal amount and interest of the Notes outstanding, which consent shall not be unreasonably withheld, (iii) wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking or that would result in any of the foregoing, or (iv) make any material changes in financial or tax accounting methods, principles or practices (or change an annual accounting period), except insofar as may be required by a change in GAAP, applicable Law or any applicable Governmental Authority.

          7. Transfer of Note. Upon due presentment for registration of transfer of this Note, the Company will execute, register and deliver in exchange a new Note equal in aggregate principal amount to the then unpaid principal amount of this Note, dated the date to which interest has been paid and registered in the name of the transferee.

          8. Governing Law. This Note shall be governed by and construed in accordance with the domestic substantive Laws of the State of New York, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

          9. Jurisdiction. The Issuers irrevocably consent to the exclusive jurisdiction of the United States federal courts and the state courts located in the County of New York, State of New York in any suit or proceeding based on or arising under this Note and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Issuers irrevocably waive the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Issuers further agree that service of process upon the Issuers mailed by first class mail shall be deemed in every respect effective service of process upon the Issuers in any such suit or proceeding. The Issuers agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. Nothing herein shall affect the right of the Holder to institute suit and conduct an action in any other appropriate manner, jurisdiction or court or to serve process in any other manner permitted by Law.

          10. Notices. All notices and other communications given to any party hereto pursuant to this Note shall be in writing and shall be delivered, or mailed first class postage prepaid, registered or certified mail, addressed as follows:

               (a) If to the Issuers, to:

NationsHealth, Inc.
13650 N.W. 8th Street
Suite 109
Sunrise, FL 33325
Fax number: (954) 903-5005
Attention: Chief Executive Officer

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with a copy to:

McDermott Will & Emery LLP
201 South Biscayne Blvd.
Miami, Florida 33131
Fax number: (305) 347-6500
Attention: Ira J. Coleman, Esq.
                 Fred Levenson, Esq.
                 Michael Boykins, Esq.

with a copy to:

Foley & Lardner LLP
100 N. Tampa St., Suite 2700
Tampa, Florida 33602
Fax number: (813) 221-4210
Attention: Steven Vazquez, Esq.

               (b) If to the Holder, to:

MHR Fund Management LLC
40 West 57th Street, 24th Floor,
New York, NY 10019
Fax number: (212) 262-9356
Attention: Hal Goldstein and
                 Emily Fine

with a copy to:

O’Melveny & Myers LLP
7 Times Square
Times Square Tower
New York, NY 10036
Fax number: (212) 408-2419
Attention: Patricia M. Perez, Esq.

Each such notice or other communication shall for all purposes be treated as being effective or having been given when delivered, if delivered personally, by e-mail or facsimile with confirmation of receipt or by overnight courier or, if sent by mail, at the earlier of its actual receipt or three (3) days after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid. The Company shall use commercially reasonable efforts to provide Holder with notices that the Company provides under the Credit Agreement concurrently with the giving of such notices under the Credit Agreement and shall provide Holder with copies of such notices upon written request of such Holder no later than five business days following receipt of such written request.

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          11. Company’s Waivers. The Issuers, to the extent permitted by Law, waive and agree not to assert or take advantage of any of the following: (a) any defense based upon an election of remedies by the Holder which may destroy or otherwise impair any subrogation or other rights of the Issuers or any guarantor or endorser of this Note; (b) any duty on the part of the Holder to disclose any facts or other data the Holder may now or hereafter know; (c) acceptance or notice of acceptance of this Note by the Issuers; (d) presentment and/or demand for payment of this Note or any other Obligations; and (e) protest and notice of dishonor with respect to this Note or other Obligations or performance of obligations arising under the Notes Documents.

          12. Amendment; Waiver. All amendments or waivers of any of the terms hereof (including, without limitation, any waiver of acceleration of the Maturity Date) and any payment of this Note with any consideration other than cash, shall be made or effected only with the written consent of the Holders of a majority of the principal amount and interest of the Notes outstanding. No failure or delay on the part of any Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

          13. Replacement of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Note by the Holder, the Company shall issue a replacement instrument, at the Company’s expense, representing such Note in lieu of such lost, stolen, destroyed, or mutilated instrument, provided that the Holder agrees to indemnify the Company for any losses incurred by the Company with respect to such lost instrument (other than the cost of issuing the new instrument).

          14. Headings. The headings of the sections of this Note are inserted for convenience only and do not constitute a part of this Note.

          15. Ranking. The Notes shall rank senior in right of payment to any Indebtedness and future Indebtedness of the Issuers and their Subsidiaries other than the Senior Indebtedness permitted by Section 6(c) and in the Intercreditor Agreement.

          16. Assignability. This Note shall be binding upon the Issuers and their successors and assigns and shall inure to the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary contained herein or in the Notes Documents, this Note may be pledged and all rights of the Holder under this Note may be assigned to any Affiliate or to any other person or entity without the consent of the Issuers, subject to the Securities Act of 1933.

          17. Cost of Collection. If default is made in the payment of this Note, the Issuers shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

          18. Remedies Cumulative. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at Law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Issuers to comply with

39

the terms of this Note. The Issuers acknowledge that a breach by them of their obligations hereunder will cause irreparable harm to the Holder of the Note and that the remedy at Law for any such breach may be inadequate. The Issuers therefore agree, in the event of any such breach or threatened breach, that the Holder of the Note shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

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          IN WITNESS WHEREOF, the Company has caused this Note to be signed and to be dated the day and year first above written.

NATIONSHEALTH, INC.
By:
	Name:
	Title:
NATIONSHEALTH HOLDINGS, L.L.C.
By:
	Name:
	Title:
UNITED STATES PHARMACEUTICAL GROUP, L.L.C.
By:
	Name:
	Title:
DIABETES CARE & EDUCATION, INC.
By:
	Name:
	Title:
NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC
By:
	Name:
	Title:

EX-10.82

Exhibit 10.82

Employment Agreement, dated April 30, 2009, by and between Dr. Glenn Parker and NationsHealth, Inc.

Execution Copy

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into on April 30, 2009, by and between NationsHealth, Inc., a Delaware corporation (the “Company”), and Glenn Parker, an individual residing at 530 Carrotwood Terrace, Plantation, Florida 33324 (the “Executive”).

     WHEREAS, the Executive and the Company entered into that certain Employment Agreement, dated March 9, 2004, as amended on November 1, 2006, February 8, 2007, and December 23, 2008 (the “Original Agreement”), pursuant to which the Executive was entitled to certain compensation and benefits;

     WHEREAS, in connection with the closing of the transactions contemplated under that certain Merger Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, a Delaware limited liability company (“Parent”), NationsHealth Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent, and the Company, the Company and the Executive have entered into this Agreement;

     WHEREAS, the Company and the Executive have agreed to amend, restate and supersede the Original Agreement in its entirety as set forth herein on the Effective Date (as defined herein);

     WHEREAS, the execution and delivery of this Agreement was an inducement and a condition precedent to the Merger Agreement;

     WHEREAS, after consummation of the transactions contemplated by the Merger Agreement, the Company desires to continue to employ the Executive in the capacity hereinafter stated, and the Executive desires to continue in the employ of the Company in such capacity for the period and on the terms and conditions set forth herein;

     WHEREAS, the Company shall provide the Executive with certain severance benefits should the Executive’s employment with the Company terminate under certain circumstances, such benefits to provide the Executive with enhanced financial security and sufficient incentive and encouragement to remain employed by the Company;

     WHEREAS, the Company’s Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware provides that the Company shall, under certain circumstances, indemnify the Executive for certain expenses, fees, judgments, fines, amounts paid in settlement, and other expenses by reason of the fact that he is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise; and

     WHEREAS, the Executive acknowledges that he has had an opportunity to consider this Agreement and consult with an independent advisor or advisors of his choosing with regard to

the terms of this Agreement, and enters this Agreement voluntarily and with a full understanding of its terms.

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

     1. Employment Term. Subject to Section 5 of this Agreement, the Executive shall be employed by the Company as its Chief Executive Officer, and the Executive, in such capacity, shall provide services to the Company for the period beginning on the Effective Date (as defined below) and ending on the fourth (4th) anniversary of the Effective Date. This Agreement shall automatically renew for additional one (1) year periods unless either party provides written notice of non-renewal no less than sixty (60) days prior to the scheduled expiration of the applicable employment period. For purposes of this Agreement, the term “Employment Term” shall mean the period in which the Executive is employed by the Company.

     2. Performance of Duties. During the Employment Term, (i) the Executive shall devote, on a full-time basis, his energies and talents to serving in the capacity of Chief Executive Officer of the Company, shall in good faith seek to act in the best interests of the Company, and shall perform the duties assigned to him by the Board of Directors of the Company (the “Board”) faithfully, efficiently and in a professional manner, (ii) the Company shall not assign the Executive, without his consent, duties that would be inconsistent with those of the Chief Executive Officer, and (iii) the Executive shall not, without prior written consent from the Board:

          (a) serve as or be a consultant to or employee or officer of any corporation, partnership or other entity other than the Company (other than civic, charitable, or other public service organizations); or

          (b) have more than a five percent (5%) ownership interest in any enterprise other than the Company if such ownership interest would adversely impact in any material respect the ability of the Executive to perform his duties hereunder.

     3. Compensation. Subject to the terms and conditions of this Agreement, during the Employment Term, the Executive shall be compensated by the Company for his services as follows:

          (a) The Executive shall receive, for each twelve (12) consecutive month period commencing as of the Effective Date and each anniversary thereof, a base rate of salary that is not less than $375,000.00 per year (the “Base Salary”), payable in substantially equal monthly or more frequent installments and subject to normal tax withholding. During the Employment Term, the Executive’s Base Salary shall not be reduced unless agreed by the Executive in writing, and shall be reviewed by the Board on or before each anniversary of the Effective Date to determine whether an increase in the Executive’s Base Salary is appropriate.

          (b) The Executive will be eligible to receive an annual incentive bonus payment (the “Incentive Bonus”) based on the Company’ achievement of certain performance

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objectives, in accordance the terms and conditions set forth on Exhibit 3(b) attached hereto. The Incentive Bonus shall be paid as soon as practical after the completion of the audit of the Company’s financial statements for the calendar year in which the Incentive Bonus is being determined, but in no event after April 15 following the applicable bonus year.

          (c) On the Effective Date, the Company shall grant to the Executive an option (the “Option”), under the NationsHealth, Inc. 2009 Stock Incentive Plan (the “Plan”), to purchase a number of shares of the Company’s common stock (the “Common Stock”), at an exercise price of $0.12 per share, equal to 10.1% of the Fully Diluted Common Stock on the Effective Date. The term “Fully Diluted Common Stock on the Effective Date” shall mean the number of issued and outstanding shares of Common Stock on the Effective Date, plus the number of shares of Common Stock issuable upon conversion of all shares of preferred stock of the Company that are outstanding on the Effective Date, plus the number of shares of Common Stock that can be purchased upon exercise of stock options that may be issued under the Company’ 2009 Equity Incentive Plan, plus the number of shares of Common Stock that can be purchased upon exercise of all warrants that are outstanding on the Effective Date (including the MHR Warrants, as defined in the Merger Agreement), but excluding all shares of Common Stock that may be issued upon conversion of any debt or promissory notes of the Company that is or are outstanding on the Effective Date. Attached Exhibit 3(c) sets forth an example of the calculation of the number of shares of Common Stock that will be subject to the Option.

          (d) The Company and the Executive will enter into an award agreement relating to the Option (the “Award Agreement”) which shall provide, among other things, that:

               (i) twenty five (25%) of such Option shall vest on the first anniversary of the Effective Date and the remaining seventy-five (75%) of such Option shall vest in equal installments every six months commencing on the date that is 18 months after the Effective Date and ending on the fourth (4^th) anniversary of the Effective Date;

               (ii) the Option shall become fully vested on the termination of Executive’s employment with the Company for any reason (including as a result death or disability), other than (A) if the Executive terminates his employment with the Company for any reason other than Good Reason (in which case the Executive shall retain any part of such Option that has vested as of such termination date) or (B) if the Company terminates the Executive on the basis of a Disqualifying Event (as defined below), in which case the vesting or forfeiture of the Option shall be determined in accordance with Section 3(d)(iv) and, if applicable, Section 3(d)(vi);

               (iii) any unvested portion of the Option shall immediately terminate, and the Executive will have no further right to exercise any unvested portion of the Option, if the Executive’s employment with the Company is terminated by the Executive other than for Good Reason (but in such case, the Executive shall retain any part of such Option that has vested as of such termination date);

               (iv) if a Disqualifying Event occurs, the Executive (without regard to whether the Executive’s employment has been terminated in connection with the events constituting the Disqualifying Event) may not exercise the Option (whether or not any portion of

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the Option has vested), and no unvested portion of the Option shall vest, until either (w) the charges constituting the Disqualifying Event in any such information or indictment are dismissed by a court of competent jurisdiction and the government is prohibited from bringing the same charges against the Executive (a “Dismissal”), (x) the Executive is acquitted of the charges constituting a Disqualifying Event (an “Acquittal”), (y) the Executive is convicted or pleads guilty or nolo contendre (or their equivalent) to the charges constituting a Disqualifying Event that are set forth in any such information or indictment (a “Conviction”), or (z) five (5) years elapse from the date of the Disqualifying Event and a Conviction has not occurred (a “Lapse”). In the case of a Dismissal, Acquittal or a Lapse, the Option shall become fully vested and the Executive may exercise the Option pursuant to its terms, and in the case of a Conviction the Option shall immediately terminate and the Executive will have no further right to exercise the Option (whether or not any portion of the Option has vested);

               (v) the exercise period for the Option shall be ten (10) years from the date of grant of the Option; and

               (vi) the Option shall become fully vested on a Change in Control of the Company (as defined in the Plan), provided, however, that in the event that a Change of Control occurs after a Disqualifying Event and prior to a Dismissal, Acquittal, Conviction or Lapse of such Disqualifying Event, then (i) the Option shall be deemed to have fully vested on the Change of Control if there is a Dismissal, Acquittal or Lapse with respect to such Disqualifying Event, (ii) the Option shall be deemed to have been forfeited in full on the date of the Change in Control if there is a Conviction with respect to such Disqualifying Event and (iii) the Company shall take such steps as are required to preserve the economic rights of the Executive arising in connection with such Change in Control (including escrowing cash in connection with a Change of Control involving a merger of the Company pursuant to which the holders of the Company’s stock receive or otherwise hold cash or other liquid assets, such as tradeable securities), which steps shall be reasonably acceptable to the Executive.

The term “Disqualifying Event” means the issuance or filing of an information or indictment against the Executive pursuant to which the Executive has been charged with a criminal offense either (y) involving embezzlement or fraud against the Company or (z) any felony committed by the Executive that has a Company Material Adverse Effect (as defined below).

The term “Company Material Adverse Effect” means any event, circumstance, development, condition, change, or effect which, is, either individually or in the aggregate with any other event, circumstance, development, condition, change, or effect, materially adverse to the business, operation, condition (financial or otherwise) assets, liabilities or results of operations of the Company and its subsidiaries, taken as a whole.

          (e) During the Employment Term, the Executive shall be entitled to participate in the Company’s health and welfare benefit plans, as maintained by the Company from time to time, on substantially the same terms and conditions as other senior executives of the Company.

          (f) In the event that Parent purchases additional shares of the Company’s preferred stock pursuant to the Preferred Stock Investment Option (as defined in the Merger

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Agreement), the Company shall issue the Executive an additional option to purchase shares of Common Stock, on terms that are the substantially the same as the Option, including an exercise price of $0.12 per share, as adjusted for stock splits, stock dividends, recapitalizations or similar events (the “Additional Option”), such that the combined number of shares subject to the Option and the Additional Option shall be an amount equal to 10.1% of (i) the Fully Diluted Common Stock on the Effective Date plus (ii) the shares of Common Stock into which the preferred stock purchased by Parent pursuant to the Preferred Stock Investment Option is convertible.

     (g) Dividend Equivalent Bonus Rights. In the event that the Company makes any dividends or distributions with respect to the Common Stock of the Company, the Company shall pay the Executive an amount equal to the amount of dividends or other distributions the Executive would have received if all of the shares of stock subject to the Option, without regard to whether the Option has vested, had been issued to Executive and were outstanding (the “DE Bonus”). Executive and Company agree that fifty percent (50%) of the DE Bonus (the “50 Percent Amount”) shall be used by the Executive to exercise the Option (or applicable portion thereof), provided, however, that in the event that the Option (or applicable portion thereof) has not vested with respect to all the shares of Common Stock that can be purchased by the payment of the 50 Percent Amount, then (I) the 50 Percent Amount shall be used to purchase the maximum number of shares purchasable upon the exercise of the vested portion of the Option, (II) the remaining portion of 50 Percent Amount shall be put into escrow (on terms reasonably satisfactory to Executive and the Company), and (III) such escrowed amounts shall be released when additional shares subject to the Option vest and, upon release, will be used to exercise such newly vested shares of stock that can be purchased under the Option. Notwithstanding the preceding provisions in this Section 3(g), in the event that a Disqualifying Event has occurred, the DE Bonus shall be payable to the Executive upon a Dismissal, Acquittal or Lapse and the DE Bonus shall not be payable in the event of a Conviction (which Conviction occurs prior to a Lapse).

     (h) Further Assurance Regarding Taxes. The Company agrees to cooperate with the Executive and its tax advisors in setting the terms and conditions of the Options.

     (i) Option Plan. The terms of the Plan (as applicable to the Executive) and the Option Agreement shall be consistent with the terms set forth in this Agreement, and the Company and its successors shall not have the right to amend the Plan or the Option Agreement in a manner that adversely affects the Executive without the Executive’s prior written consent.

     4. Restrictive Covenants. The Executive acknowledges and agrees that the Executive has a major responsibility for the operation, development and growth of the Company’s business, the Executive’s work for the Company has brought him and will continue to bring him into close contact with confidential information of the Company and its customers, and the agreements and covenants contained in this Section 4 are essential to protect the business interests of the Company and that the Company will not enter into this Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the following:

          (a) Confidential Information. Except as may be required under applicable law, including by the lawful order of a court or agency of competent jurisdiction, the Executive agrees to keep secret and confidential, both during the Employment Term and indefinitely after

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the Executive’s employment with the Company terminates, all non-public information concerning the Company and its affiliates that was acquired by, or disclosed to, the Executive during the course of his employment by the Company or any of its affiliates, including trade secrets, know-how, research and development, software, databases, inventions, processes, technology, and information relating to customers (including, without limitation, credit history, repayment history, financial information and financial statements), costs, operations, sales, pricing, suppliers, vendors, compensation, marketing, advertising, promotions, financial data, plans, and government and regulatory activities, whether past, current or planned and not to disclose the same, either directly or indirectly, to any other person, firm or business entity, or to use it in any way; provided, however, that the provisions of this Section 4(a) shall not apply to information that (i) was, is now, or becomes generally available to the public (but not as a result of a breach of any duty of confidentiality by which the Executive is bound); (ii) was disclosed to the Executive by a third party not subject to any duty of confidentiality to the Company known to Executive prior to its disclosure to the Executive; (iii) is disclosed by the Executive in the ordinary course of the Company’s business as a proper part of his employment in connection with communications with customers, vendors and other proper parties, provided that it is for a proper purpose solely for the benefit of the Company, and (iv) the Company agrees in writing was available to the Executive on a nonconfidential basis prior to disclosure. If the Executive is requested or required by law to disclose any such information, to the extent not legally prohibited, he will notify the Company promptly so that the Company may seek any appropriate protective order, seek to obtain confidential treatment of such information and/or take any other action related to the protection of such information, and the Executive shall, at the expense of the Company, use commercially reasonable efforts to assist the Company in its efforts.

     (b) Non Competition.

     (i) For the Non Competition Period (as defined below), the Executive shall not directly or indirectly, alone or as a partner, officer, director, employee, consultant, agent, independent contractor, member or stockholder of any person or entity (“Person”), (A) engage, anywhere in the United States or its territories, in the Business of the Company (as defined below) or in any business activity that is directly or indirectly in competition with the Business of the Company; provided, however, that the record or beneficial ownership by the Executive of five percent (5%) or less of the outstanding publicly traded capital stock of any company for investment purposes shall not be deemed to be in violation of this Section 4(b) so long as the Executive is not an officer, director, employee or consultant of such Person; or (B) enter the employ of, render any services to, or acquire a financial interests in, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in the Business of the Company.

The “Non Competition Period” means (A) in the event that the Executive’s employment terminates as a result of the Company’s election not to renew this Agreement under Section 1, the Non-Competition Period shall be the Employment Term, and (B) in all other circumstances, the Non-Competition Period shall be the Employment Term and during the one (1) year period following the Employment Term; provided, however that the Company may elect to increase the Non-Competition Period to include a period of up

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to two (2) years following the Employment Term by (I) providing the Executive with written notice of such election within ten (10) days after the Employment Term, which notice specifies the duration of the Non-Competition Period and (II) paying the Executive’s Base Salary during the extended portion of the Non-Compete Period, which shall be in addition to the Severance Amount required to be paid under Section 5(a).

The “Business of the Company” means the businesses in which the Company and its subsidiaries are engaged on the date that the Executive’s employment with the Company is terminated and any other businesses that the Company is actively pursuing on such date (provided that the Company engages in such business within six (6) months thereafter), which currently includes without limitation the providing of medical products to Medicare and managed care beneficiaries and the providing of certain services, including marketing, insurance agent training and licensing, member enrollment and service, distribution and billing and collections, to Medicare Part D prescription drug plan providers and other Medicare benefit sponsors.

     (ii) During the Non Competition Period, the Executive shall not, directly or indirectly, in any capacity, either separately or in association with others (A) employ or solicit for employment or endeavor in any way to entice away from employment with the Company or its affiliates any employee of the Company or its affiliates; provided, however, that this restriction shall not apply to general solicitations of employment conducted by the Executive in newspapers, trade journals, the Internet, through recruiters or by any similar media and in each case not directed at the Company’s employees or to the employment of, or employment discussions with, any person who responds to any such general solicitations; (B) solicit, induce or influence any supplier, customer, agent, consultant or other person or entity that has a business relationship with the Company to discontinue, reduce or modify such relationship with the Company; or (C) solicit any of the Company’s identified potential acquisition candidates.

          (c) Remedies. If the Executive breaches, or threatens to commit a breach of any of the provisions contained in Section 4(a) and/or Section 4(b) (collectively, the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which shall be enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.

               (i) The Executive shall account for and pay over to the Company all compensation, profits, and other benefits which inure to the Executive’s benefit which are derived or received by the Executive or any person or business entity controlled by the Executive, or his relatives, resulting from any action or transactions constituting a breach of any of the Restrictive Covenants.

               (ii) Notwithstanding the provisions of Section 4(c)(i) above, the Executive acknowledges and agrees that in the event of a violation or threatened violation of any of the Restrictive Covenants, the Company shall have no adequate remedy at law and shall therefore be entitled to enforce each such provision by temporary or permanent injunction or mandatory relief obtained in any court of competent jurisdiction without the necessity of

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proving damages, posting any bond or other security, and without prejudice to any other rights and remedies that may be available at law or in equity, and the Company may also be entitled to recover its attorneys’ fees and costs incurred to enforce any of the Restrictive Covenants from the Executive pursuant to Section 20.

          (d) Severability. If any of the Restrictive Covenants, or any part thereof, are held to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid or unenforceable portions. Without limiting the generality of the foregoing, if any of the Restrictive Covenants, or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties hereto agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, such provision shall then be enforceable.

          (e) Proprietary Rights. The Executive acknowledges and agrees that all know-how, documents, reports, plans, proposals, marketing and sales plans, client lists, client files, and any materials made by the Executive during the Employment Term and within the scope of his duties under this Agreement or by the Company are the property of the Company and shall not be used by the Executive in any way adverse to the Company’s interests. The Executive shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any third party unless such delivery or reproduction is (i) made by Executive in the proper performance of his duties hereunder or (ii) approved by the Company’s Board. The Executive hereby assigns to the Company any rights which he may have in any such trade secret or proprietary information.

     5. Termination and Compensation Due Upon Termination. The Employment Term may be terminated by the Company at any time and for any reason (and by the Executive pursuant to Section 5(c)) and the Executive’s right to compensation for periods after the Employment Term shall be determined in accordance with the following:

          (a) Termination Without Cause or Resignation with Good Reason. In the event the Executive’s employment with the Company is terminated during the Employment Term by the Company without Cause (as defined below), including a termination in connection with a sale of the Company, the Company shall pay the Executive any compensation, benefits (including accrued vacation) and expense reimbursement the Company owes to the Executive through the effective date of termination, including the payment of any Incentive Bonus pursuant to Section 3(b) that has been earned and not paid as of the effective date of the Executive’s termination (i.e., the effective date of termination occurs after December 31st of a given year and an Incentive Bonus pursuant to Section 3(b) has been earned for such year but has not been paid as of the effective date of the Executive’s termination) (collectively, the “Owed Obligations”). Additionally, and conditioned upon the Executive’s voluntary execution of a written release substantially to the form of Exhibit 5(a) (the “Release”) (to be drafted and provided by the Company within 10 days after termination of employment) within sixty (60) days of the Executive’s termination date that is not revoked before the expiration of such sixty (60) day period, the Executive shall be entitled to receive payments in an aggregate cash amount equal to Seven Hundred Eighty-Seven Thousand Five Hundred Dollars ($787,500), payable in equal

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monthly installments during the one (1) year following the Employment Term, plus the additional severance payments to be made under Section 4(b)(i) if the Company extends the Non-Compete Period under Section 4(b)(i).

     If the Executive does not voluntarily execute the Release or the Release is deemed not to be effective within sixty (60) days of the date the Release is executed by the Executive, the Executive shall not be entitled to the Severance.

          (b) Resignation With Good Reason. Executive shall have the right to terminate his employment during the Employment Term for Good Reason. In the event Executive terminated his employment for Good Reason during the Employment Term (including any extension of the Employment Term pursuant to an Extension Notice), he will be entitled to all payments and benefits as if Company he had been terminated pursuant to Section 5(a). “Good Reason” shall mean:

               (i) The Company commits a material breach of this Agreement, including increasing the Target EBITDA Threshold for the Incentive Bonus in violation of terms set forth in Exhibit 3(b);

               (ii) The assignment of the Executive without his consent to a position, responsibilities, or duties of a materially lesser status or degree of responsibility than his position, responsibilities, or duties set forth in Section 2, or the Company or Board adopts policies or procedures that materially impair the Executive’s ability to manage the day-to-day operations of the Company or to perform his duties as Chief Executive Officer of the Company;

               (iii) The assignment of the Executive without his consent to a position that he is required to report to any other officer or employee of the Company;

               (iv) The requirement by the Company that any employee other than the Executive report directly to the Board rather than, directly or indirectly, to the Executive;

               (v) The relocation of the Company’s principal executive offices more than twenty-five miles from its location on the Effective Date; or

               (vi) The requirement by the Company that the Executive be based anywhere other than the Company’s principal executive offices, in either case without the Executive’s consent,

provided that the occurrence of any of the foregoing events shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from the Executive of written notice of such occurrence (provided that such opportunity to cure shall not apply in the event that the Company repeatedly causes the event constituting Good Reason); provided, further, that Good Reason shall cease to exist following the 45 days following the Executive’s actual knowledge of its occurrence, unless Executive has given the Company written notice thereof prior to such date. The Company shall be deemed to repeatedly cause the event constituting Good Reason if the Company, in bad faith, repeats the event constituting Good Reason and uses

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its cure period in a manner so as to negate the spirit of the provisions set forth herein allowing the Executive to terminate his employment for Good Reason.

          (c) Voluntary Resignation. The Executive may terminate his employment with the Company for any reason (or no reason at all) other than for Good Reason at any time by giving the Company sixty (60) days prior written notice of voluntary resignation; provided, however, that the Company may elect that the Executive’s voluntary resignation be effective immediately upon notice of such resignation. In such event, the Company shall pay the Executive the Owed Obligations and have no further obligation to make any other payments to the Executive in accordance with the provisions of Section 3 or otherwise for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary resignation.

          (d) Termination for Cause. The Company shall pay the Executive his accrued salary (as of the date of termination), benefits (including accrued vacation) and unpaid expense reimbursements through the date of termination and shall have no further obligation to make any other payments to the Executive in accordance with the provisions of Section 3 or otherwise for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause. For purposes of this Section 5, the Executive shall be considered terminated for “Cause” if he is discharged by the Company on account of the occurrence of one or more of the following events:

               (i) the Executive discloses confidential information in violation of Section 4(a) which disclosure is intended to harm the Company or has a Company Material Adverse Effect, or engages in competition in violation of Section 4(b);

               (ii) the Executive fails to follow the reasonable, lawful instructions of the Board that do not constitute Good Reason (including any reasonable request to cooperate with an investigation by or with respect to the Company) and fails to cure such failure within fifteen (15) days after receipt of written notice from the Company specifying such failure and stating that such failure is grounds for termination for Cause (provided that such opportunity to cure will not apply in the event the Executive repeatedly fails to follow such instruction), it being understood that the failure of the Company or Executive to achieve the results specified in instructions of the Board (such as financial performance targets) shall not constitute Cause provided that the Executive pursues in good faith the achievement of such results;

               (iii) the Executive breaches any of the Executive’s obligations under this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice from the Company specifying the breach and that such breach is grounds for a termination for Cause (provided that such opportunity to cure will not apply in the event the Executive repeatedly breaches such obligation);

               (iv) the Company is directed by regulatory or governmental authorities to terminate the employment of the Executive as a result of the acts or alleged acts of the Executive, provided that the Company has used its commercially reasonable efforts to challenge or avoid such direction by the applicable regulatory or governmental authority or the Executive

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engages in activities that cause actions to be taken by regulatory or governmental authorities that have a Company Material Adverse Effect;

               (v) the Executive is convicted of, or enters into a plea of guilty or no contest to, a felony (other than a felony resulting from a minor traffic violation);

               (vi) the Executive misappropriates a material corporate opportunity of the Company or any of its subsidiaries in the health care industry;

               (vii) the Executive engages in willful or intentional misconduct, the purpose or effect of which is to have a Company Material Adverse Effect;

               (viii) the Executive commits fraud, theft, or embezzlement against the Company or any subsidiary or affiliate thereof (other than on account of unintentional and immaterial actions);

               (ix) the Executive materially breaches any material provision under the Company’s code of ethics approved by the Board or under any similar or successor Company policy that is approved by the Board, provided that, if such breach is curable, the Executive fails to cure such breach within (30) days after receipt of written notice from the Company specifying the breach and that such breach is grounds for a termination for Cause; or

               (x) The Executive’s reporting to work under the influence of illegal narcotics or use of (or testing positive for) such substances while at work or scheduled to be at work.

The Executive shall be deemed to repeatedly engage in an event constituting Cause if the Executive, in bad faith, repeats the event constituting Cause and uses his cure period in a manner so as to negate the spirit of the provisions set forth herein allowing the Company to terminate his employment for Cause.

          (e) Disability. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Section 3 for periods after the date the Executive’s employment with the Company terminates on account of disability, except payments due and owing through the effective date of termination. For purposes of this Section 5(e), determination of whether the Executive is disabled shall be determined in accordance with the Company’s long term disability plan (if any) and applicable law.

          (f) Death. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Section 3 for periods after the date of the Executive’s death, except payments due and owing as of such date.

     6. Successors. This Agreement shall be binding on the Company and its successors and assigns, and any person acquiring, whether by merger, consolidation, purchase of all or substantially all of the Company’s assets and business, or otherwise without further action or consent by the Executive, the Company or its successor; Executive hereby agrees, in the event of a sale of all or substantially all of the Company’s assets, the Executive will execute an

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acknowledgment of assignment if requested to do so by the purchaser; and the Company hereby agrees, in the event of a sale of all or substantially all of the Company’s assets, to cause the purchaser of such assets to execute an acknowledgement of assignment and assumption by the purchaser if requested to do so by the Executive.

     7. Nonalienation. The interests of the Executive under this Agreement are not subject to the claims of his creditors, other than the Company, and may not otherwise be voluntarily or involuntarily assigned, alienated or encumbered except to the Executive’s estate upon his death.

     8. Waiver of Breach. The waiver by either the Company or the Executive of a breach of any provision of this Agreement shall not operate as, or be deemed a waiver of, any subsequent breach by either the Company or the Executive.

     9. Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

     10. Notice. Any notice to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given when received, rejected or refused or, when deposited in the U.S. mail, certified or registered mail, postage prepaid to the parties at the following addresses:

If to the Company, to:

NationsHealth, Inc.
13630 NW 8th Street
Suite 210
Sunrise, Florida 33325
Attention: Chief Executive Officer
Facsimile: (954) 903-5005

with a copy (which shall not constitute notice) to:

McDermott Will & Emery LLP
201 South Biscayne Boulevard
22nd Floor
Miami, Florida 33131

Attention: Ira J. Coleman, Esq.
Frederic L. Levenson, Esq.
Harris Siskind, Esq.

Facsimile: (305) 347-6500

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and

Foley & Lardner LLP
100 North Tampa Street
Tampa, Florida 33602
Attention: Steven W. Vazquez
Facsimile: (813) 221-4217

If to Parent, to:

ComVest Investment Partners III, L.P.
One North Clematis
Suite 300
West Palm Beach, Florida 33401
Attention: Cecilio Rodriguez
Facsimile: (561) 671-3225

with a copy (which shall not constitute notice) to:

Foley & Lardner LLP
100 North Tampa Street
Tampa, Florida 33602
Attention: Steven W. Vazquez
Facsimile: (813) 221-4217

If to the Executive to:

Glenn Parker
530 Carrotwood Terrace
Plantation, FL 33324
Facsimile:                     

with a copy (which shall not constitute notice) to:

Baker & McKenzie, LLP
1111 Brickell Avenue
Suite 1700
Miami, Florida 33131
Attn: Roy J. Larson
Facsimile: (305) 789-8953

     11. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and no person, other than the parties hereto (and the Executive’s estate upon his death), shall have any rights under or interest in this Agreement or the subject matter hereof. The parties hereby agree that no oral conversations shall be deemed to be a modification of this Agreement and neither party shall assert the same.

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     12. Counterparts and Fax Signatures. This Agreement may be executed in two or more counterparts (including by means of fax or electronically transmitted portable document format (PDF) signature pages), each of which shall be deemed to be an original, but all of which together shall constitute and be one and the same instrument; provided that fax or electronically transmitted signatures of this Agreement shall be deemed to be originals. Counterpart signatures need not be on the same page and shall be deemed effective upon receipt.

     13. Applicable Law. The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Florida.

     14. No Assignments. The Executive shall not be permitted to assign this Agreement or any of the Executive’s rights under this Agreement without the prior written consent of the Company. The Company may assign (but not novate) this Agreement and its rights hereunder to any Affiliate, including Parent provided that the Company and the assignee shall be responsible for the obligations of the Company hereunder.

     15. Effectiveness. Notwithstanding anything to the contrary herein, this Agreement shall only be given effect upon the Closing (as defined in the Merger Agreement) (the “Effective Date”). In the event the Merger Agreement is terminated without the Closing having occurred, this Agreement shall be of no force or effect and the Original Agreement shall not be terminated and shall remain in full force and effect. Effective as of the Effective Date, this Agreement shall supersede the Original Agreement and any other prior employment agreements between the Executive and the Company or any of the Company’s affiliates and neither the Company nor any of its affiliates shall have any obligations under, and the Executive shall have no further rights under, the Original Agreement or any other such prior employment agreement; provided, however that nothing in this Section 15 shall be deemed to be a waiver by the Executive of his rights to indemnification from the Company, to rights arising in respect of the Option or rights under any benefit plan or insurance provided to Executive.

     16. Consequences of End of Employment. Following the Employment Term, all of the provisions of this Agreement shall terminate, except that (A) Sections 4(a), (c), (d), and (e) the Company’s payment obligations under Section 5, and Sections 6 through 21 shall survive indefinitely after the expiration of the Employment Term and (B) Section 4(b) shall terminate upon the expiration of the Non-Competition Period pursuant to Section 4(b).

     17. Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and the Executive relating to the subject matter herein and merges all prior discussions between the parties, including but not limited to any and all statements made by any officer, employee or representative of the Company. The Executive understands and acknowledges that, except as set forth in this Agreement, (a) no other representation or inducement has been made to Executive, (b) Executive has relied on Executive’s own judgment and investigation in executing this Agreement, and (c) Executive has not relied on any representation or inducement made by any officer, employee or representative of the Company. To the extent there is any conflict between the terms and conditions of this Agreement and the terms and conditions of any prior employment or consulting agreement, the terms and conditions of this Agreement shall control.

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     18. Separation from Service. Notwithstanding any provision of this Agreement to the contrary, the Executive’s employment will be deemed to have terminated on the date of the Executives “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company, as reasonably determined by the Board.

     19. 409A. It is intended that this Agreement will comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and any regulations and guideline issued thereunder (“Section 409A”) to the extent that any compensation and benefits provided hereunder constitute deferred compensation subject to Section 409A. This Agreement shall be interpreted on a basis consistent with this intent. The parties will negotiate in good faith to amend this Agreement as necessary to comply with Section 409A in a manner that preserves the original intent of the parties to the extent reasonably possible. No action or failure to act, pursuant to this Section 20 shall subject the Company to any claim, liability, or expense, and the Company shall not have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any taxes pursuant to Section 409A of the Code.

     20. Fees. The Company shall be responsible and pay for the reasonable legal fees and costs incurred by the Executive in connection with the negotiation, execution and delivery of this Agreement and any amendment, extension, or replacement thereof. Such fees and costs will be paid within thirty (30) days following submission to the Company. In the event that there is any dispute under this Agreement, the prevailing party to such dispute shall be entitled to recover from the non-prevailing party and out-of pocket costs reasonably incurred in connection with such dispute.

     21. Indemnification.

     (a) Generally. The Company will, to the fullest extent to which it is empowered to do so under applicable law, as the same now exists or may hereafter be amended (but, in the case of any such amendment only to the extent that such amendment permits the Company to provide broader indemnification rights than the Company may provide immediately prior to such amendment), indemnify and hold harmless the Executive if the Executive is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive was employed by or acted on behalf of the Company (including all periods prior to the Effective Date), against all losses, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and the reasonable fees and expenses of experts and consultants) (collectively, “Damages”) incurred or suffered by Executive in connection with such action, suit or proceeding; provided, however, that (unless the Board of Directors otherwise consents) Executive will not be indemnified for any Damages incurred or suffered that are attributable to Executive’s fraud against the Company or its subsidiaries or willful violation of applicable law.

     (b) Expenses. The Company will, to the extent permitted under applicable law, advance to Executive reasonable attorneys’ fees, consulting and expert fees and other costs and expenses incurred in connection with the defense of any action, suit or proceeding if the Executive agrees in writing before any advancement that Executive will reimburse the Company for such fees, costs and expenses to the extent that a judgment or other final adjudication adverse

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to the Executive establishes that such Executive’s acts or omissions were otherwise of such a character that applicable law would require that such amounts be repaid.

     (c) Non-Exclusive. The rights of Executive under this Section 21 will not exclude any other right to which such Executive may be lawfully entitled.

     (d) Savings Clause; Survival. If this Section 21 or any portion of it is invalidated on any ground by any court of competent jurisdiction, then the Company will nevertheless indemnify the Executive to the fullest extent permitted by any applicable portion of this Section 21 that has not been invalidated and to the fullest extent permitted by applicable law. This Section 21 shall survive the termination of Executive’s employment for any reason.

     22. 2008 Bonus. The Executive shall be entitled to receive a bonus relating to the Company’s 2008 Cash Incentive Program in the amount of Three Hundred Thirteen Thousand Dollars ($313,000), (a) $175,000 of which bonus shall be paid upon receipt of at least $900,000 of insurance proceeds relating to the fire that occurred on June 8, 2008 at the Company’s facility and (b) $138,000 of which shall be paid in six equal monthly installments beginning one month after the Effective Date, after taking into account the cash flow needs of the Company, but in no event shall the amounts paid under clause (a) or clause (b) be made later than ten (10) days prior to the date in which penalties under Section 409A would be applicable.

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IN WITNESS WHEREOF the Executive and the Company have executed this Employment Agreement as of the day and year first above written.

NATIONSHEALTH, INC.
/s/ Lewis Stone
Name:	Lewis Stone
Title:	CIO
EXECUTIVE:
/s/ Glenn Parker
Glenn Parker

EX-10.83

Exhibit 10.83

Employment Agreement, dated April 30, 2009, by and between Mr. Timothy Fairbanks and NationsHealth, Inc. (as
supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009,
by and between Mr. Timothy Fairbanks and NationsHealth, Inc.)

Execution Copy

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into on April 30, 2009, by and between NationsHealth, Inc., a Delaware corporation (the “Company”), and Timothy Fairbanks, an individual residing at 6605 N.W. 122 Avenue, Parkland, Florida 33076 (the “Executive”).

     WHEREAS, the Executive and the Company entered into that certain Amended and Restated Employment Agreement, dated May 14, 2008, effective as of May 15, 2008, as amended on December 23, 2008 (the “Original Agreement”), pursuant to which the Executive was entitled to certain compensation and benefits;

     WHEREAS, in connection with the closing of the transactions contemplated under that certain Merger Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, a Delaware limited liability company (“Parent”), NationsHealth Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent, and the Company, the Company and the Executive have entered into this Agreement;

     WHEREAS, the Company and the Executive have agreed to amend, restate and supersede the Original Agreement in its entirety as set forth herein on the Effective Date (as defined herein);

     WHEREAS, the execution and delivery of this Agreement was an inducement and a condition precedent to the Merger Agreement;

     WHEREAS, after consummation of the transactions contemplated by the Merger Agreement, the Company desires to continue to employ the Executive in the capacity hereinafter stated, and the Executive desires to continue in the employ of the Company in such capacity for the period and on the terms and conditions set forth herein;

     WHEREAS, the Company shall provide the Executive with certain severance benefits should the Executive’s employment with the Company terminate under certain circumstances, such benefits to provide the Executive with enhanced financial security and sufficient incentive and encouragement to remain employed by the Company;

     WHEREAS, the Company’s Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware provides that the Company shall, under certain circumstances, indemnify the Executive for certain expenses, fees, judgments, fines, amounts paid in settlement, and other expenses by reason of the fact that he is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise;

     WHEREAS, concurrently in connection with the execution of this Agreement, the Company and the Executive are entering into that certain Supplemental Agreement to

Employment Agreement attached as Exhibit A (the “Supplemental Agreement”), the terms of which are incorporated into the terms of this Agreement; and

     WHEREAS, the Executive acknowledges that he has had an opportunity to consider this Agreement and consult with an independent advisor or advisors of his choosing with regard to the terms of this Agreement, and enters this Agreement voluntarily and with a full understanding of its terms.

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

     1. Employment Term. Subject to Section 5 of this Agreement, the Executive shall be employed by the Company in the position (the “Executive Position”) set forth in the Supplemental Agreement, and the Executive, in such capacity, shall provide services to the Company for the period beginning on the Effective Date (as defined below) and ending on the fourth (4th) anniversary of the Effective Date. This Agreement shall automatically renew for additional one (1) year periods unless either party provides written notice of non-renewal no less than sixty (60) days prior to the scheduled expiration of the applicable employment period. For purposes of this Agreement, the term “Employment Term” shall mean the period in which the Executive is employed by the Company.

     2. Performance of Duties. During the Employment Term, (i) the Executive shall devote, on a full-time basis, his energies and talents to serving in the capacity of the Executive Position of the Company, shall in good faith seek to act in the best interests of the Company, and shall perform the duties assigned to him by the Reporting Officer (as defined in the Supplemental Agreement) faithfully, efficiently and in a professional manner, (ii) the Company shall not assign the Executive, without his consent, duties that would be inconsistent with those of the Executive Position, and (iii) the Executive shall not, without prior written consent from the Reporting Officer:

          (a) serve as or be a consultant to or employee or officer of any corporation, partnership or other entity other than the Company (other than civic, charitable, or other public service organizations); or

          (b) have more than a five percent (5%) ownership interest in any enterprise other than the Company if such ownership interest would adversely impact in any material respect the ability of the Executive to perform his duties hereunder.

     3. Compensation. Subject to the terms and conditions of this Agreement, during the Employment Term, the Executive shall be compensated by the Company for his services as follows:

          (a) The Executive shall receive, for each twelve (12) consecutive month period commencing as of the Effective Date and each anniversary thereof, a base rate of salary that is not less than the base salary set forth in the Supplemental Agreement (the “Base Salary”), payable in substantially equal monthly or more frequent installments and subject to normal tax

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withholding. During the Employment Term, the Executive’s Base Salary shall not be reduced unless agreed by the Executive in writing, and shall be reviewed by the Chief Executive Officer and the Board of Directors of the Company (the “Board”) on or before each anniversary of the Effective Date to determine whether an increase in the Executive’s Base Salary is appropriate.

          (b) The Executive will be eligible to receive an annual incentive bonus payment (the “Incentive Bonus”) based on the Company’ achievement of certain performance objectives, in accordance the terms and conditions set forth on Exhibit 3(b) attached hereto. The Incentive Bonus shall be paid as soon as practical after the completion of the audit of the Company’s financial statements for the calendar year in which the Incentive Bonus is being determined, but in no event after April 15 following the applicable bonus year.

          (c) On the Effective Date, the Company shall grant to the Executive an option (the “Option”), under the NationsHealth, Inc. 2009 Stock Incentive Plan (the “Plan”), to purchase a number of shares of the Company’s common stock (the “Common Stock”), at the exercise price set forth in the Supplemental Agreement (the “Option Exercise Price”), equal to a percentage (the “Option Percentage”), that is set forth in the Supplemental Agreement, of the Fully Diluted Common Stock on the Effective Date. The term “Fully Diluted Common Stock on the Effective Date” shall mean the number of issued and outstanding shares of Common Stock on the Effective Date, plus the number of shares of Common Stock issuable upon conversion of all shares of preferred stock of the Company that are outstanding on the Effective Date, plus the number of shares of Common Stock that can be purchased upon exercise of stock options that may be issued under the Company’ 2009 Equity Incentive Plan, plus the number of shares of Common Stock that can be purchased upon exercise of all warrants that are outstanding on the Effective Date (including the MHR Warrants, as defined in the Merger Agreement), but excluding all shares of Common Stock that may be issued upon conversion of any debt or promissory notes of the Company that is or are outstanding on the Effective Date. Attached Exhibit 3(c) sets forth an example of the calculation of the number of shares of Common Stock that will be subject to the Option.

          (d) The Company and the Executive will enter into an award agreement relating to the Option (the “Award Agreement”) which shall provide, among other things, that:

               (i) twenty five (25%) of such Option shall vest on the first anniversary of the Effective Date and the remaining seventy-five (75%) of such Option shall vest in equal installments every six months commencing on the date that is 18 months after the Effective Date and ending on the fourth (4^th) anniversary of the Effective Date;

               (ii) the Option shall become fully vested on the termination of Executive’s employment with the Company for any reason (including as a result death or disability), other than (A) if the Executive terminates his employment with the Company for any reason other than Good Reason (in which case the Executive shall retain any part of such Option that has vested as of such termination date) or (B) if the Company terminates the Executive for Cause pursuant to Section 5(d) of this Agreement;

               (iii) any unvested portion of the Option shall immediately terminate, and the Executive will have no further right to exercise any unvested portion of the Option, if the

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Executive’s employment with the Company is terminated by the Executive other than for Good Reason (but in such case, the Executive shall retain any part of such Option that has vested as of such termination date) or by the Company for Cause pursuant to Section 5(d) of this Agreement; and

               (iv) the Option shall become fully vested on a Change in Control of the Company (as defined in the Plan); and

               (v) the exercise period for the Option shall be ten (10) years from the date of grant of the Option.

          (e) During the Employment Term, the Executive shall be entitled to participate in the Company’s health and welfare benefit plans, as maintained by the Company from time to time, on substantially the same terms and conditions as other senior executives of the Company.

          (f) In the event that Parent purchases additional shares of the Company’s preferred stock pursuant to the Preferred Stock Investment Option (as defined in the Merger Agreement), the Company shall issue the Executive an additional option to purchase shares of Common Stock, on terms that are the substantially the same as the Option, including an exercise price equal to the Option Exercise Price, as adjusted for stock splits, stock dividends, recapitalizations or similar events (the “Additional Option”), such that the combined number of shares subject to the Option and the Additional Option shall be an amount equal to the Option Percentage of (i) the Fully Diluted Common Stock on the Effective Date plus (ii) the shares of Common Stock into which the preferred stock purchased by Parent pursuant to the Preferred Stock Investment Option is convertible.

          (g) Dividend Equivalent Bonus Rights. In the event that the Company makes any dividends or distributions with respect to the Common Stock of the Company, the Company shall pay the Executive an amount equal to the amount of dividends or other distributions the Executive would have received if all of the shares of stock subject to the Option, without regard to whether the Option has vested, had been issued to Executive and were outstanding (the “DE Bonus”). Executive and Company agree that fifty percent (50%) of the DE Bonus (the “50 Percent Amount”) shall be used by the Executive to exercise the Option (or applicable portion thereof), provided, however, that in the event that the Option (or applicable portion thereof) has not vested with respect to all the shares of Common Stock that can be purchased by the payment of the 50 Percent Amount, then (I) the 50 Percent Amount shall be used to purchase the maximum number of shares purchasable upon the exercise of the vested portion of the Option, (II) the remaining portion of 50 Percent Amount shall be put into escrow (on terms reasonably satisfactory to Executive and the Company), and (III) such escrowed amounts shall be released when additional shares subject to the Option vest and, upon release, will be used to exercise such newly vested shares of stock that can be purchased under the Option.

          (h) Further Assurance Regarding Taxes. The Company agrees to cooperate with the Executive and its tax advisors in setting the terms and conditions of the Options.

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          (i) Option Plan. The terms of the Plan (as applicable to the Executive) and the Option Agreement shall be consistent with the terms set forth in this Agreement, and the Company and its successors shall not have the right to amend the Plan or the Option Agreement in a manner that adversely affects the Executive without the Executive’s prior written consent.

     4. Restrictive Covenants. The Executive acknowledges and agrees that the Executive has a major responsibility for the operation, development and growth of the Company’s business, the Executive’s work for the Company has brought him and will continue to bring him into close contact with confidential information of the Company and its customers, and the agreements and covenants contained in this Section 4 are essential to protect the business interests of the Company and that the Company will not enter into this Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the following:

          (a) Confidential Information. Except as may be required under applicable law, including by the lawful order of a court or agency of competent jurisdiction, the Executive agrees to keep secret and confidential, both during the Employment Term and indefinitely after the Executive’s employment with the Company terminates, all non-public information concerning the Company and its affiliates that was acquired by, or disclosed to, the Executive during the course of his employment by the Company or any of its affiliates, including trade secrets, know-how, research and development, software, databases, inventions, processes, technology, and information relating to customers (including, without limitation, credit history, repayment history, financial information and financial statements), costs, operations, sales, pricing, suppliers, vendors, compensation, marketing, advertising, promotions, financial data, plans, and government and regulatory activities, whether past, current or planned and not to disclose the same, either directly or indirectly, to any other person, firm or business entity, or to use it in any way; provided, however, that the provisions of this Section 4(a) shall not apply to information that (i) was, is now, or becomes generally available to the public (but not as a result of a breach of any duty of confidentiality by which the Executive is bound); (ii) was disclosed to the Executive by a third party not subject to any duty of confidentiality to the Company known to Executive prior to its disclosure to the Executive; (iii) is disclosed by the Executive in the ordinary course of the Company’s business as a proper part of his employment in connection with communications with customers, vendors and other proper parties, provided that it is for a proper purpose solely for the benefit of the Company, and (iv) the Company agrees in writing was available to the Executive on a nonconfidential basis prior to disclosure. If the Executive is requested or required by law to disclose any such information, to the extent not legally prohibited, he will notify the Company promptly so that the Company may seek any appropriate protective order, seek to obtain confidential treatment of such information and/or take any other action related to the protection of such information, and the Executive shall, at the expense of the Company, use commercially reasonable efforts to assist the Company in its efforts.

          (b) Non Competition.

     (i) For the Non Competition Period (as defined below), the Executive shall not directly or indirectly, alone or as a partner, officer, director, employee, consultant, agent, independent contractor, member or stockholder of any person or entity (“Person”), (A) engage, anywhere in the United States or its territories, in the Business of the

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Company (as defined below) or in any business activity that is directly or indirectly in competition with the Business of the Company; provided, however, that the record or beneficial ownership by the Executive of five percent (5%) or less of the outstanding publicly traded capital stock of any company for investment purposes shall not be deemed to be in violation of this Section 4(b) so long as the Executive is not an officer, director, employee or consultant of such Person; or (B) enter the employ of, render any services to, or acquire a financial interests in, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in the Business of the Company.

The “Non Competition Period” means (A) in the event that the Executive’s employment terminates as a result of the Company’s election not to renew this Agreement under Section 1, the Non-Competition Period shall be the Employment Term, or (B) in all other circumstances, the Non-Competition Period shall be the Employment Term and during the one (1) year period following the Employment Term; provided, however that the Company may elect to increase the Non-Competition Period to include a period of up to two (2) years following the Employment Term by (I) providing the Executive with written notice of such election within ten (10) days after the Employment Term, which notice specifies the duration of the Non-Competition Period and (II) increasing the Severance Period described in Section 5(a) so that such Severance Period (and corresponding Severance Payments) run until the end of the Non-Competition Period..

The “Business of the Company” means the businesses in which the Company and its subsidiaries are engaged on the date that the Executive’s employment with the Company is terminated and any other businesses that the Company is actively pursuing on such date (provided that the Company engages in such business within six (6) months thereafter), which currently includes without limitation the providing of medical products to Medicare and managed care beneficiaries and the providing of certain services, including marketing, insurance agent training and licensing, member enrollment and service, distribution and billing and collections, to Medicare Part D prescription drug plan providers and other Medicare benefit sponsors.

     (ii) During the Non Competition Period, the Executive shall not, directly or indirectly, in any capacity, either separately or in association with others (A) employ or solicit for employment or endeavor in any way to entice away from employment with the Company or its affiliates any employee of the Company or its affiliates; provided, however, that this restriction shall not apply to general solicitations of employment conducted by the Executive in newspapers, trade journals, the Internet, through recruiters or by any similar media and in each case not directed at the Company’s employees or to the employment of, or employment discussions with, any person who responds to any such general solicitations; (B) solicit, induce or influence any supplier, customer, agent, consultant or other person or entity that has a business relationship with the Company to discontinue, reduce or modify such relationship with the Company; or (C) solicit any of the Company’s identified potential acquisition candidates.

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          (c) Remedies. If the Executive breaches, or threatens to commit a breach of any of the provisions contained in Section 4(a) and/or Section 4(b) (collectively, the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which shall be enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.

               (i) The Executive shall account for and pay over to the Company all compensation, profits, and other benefits which inure to the Executive’s benefit which are derived or received by the Executive or any person or business entity controlled by the Executive, or his relatives, resulting from any action or transactions constituting a breach of any of the Restrictive Covenants.

               (ii) Notwithstanding the provisions of Section 4(c)(i) above, the Executive acknowledges and agrees that in the event of a violation or threatened violation of any of the Restrictive Covenants, the Company shall have no adequate remedy at law and shall therefore be entitled to enforce each such provision by temporary or permanent injunction or mandatory relief obtained in any court of competent jurisdiction without the necessity of proving damages, posting any bond or other security, and without prejudice to any other rights and remedies that may be available at law or in equity, and the Company may also be entitled to recover its attorneys’ fees and costs incurred to enforce any of the Restrictive Covenants from the Executive pursuant to Section 20.

          (d) Severability. If any of the Restrictive Covenants, or any part thereof, are held to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid or unenforceable portions. Without limiting the generality of the foregoing, if any of the Restrictive Covenants, or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties hereto agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, such provision shall then be enforceable.

          (e) Proprietary Rights. The Executive acknowledges and agrees that all know-how, documents, reports, plans, proposals, marketing and sales plans, client lists, client files, and any materials made by the Executive during the Employment Term and within the scope of his duties under this Agreement or by the Company are the property of the Company and shall not be used by the Executive in any way adverse to the Company’s interests. The Executive shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any third party unless such delivery or reproduction is (i) made by Executive in the proper performance of his duties hereunder or (ii) approved by the Company’s Board or the Reporting Officer. The Executive hereby assigns to the Company any rights which he may have in any such trade secret or proprietary information.

     5. Termination and Compensation Due Upon Termination. The Employment Term may be terminated by the Company at any time and for any reason (and by the Executive pursuant to Section 5(c)) and the Executive’s right to compensation for periods after the date of the Employment Term shall be determined in accordance with the following:

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          (a) Termination Without Cause or Resignation with Good Reason. In the event the Executive’s employment with the Company is terminated during the Employment Term by the Company without Cause (as defined below), including a termination in connection with a sale of the Company, the Company shall pay the Executive any compensation, benefits (including accrued vacation) and expense reimbursement the Company owes to the Executive through the effective date of termination, including the payment of any Incentive Bonus pursuant to Section 3(b) that has been earned and not paid as of the effective date of the Executive’s termination (i.e., the effective date of termination occurs after December 31st of a given year and an Incentive Bonus pursuant to Section 3(b) has been earned for such year but has not been paid as of the effective date of the Executive’s termination) (collectively, the “Owed Obligations”). Additionally, and conditioned upon the Executive’s voluntary execution of a written release substantially to the form of Exhibit 5(a) (the “Release”) (to be drafted and provided by the Company within 10 days after termination of employment) within sixty (60) days of the Executive’s termination date that is not revoked before the expiration of such sixty (60) day period the Executive shall be entitled to receive continued payment of Base Salary (the “Severance Payments”) during the one (1) year following the Employment Term (“Severance Period”), subject to adjustment in accordance with Section 4(b)(i).

     If the Executive does not voluntarily execute the Release or the Release is deemed not to be effective within sixty (60) days of the date the Release is executed by the Executive, the Executive shall not be entitled to the Severance Payments.

          (b) Resignation With Good Reason. Executive shall have the right to terminate his employment during the Employment Term for Good Reason. In the event Executive terminated his employment for Good Reason during the Employment Term (including any extension of the Employment Period pursuant to an Extension Notice), he will be entitled to all payments and benefits as if Company he had been terminated pursuant to Section 5(a). “Good Reason” shall mean:

               (i) The Company commits a material breach of this Agreement, including increasing the Target EBITDA Threshold for the Incentive Bonus in violation of terms set forth in Exhibit 3(b);

               (ii) The assignment of the Executive without his consent to a position, responsibilities, or duties of a materially lesser status or degree of responsibility than his position, responsibilities, or duties set forth in Section 2 or the requirement that the Executive report to any person other than the Reporting Officer;

               (iii) The relocation of the Company’s principal executive offices more than twenty-five miles from its location on the Effective Date; or

               (iv) The requirement by the Company that the Executive be based anywhere other than the Company’s principal executive offices, in either case without the Executive’s consent,

provided that the occurrence of any of the foregoing events shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from the Executive of written

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notice of such occurrence (provided that such opportunity to cure shall not apply in the event that the Company repeatedly causes the event constituting Good Reason); provided, further, that Good Reason shall cease to exist following the 45 days following the Executive’s actual knowledge of its occurrence, unless Executive has given the Company written notice thereof prior to such date. The Company shall be deemed to repeatedly cause the event constituting Good Reason if the Company, in bad faith, repeats the event constituting Good Reason and uses its cure period in a manner so as to negate the spirit of the provisions set forth herein allowing the Executive to terminate his employment for Good Reason.

          (c) Voluntary Resignation. The Executive may terminate his employment with the Company for any reason (or no reason at all) other than for Good Reason at any time by giving the Company sixty (60) days prior written notice of voluntary resignation; provided, however, that the Company may elect that the Executive’s voluntary resignation be effective immediately upon notice of such resignation. In such event, the Company shall pay the Executive the Owed Obligations and have no further obligation to make any other payments to the Executive in accordance with the provisions of Section 3 or otherwise for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary resignation.

          (d) Termination for Cause. The Company shall pay the Executive his accrued salary (as of the date of termination), benefits (including accrued vacation) and unpaid expense reimbursements through the date of termination and shall have no further obligation to make any other payments to the Executive in accordance with the provisions of Section 3 or otherwise for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause. For purposes of this Section 5, the Executive shall be considered terminated for “Cause” if he is discharged by the Company on account of the occurrence of one or more of the following events:

               (i) the Executive discloses confidential information in violation of Section 4(a) which disclosure is intended to harm the Company or has a Company Material Adverse Effect, or engages in competition in violation of Section 4(b);

               (ii) the Executive fails to follow the reasonable, lawful instructions of the Reporting Officer that does not constitute Good Reason (including any reasonable request to cooperate with an investigation by or with respect to the Company) and fails to cure such failure within fifteen (15) days after receipt of written notice from the Company specifying such failure and stating that such failure is grounds for termination for Cause (provided that such opportunity to cure will not apply in the event the Executive repeatedly fails to follow such instruction), it being understood that the failure of the Company or Executive to achieve the results specified in instructions of the Reporting Officer (such as financial performance targets) shall not constitute Cause provided that the Executive pursues in good faith the achievement of such results;

               (iii) the Executive breaches any of the Executive’s obligations under this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice from the Company specifying the breach and that such breach is grounds for a termination for

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Cause (provided that such opportunity to cure will not apply in the event the Executive repeatedly breaches such obligation);

               (iv) the Company is directed by regulatory or governmental authorities to terminate the employment of the Executive as a result of the acts or alleged acts of the Executive, provided that the Company has used its commercially reasonable efforts to challenge or avoid such direction by the applicable regulatory or governmental authority or the Executive engages in activities that cause actions to be taken by regulatory or governmental authorities that have a Company Material Adverse Effect;

               (v) the Executive is convicted of, or enters into a plea of guilty or no contest to, a felony (other than a felony resulting from a minor traffic violation);

               (vi) the Executive misappropriates a material corporate opportunity of the Company or any of its subsidiaries in the health care industry;

               (vii) the Executive engages in willful or intentional misconduct, the purpose or effect of which is to have a Company Material Adverse Effect;

               (viii) the Executive commits fraud, theft, or embezzlement against the Company or any subsidiary or affiliate thereof (other than on account of unintentional and immaterial actions);

               (ix) the Executive materially breaches any material provision under the Company’s code of ethics approved by the Board or under any similar or successor Company policy that is approved by the Board, provided that, if such breach is curable, the Executive fails to cure such breach within (30) days after receipt of written notice from the Company specifying the breach and that such breach is grounds for a termination for Cause; or

               (x) The Executive’s reporting to work under the influence of illegal narcotics or use of (or testing positive for) such substances while at work or scheduled to be at work.

The term “Company Material Adverse Effect” means any event, circumstance, development, condition, change, or effect which, is, either individually or in the aggregate with any other event, circumstance, development, condition, change, or effect, materially adverse to the business, operation, condition (financial or otherwise) assets, liabilities or results of operations of the Company and its subsidiaries, taken as a whole.

The Executive shall be deemed to repeatedly engage in an event constituting Cause if the Executive, in bad faith, repeats the event constituting Cause and uses his cure period in a manner so as to negate the spirit of the provisions set forth herein allowing the Company to terminate his employment for Cause.

          (e) Disability. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Section 3 for periods after the date the Executive’s employment with the Company terminates on account of disability, except payments

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due and owing through the effective date of termination. For purposes of this Section 5(e), determination of whether the Executive is disabled shall be determined in accordance with the Company’s long term disability plan (if any) and applicable law.

          (f) Death. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Section 3 for periods after the date of the Executive’s death, except payments due and owing as of such date.

     6. Successors. This Agreement shall be binding on the Company and its successors and assigns, and any person acquiring, whether by merger, consolidation, purchase of all or substantially all of the Company’s assets and business, or otherwise without further action or consent by the Executive, the Company or its successor; Executive hereby agrees, in the event of a sale of all or substantially all of the Company’s assets, the Executive will execute an acknowledgment of assignment if requested to do so by the purchaser; and the Company hereby agrees, in the event of a sale of all or substantially all of the Company’s assets, to cause the purchaser of such assets to execute an acknowledgement of assignment and assumption by the purchaser if requested to do so by the Executive.

     7. Nonalienation. The interests of the Executive under this Agreement are not subject to the claims of his creditors, other than the Company, and may not otherwise be voluntarily or involuntarily assigned, alienated or encumbered except to the Executive’s estate upon his death.

     8. Waiver of Breach. The waiver by either the Company or the Executive of a breach of any provision of this Agreement shall not operate as, or be deemed a waiver of, any subsequent breach by either the Company or the Executive.

     9. Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

     10. Notice. Any notice to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given when received, rejected or refused or, when deposited in the U.S. mail, certified or registered mail, postage prepaid to the parties at the following addresses:

If to the Company, to:

NationsHealth, Inc.
13630 NW 8th Street
Suite 210
Sunrise, Florida 33325

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Attention: Chief Executive Officer
Facsimile: (954) 903-5005

with a copy (which shall not constitute notice) to:

McDermott Will & Emery LLP
201 South Biscayne Boulevard
22nd Floor
Miami, Florida 33131
Attention:      Ira J. Coleman, Esq.
                      Frederic L. Levenson, Esq.
                      Harris Siskind, Esq.
Facsimile: (305) 347-6500

and

Foley & Lardner LLP
100 North Tampa Street
Tampa, Florida 33602
Attention: Steven W. Vazquez
Facsimile: (813) 221-4217

If to Parent, to:

ComVest Investment Partners III, L.P.
One North Clematis
Suite 300
West Palm Beach, Florida 33401
Attention: Cecilio Rodriguez
Facsimile: (561) 671-3225

with a copy (which shall not constitute notice) to:

Foley & Lardner LLP
100 North Tampa Street
Tampa, Florida 33602
Attention: Steven W. Vazquez
Facsimile: (813) 221-4217

If to the Executive to:

Timothy Fairbanks
6605 N.W. 122 Avenue
Parkland, Florida 33076
Facsimile:                     

with a copy (which shall not constitute notice) to:

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Baker & McKenzie, LLP
1111 Brickell Avenue
Suite 1700
Miami, Florida 33131
Attn: Roy J. Larson
Facsimile: (305) 789-8953

     11. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and no person, other than the parties hereto (and the Executive’s estate upon his death), shall have any rights under or interest in this Agreement or the subject matter hereof. The parties hereby agree that no oral conversations shall be deemed to be a modification of this Agreement and neither party shall assert the same.

     12. Counterparts and Fax Signatures. This Agreement may be executed in two or more counterparts (including by means of fax or electronically transmitted portable document format (PDF) signature pages), each of which shall be deemed to be an original, but all of which together shall constitute and be one and the same instrument; provided that fax or electronically transmitted signatures of this Agreement shall be deemed to be originals. Counterpart signatures need not be on the same page and shall be deemed effective upon receipt.

     13. Applicable Law. The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Florida.

     14. No Assignments. The Executive shall not be permitted to assign this Agreement or any of the Executive’s rights under this Agreement without the prior written consent of the Company. The Company may assign (but not novate) this Agreement and its rights hereunder to any Affiliate, including Parent provided that the Company and the assignee shall be responsible for the obligations of the Company hereunder.

     15. Effectiveness. Notwithstanding anything to the contrary herein, this Agreement shall only be given effect upon the Closing (as defined in the Merger Agreement) (the “Effective Date”). In the event the Merger Agreement is terminated without the Closing having occurred, this Agreement shall be of no force or effect and the Original Agreement shall not be terminated and shall remain in full force and effect. Effective as of the Effective Date, this Agreement shall supersede the Original Agreement and any other prior employment agreements between the Executive and the Company or any of the Company’s affiliates and neither the Company nor any of its affiliates shall have any obligations under, and the Executive shall have no further rights under, the Original Agreement or any other such prior employment agreement; provided, however that nothing in this Section 15 shall be deemed to be a waiver by the Executive of his rights to indemnification from the Company, to rights arising in respect of the Option or rights under any benefit plan or insurance provided to Executive.

     16. Consequences of End of Employment. Following the Employment Term, all of the provisions of this Agreement shall terminate, except that (A) Sections 4(a), (c), (d), and (e) the Company’s payment obligations under Section 5, and Sections 6 through 21 shall survive

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indefinitely after the expiration of the Employment Term and (B) Section 4(b) shall terminate upon the expiration of the Non-Competition Period pursuant to Section 4(b).

     17. Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and the Executive relating to the subject matter herein and merges all prior discussions between the parties, including but not limited to any and all statements made by any officer, employee or representative of the Company. The Executive understands and acknowledges that, except as set forth in this Agreement, (a) no other representation or inducement has been made to Executive, (b) Executive has relied on Executive’s own judgment and investigation in executing this Agreement, and (c) Executive has not relied on any representation or inducement made by any officer, employee or representative of the Company. To the extent there is any conflict between the terms and conditions of this Agreement and the terms and conditions of any prior employment or consulting agreement, the terms and conditions of this Agreement shall control.

     18. Separation from Service. Notwithstanding any provision of this Agreement to the contrary, the Executive’s employment will be deemed to have terminated on the date of the Executives “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company, as reasonably determined by the Board.

     19. 409A. It is intended that this Agreement will comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and any regulations and guideline issued thereunder (“Section 409A”) to the extent that any compensation and benefits provided hereunder constitute deferred compensation subject to Section 409A. This Agreement shall be interpreted on a basis consistent with this intent. The parties will negotiate in good faith to amend this Agreement as necessary to comply with Section 409A in a manner that preserves the original intent of the parties to the extent reasonably possible. No action or failure to act, pursuant to this Section 19 shall subject the Company to any claim, liability, or expense, and the Company shall not have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any taxes pursuant to Section 409A of the Code.

     20. Fees. The Company shall be responsible and pay for the reasonable legal fees and costs incurred by the Executive in connection with the negotiation, execution and delivery of this Agreement and any amendment, extension, or replacement thereof. Such fees and costs will be paid within thirty (30) days following submission to the Company. In the event that there is any dispute under this Agreement, the prevailing party to such dispute shall be entitled to recover from the non-prevailing party and out-of pocket costs reasonably incurred in connection with such dispute.

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     21. Indemnification.

     (a) Generally. The Company will, to the fullest extent to which it is empowered to do so under applicable law, as the same now exists or may hereafter be amended (but, in the case of any such amendment only to the extent that such amendment permits the Company to provide broader indemnification rights than the Company may provide immediately prior to such amendment), indemnify and hold harmless the Executive if the Executive is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive was employed by or acted on behalf of the Company (including all periods prior to the Effective Date), against all losses, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and the reasonable fees and expenses of experts and consultants) (collectively, “Damages”) incurred or suffered by Executive in connection with such action, suit or proceeding; provided, however, that (unless the Board of Directors otherwise consents) Executive will not be indemnified for any Damages incurred or suffered that are attributable to Executive’s fraud against the Company or its subsidiaries or willful violation of applicable law.

     (b) Expenses. The Company will, to the extent permitted under applicable law, advance to Executive reasonable attorneys’ fees, consulting and expert fees and other costs and expenses incurred in connection with the defense of any action, suit or proceeding if the Executive agrees in writing before any advancement that Executive will reimburse the Company for such fees, costs and expenses to the extent that a judgment or other final adjudication adverse to the Executive establishes that such Executive’s acts or omissions were otherwise of such a character that applicable law would require that such amounts be repaid.

     (c) Non-Exclusive. The rights of Executive under this Section 21 will not exclude any other right to which such Executive may be lawfully entitled.

     (d) Savings Clause; Survival. If this Section 21 or any portion of it is invalidated on any ground by any court of competent jurisdiction, then the Company will nevertheless indemnify the Executive to the fullest extent permitted by any applicable portion of this Section 21 that has not been invalidated and to the fullest extent permitted by applicable law. This Section 21 shall survive the termination of Executive’s employment for any reason.

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IN WITNESS WHEREOF the Executive and the Company have executed this Employment Agreement as of the day and year first above written.

NATIONSHEALTH, INC.
/s/ Glenn Parker
Name:	Glenn Parker
Title:	CEO
EXECUTIVE:
/s/ Timothy Fairbanks
Timothy Fairbanks

Execution Copy

SUPPLEMENTAL AGREEMENT TO
EMPLOYMENT AGREEMENT

     This SUPPLEMENTAL AGREEMENT TO EMPLOYMENT AGREEMENT (the “Supplemental Agreement”) is made and entered into on April 30, 2009, by and between NationsHealth, Inc., a Delaware corporation (the “Company”), and Timothy Fairbanks, an individual residing at 6605 N.W. 122 Avenue, Parkland, Florida 33076 (the “Executive”).

     WHEREAS, the Executive and the Company entered into that certain Employment Agreement, dated as of the date hereof (the “Employment Agreement”), which agreement sets forth the terms of Executive’s employment with the Company;

     WHEREAS, unless the context requires otherwise, capitalized terms that are not defined in this Supplemental Agreement shall have the meaning assigned to such terms in the Employment Agreement;

     WHEREAS, the Executive and the Company desire to set forth certain additional terms that will be incorporated into the terms of the Employment Agreement;

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

     1. Position. The Executive Position is Chief Financial Officer.

     2. Base Salary. The Base Salary is Three Hundred Thousand Dollars ($300,000) per year.

     3. Option Percentage. The Option Percentage is 2.8%.

     4. Option Exercise Price. The Option Exercise Price is $0.01 per share.

     5. Reporting Officer. The Reporting Officer means the Chief Executive Officer of the Company.

     6. 2008 Bonus. The Executive shall be entitled to receive a bonus relating to the Company’s 2008 Cash Incentive Program in the amount of Two Hundred Twenty Five Thousand Dollars ($225,000), (a) One Hundred Twenty Five Thousand Dollars ($125,000) of which shall be paid upon receipt of at least $900,000 of insurance proceeds relating to the fire that occurred on June 8, 2008 at the Company’s facility and (b) One Hundred Thousand Dollars ($100,000) of which shall be paid in six equal monthly installments beginning one month after the Effective Date but subject to delay after taking into account the cash flow needs of the Company, but in no event shall be the payments under clause (a) or clause (b) be made later than ten (10) days prior to the date in which penalties under Section 409A would be applicable.

     7. Tax Structuring. On or prior to the Effective Date, the Executive shall have the opportunity to consult with a tax advisor regarding the Loan (as defined below), the Option and

the arrangements ancillary thereto and the Company agrees to restructure the Loan, the Option and such ancillary arrangements in a manner that (i) preserves the underlying economic arrangements of such agreements and arrangements and (ii) provides Executive with the most beneficial tax consequences for such agreements and arrangements; provided, however, that the Company shall not be required to restructure the Loan.

     8. Loan Arrangement. On the Effective Date, the Company will make a loan to the Executive in the principal amount of Four Hundred Twenty Five Thousand Dollars ($425,000) (the “Loan”). Prior to the Effective Date, the Company and the Executive shall enter customary agreements evidencing the Loan, which will incorporate the following terms: (a) the Loan will be evidenced by a promissory note; (b) the Loan will bear simple interest at a rate equal to the prime rate as of the first day of the month immediately preceding the Effective Date; (c) the Loan will be secured by all of the shares of stock in the Company currently owned by the Executive, plus the Preferred Stock (as defined below), plus the shares purchased or under the Option (“Executive Shares”); (d) in the event that the Executive defaults under the Loan, the Company’s sole recourse under the Loan shall be to take possession of a number of Executive Shares that have a value equal to the unpaid payment obligations of the Executive under the Loan; (e) Loan shall be forgiven (including any accrued interest) in the event that (I) the Company makes dividends or other dispositions to shareholders of the Company such that Comvest has received a two times return on its equity investment in the Company or (II) a change of control (to be defined in the Loan agreement) occurs and the value of Comvest’s equity interests at the time of such Change of Control is equal to two times (2x) the amount of equity invested by Comvest in the Company); (f) the Executive shall use One Hundred Fifty Thousand Dollars ($150,000) of the proceeds of the Loan to purchase Series A Preferred Stock of the Company at a purchase price of $0.12 per share (the “Preferred Stock”); (g) no interest or principal is required to be paid under the Loan until there is a Change of Control, provided, however, that in no event shall Executive be required to pay more under the Loan than the Executive receives as cash (or other liquid consideration) for the Executive Shares in connection with the Change of Control; and (h) the Executive shall have the right to prepay the Loan at any time and shall have the right to repay the Loan by delivering all of the Executive Shares and forfeiting the remaining portion of the Option.

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IN WITNESS WHEREOF the Executive and the Company have executed this Supplemental Agreement as of the day and year first above written.

NATIONSHEALTH, INC.
By: Name:	/s/ Glenn Parker Glenn Parker
Title:	CEO
EXECUTIVE:
/s/ Timothy Fairbanks
Timothy	Fairbanks

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EX-10.84

Exhibit 10.84

Employment Agreement, dated April 30, 2009, by and between Mr. Lewis Stone and NationsHealth, Inc. (as
supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009,
by and between Mr. Lewis Stone and NationsHealth, Inc.)

Execution Copy

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into on April 30, 2009, by and between NationsHealth, Inc., a Delaware corporation (the “Company”), and Lewis Stone, an individual residing at 6618 N.W. 103rd Lane, Parkland, Florida 33076 (the “Executive”).

     WHEREAS, the Executive and the Company entered into that certain Employment Agreement, dated March 9, 2004, as amended on March 29, 2008 (the “Original Agreement”), pursuant to which the Executive was entitled to certain compensation and benefits;

     WHEREAS, in connection with the closing of the transactions contemplated under that certain Merger Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, a Delaware limited liability company (“Parent”), NationsHealth Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent, and the Company, the Company and the Executive have entered into this Agreement;

     WHEREAS, the Company and the Executive have agreed to amend, restate and supersede the Original Agreement in its entirety as set forth herein on the Effective Date (as defined herein);

     WHEREAS, the execution and delivery of this Agreement was an inducement and a condition precedent to the Merger Agreement;

     WHEREAS, after consummation of the transactions contemplated by the Merger Agreement, the Company desires to continue to employ the Executive in the capacity hereinafter stated, and the Executive desires to continue in the employ of the Company in such capacity for the period and on the terms and conditions set forth herein;

     WHEREAS, the Company shall provide the Executive with certain severance benefits should the Executive’s employment with the Company terminate under certain circumstances, such benefits to provide the Executive with enhanced financial security and sufficient incentive and encouragement to remain employed by the Company;

     WHEREAS, the Company’s Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware provides that the Company shall, under certain circumstances, indemnify the Executive for certain expenses, fees, judgments, fines, amounts paid in settlement, and other expenses by reason of the fact that he is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise;

     WHEREAS, concurrently in connection with the execution of this Agreement, the Company and the Executive are entering into that certain Supplemental Agreement to Employment Agreement attached as Exhibit A (the “Supplemental Agreement”), the terms of which are incorporated into the terms of this Agreement; and

     WHEREAS, the Executive acknowledges that he has had an opportunity to consider this Agreement and consult with an independent advisor or advisors of his choosing with regard to the terms of this Agreement, and enters this Agreement voluntarily and with a full understanding of its terms.

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

     1. Employment Term. Subject to Section 5 of this Agreement, the Executive shall be employed by the Company in the position (the “Executive Position”) set forth in the Supplemental Agreement, and the Executive, in such capacity, shall provide services to the Company for the period beginning on the Effective Date (as defined below) and ending on the fourth (4th) anniversary of the Effective Date. This Agreement shall automatically renew for additional one (1) year periods unless either party provides written notice of non-renewal no less than sixty (60) days prior to the scheduled expiration of the applicable employment period. For purposes of this Agreement, the term “Employment Term” shall mean the period in which the Executive is employed by the Company.

     2. Performance of Duties. During the Employment Term, (i) the Executive shall devote, on a full-time basis, his energies and talents to serving in the capacity of the Executive Position of the Company, shall in good faith seek to act in the best interests of the Company, and shall perform the duties assigned to him by the Reporting Officer (as defined in the Supplemental Agreement) faithfully, efficiently and in a professional manner, (ii) the Company shall not assign the Executive, without his consent, duties that would be inconsistent with those of the Executive Position, and (iii) the Executive shall not, without prior written consent from the Reporting Officer:

          (a) serve as or be a consultant to or employee or officer of any corporation, partnership or other entity other than the Company (other than civic, charitable, or other public service organizations); or

          (b) have more than a five percent (5%) ownership interest in any enterprise other than the Company if such ownership interest would adversely impact in any material respect the ability of the Executive to perform his duties hereunder.

     3. Compensation. Subject to the terms and conditions of this Agreement, during the Employment Term, the Executive shall be compensated by the Company for his services as follows:

          (a) The Executive shall receive, for each twelve (12) consecutive month period commencing as of the Effective Date and each anniversary thereof, a base rate of salary that is not less than the base salary set forth in the Supplemental Agreement (the “Base Salary”), payable in substantially equal monthly or more frequent installments and subject to normal tax withholding. During the Employment Term, the Executive’s Base Salary shall not be reduced unless agreed by the Executive in writing, and shall be reviewed by the Chief Executive Officer

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and the Board of Directors of the Company (the “Board”) on or before each anniversary of the Effective Date to determine whether an increase in the Executive’s Base Salary is appropriate.

          (b) The Executive will be eligible to receive an annual incentive bonus payment (the “Incentive Bonus”) based on the Company’ achievement of certain performance objectives, in accordance the terms and conditions set forth on Exhibit 3(b) attached hereto. The Incentive Bonus shall be paid as soon as practical after the completion of the audit of the Company’s financial statements for the calendar year in which the Incentive Bonus is being determined, but in no event after April 15 following the applicable bonus year.

          (c) On the Effective Date, the Company shall grant to the Executive an option (the “Option”), under the NationsHealth, Inc. 2009 Stock Incentive Plan (the “Plan”), to purchase a number of shares of the Company’s common stock (the “Common Stock”), at the exercise price set forth in the Supplemental Agreement (the “Option Exercise Price”), equal to a percentage (the “Option Percentage”), that is set forth in the Supplemental Agreement, of the Fully Diluted Common Stock on the Effective Date. The term “Fully Diluted Common Stock on the Effective Date” shall mean the number of issued and outstanding shares of Common Stock on the Effective Date, plus the number of shares of Common Stock issuable upon conversion of all shares of preferred stock of the Company that are outstanding on the Effective Date, plus the number of shares of Common Stock that can be purchased upon exercise of stock options that may be issued under the Company’ 2009 Equity Incentive Plan, plus the number of shares of Common Stock that can be purchased upon exercise of all warrants that are outstanding on the Effective Date (including the MHR Warrants, as defined in the Merger Agreement), but excluding all shares of Common Stock that may be issued upon conversion of any debt or promissory notes of the Company that is or are outstanding on the Effective Date. Attached Exhibit 3(c) sets forth an example of the calculation of the number of shares of Common Stock that will be subject to the Option.

          (d) The Company and the Executive will enter into an award agreement relating to the Option (the “Award Agreement”) which shall provide, among other things, that:

               (i) twenty five (25%) of such Option shall vest on the first anniversary of the Effective Date and the remaining seventy-five (75%) of such Option shall vest in equal installments every six months commencing on the date that is 18 months after the Effective Date and ending on the fourth (4^th) anniversary of the Effective Date;

               (ii) the Option shall become fully vested on the termination of Executive’s employment with the Company for any reason (including as a result death or disability), other than (A) if the Executive terminates his employment with the Company for any reason other than Good Reason (in which case the Executive shall retain any part of such Option that has vested as of such termination date) or (B) if the Company terminates the Executive for Cause pursuant to Section 5(d) of this Agreement;

               (iii) any unvested portion of the Option shall immediately terminate, and the Executive will have no further right to exercise any unvested portion of the Option, if the Executive’s employment with the Company is terminated by the Executive other than for Good Reason (but in such case, the Executive shall retain any part of such Option that has vested as of

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such termination date) or by the Company for Cause pursuant to Section 5(d) of this Agreement; and

               (iv) the Option shall become fully vested on a Change in Control of the Company (as defined in the Plan); and

               (v) the exercise period for the Option shall be ten (10) years from the date of grant of the Option.

          (e) During the Employment Term, the Executive shall be entitled to participate in the Company’s health and welfare benefit plans, as maintained by the Company from time to time, on substantially the same terms and conditions as other senior executives of the Company.

          (f) In the event that Parent purchases additional shares of the Company’s preferred stock pursuant to the Preferred Stock Investment Option (as defined in the Merger Agreement), the Company shall issue the Executive an additional option to purchase shares of Common Stock, on terms that are the substantially the same as the Option, including an exercise price equal to the Option Exercise Price, as adjusted for stock splits, stock dividends, recapitalizations or similar events (the “Additional Option”), such that the combined number of shares subject to the Option and the Additional Option shall be an amount equal to the Option Percentage of (i) the Fully Diluted Common Stock on the Effective Date plus (ii) the shares of Common Stock into which the preferred stock purchased by Parent pursuant to the Preferred Stock Investment Option is convertible.

          (g) Dividend Equivalent Bonus Rights. In the event that the Company makes any dividends or distributions with respect to the Common Stock of the Company, the Company shall pay the Executive an amount equal to the amount of dividends or other distributions the Executive would have received if all of the shares of stock subject to the Option, without regard to whether the Option has vested, had been issued to Executive and were outstanding (the “DE Bonus”). Executive and Company agree that fifty percent (50%) of the DE Bonus (the “50 Percent Amount”) shall be used by the Executive to exercise the Option (or applicable portion thereof), provided, however, that in the event that the Option (or applicable portion thereof) has not vested with respect to all the shares of Common Stock that can be purchased by the payment of the 50 Percent Amount, then (I) the 50 Percent Amount shall be used to purchase the maximum number of shares purchasable upon the exercise of the vested portion of the Option, (II) the remaining portion of 50 Percent Amount shall be put into escrow (on terms reasonably satisfactory to Executive and the Company), and (III) such escrowed amounts shall be released when additional shares subject to the Option vest and, upon release, will be used to exercise such newly vested shares of stock that can be purchased under the Option.

          (h) Further Assurance Regarding Taxes. The Company agrees to cooperate with the Executive and its tax advisors in setting the terms and conditions of the Options.

          (i) Option Plan. The terms of the Plan (as applicable to the Executive) and the Option Agreement shall be consistent with the terms set forth in this Agreement, and the

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Company and its successors shall not have the right to amend the Plan or the Option Agreement in a manner that adversely affects the Executive without the Executive’s prior written consent.

     4. Restrictive Covenants. The Executive acknowledges and agrees that the Executive has a major responsibility for the operation, development and growth of the Company’s business, the Executive’s work for the Company has brought him and will continue to bring him into close contact with confidential information of the Company and its customers, and the agreements and covenants contained in this Section 4 are essential to protect the business interests of the Company and that the Company will not enter into this Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the following:

          (a) Confidential Information. Except as may be required under applicable law, including by the lawful order of a court or agency of competent jurisdiction, the Executive agrees to keep secret and confidential, both during the Employment Term and indefinitely after the Executive’s employment with the Company terminates, all non-public information concerning the Company and its affiliates that was acquired by, or disclosed to, the Executive during the course of his employment by the Company or any of its affiliates, including trade secrets, know-how, research and development, software, databases, inventions, processes, technology, and information relating to customers (including, without limitation, credit history, repayment history, financial information and financial statements), costs, operations, sales, pricing, suppliers, vendors, compensation, marketing, advertising, promotions, financial data, plans, and government and regulatory activities, whether past, current or planned and not to disclose the same, either directly or indirectly, to any other person, firm or business entity, or to use it in any way; provided, however, that the provisions of this Section 4(a) shall not apply to information that (i) was, is now, or becomes generally available to the public (but not as a result of a breach of any duty of confidentiality by which the Executive is bound); (ii) was disclosed to the Executive by a third party not subject to any duty of confidentiality to the Company known to Executive prior to its disclosure to the Executive; (iii) is disclosed by the Executive in the ordinary course of the Company’s business as a proper part of his employment in connection with communications with customers, vendors and other proper parties, provided that it is for a proper purpose solely for the benefit of the Company, and (iv) the Company agrees in writing was available to the Executive on a nonconfidential basis prior to disclosure. If the Executive is requested or required by law to disclose any such information, to the extent not legally prohibited, he will notify the Company promptly so that the Company may seek any appropriate protective order, seek to obtain confidential treatment of such information and/or take any other action related to the protection of such information, and the Executive shall, at the expense of the Company, use commercially reasonable efforts to assist the Company in its efforts.

          (b) Non Competition.

     (i) For the Non Competition Period (as defined below), the Executive shall not directly or indirectly, alone or as a partner, officer, director, employee, consultant, agent, independent contractor, member or stockholder of any person or entity (“Person”), (A) engage, anywhere in the United States or its territories, in the Business of the Company (as defined below) or in any business activity that is directly or indirectly in competition with the Business of the Company; provided, however, that the record or

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beneficial ownership by the Executive of five percent (5%) or less of the outstanding publicly traded capital stock of any company for investment purposes shall not be deemed to be in violation of this Section 4(b) so long as the Executive is not an officer, director, employee or consultant of such Person; or (B) enter the employ of, render any services to, or acquire a financial interests in, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in the Business of the Company.

     The “Non Competition Period” means (A) in the event that the Executive’s employment terminates as a result of the Company’s election not to renew this Agreement under Section 1, the Non-Competition Period shall be the Employment Term, or (B) in all other circumstances, the Non-Competition Period shall be the Employment Term and during the one (1) year period following the Employment Term; provided, however that the Company may elect to increase the Non-Competition Period to include a period of up to two (2) years following the Employment Term by (I) providing the Executive with written notice of such election within ten (10) days after the Employment Term, which notice specifies the duration of the Non-Competition Period and (II) increasing the Severance Period described in Section 5(a) so that such Severance Period (and corresponding Severance Payments) run until the end of the Non-Competition Period..

     The “Business of the Company” means the businesses in which the Company and its subsidiaries are engaged on the date that the Executive’s employment with the Company is terminated and any other businesses that the Company is actively pursuing on such date (provided that the Company engages in such business within six (6) months thereafter), which currently includes without limitation the providing of medical products to Medicare and managed care beneficiaries and the providing of certain services, including marketing, insurance agent training and licensing, member enrollment and service, distribution and billing and collections, to Medicare Part D prescription drug plan providers and other Medicare benefit sponsors.

     (ii) During the Non Competition Period, the Executive shall not, directly or indirectly, in any capacity, either separately or in association with others (A) employ or solicit for employment or endeavor in any way to entice away from employment with the Company or its affiliates any employee of the Company or its affiliates; provided, however, that this restriction shall not apply to general solicitations of employment conducted by the Executive in newspapers, trade journals, the Internet, through recruiters or by any similar media and in each case not directed at the Company’s employees or to the employment of, or employment discussions with, any person who responds to any such general solicitations; (B) solicit, induce or influence any supplier, customer, agent, consultant or other person or entity that has a business relationship with the Company to discontinue, reduce or modify such relationship with the Company; or (C) solicit any of the Company’s identified potential acquisition candidates.

          (c) Remedies. If the Executive breaches, or threatens to commit a breach of any of the provisions contained in Section 4(a) and/or Section 4(b) (collectively, the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which shall be

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enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.

               (i) The Executive shall account for and pay over to the Company all compensation, profits, and other benefits which inure to the Executive’s benefit which are derived or received by the Executive or any person or business entity controlled by the Executive, or his relatives, resulting from any action or transactions constituting a breach of any of the Restrictive Covenants.

               (ii) Notwithstanding the provisions of Section 4(c)(i) above, the Executive acknowledges and agrees that in the event of a violation or threatened violation of any of the Restrictive Covenants, the Company shall have no adequate remedy at law and shall therefore be entitled to enforce each such provision by temporary or permanent injunction or mandatory relief obtained in any court of competent jurisdiction without the necessity of proving damages, posting any bond or other security, and without prejudice to any other rights and remedies that may be available at law or in equity, and the Company may also be entitled to recover its attorneys’ fees and costs incurred to enforce any of the Restrictive Covenants from the Executive pursuant to Section 20.

          (d) Severability. If any of the Restrictive Covenants, or any part thereof, are held to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid or unenforceable portions. Without limiting the generality of the foregoing, if any of the Restrictive Covenants, or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties hereto agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, such provision shall then be enforceable.

          (e) Proprietary Rights. The Executive acknowledges and agrees that all know-how, documents, reports, plans, proposals, marketing and sales plans, client lists, client files, and any materials made by the Executive during the Employment Term and within the scope of his duties under this Agreement or by the Company are the property of the Company and shall not be used by the Executive in any way adverse to the Company’s interests. The Executive shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any third party unless such delivery or reproduction is (i) made by Executive in the proper performance of his duties hereunder or (ii) approved by the Company’s Board or the Reporting Officer. The Executive hereby assigns to the Company any rights which he may have in any such trade secret or proprietary information.

     5. Termination and Compensation Due Upon Termination. The Employment Term may be terminated by the Company at any time and for any reason (and by the Executive pursuant to Section 5(c)) and the Executive’s right to compensation for periods after the date of the Employment Term shall be determined in accordance with the following:

          (a) Termination Without Cause or Resignation with Good Reason. In the event the Executive’s employment with the Company is terminated during the Employment Term by the Company without Cause (as defined below), including a termination in connection

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with a sale of the Company, the Company shall pay the Executive any compensation, benefits (including accrued vacation) and expense reimbursement the Company owes to the Executive through the effective date of termination, including the payment of any Incentive Bonus pursuant to Section 3(b) that has been earned and not paid as of the effective date of the Executive’s termination (i.e., the effective date of termination occurs after December 31st of a given year and an Incentive Bonus pursuant to Section 3(b) has been earned for such year but has not been paid as of the effective date of the Executive’s termination) (collectively, the “Owed Obligations”). Additionally, and conditioned upon the Executive’s voluntary execution of a written release substantially to the form of Exhibit 5(a) (the “Release”) (to be drafted and provided by the Company within 10 days after termination of employment) within sixty (60) days of the Executive’s termination date that is not revoked before the expiration of such sixty (60) day period the Executive shall be entitled to receive continued payment of Base Salary (the “Severance Payments”) during the one (1) year following the Employment Term (“Severance Period”), subject to adjustment in accordance with Section 4(b)(i).

     If the Executive does not voluntarily execute the Release or the Release is deemed not to be effective within sixty (60) days of the date the Release is executed by the Executive, the Executive shall not be entitled to the Severance Payments.

          (b) Resignation With Good Reason. Executive shall have the right to terminate his employment during the Employment Term for Good Reason. In the event Executive terminated his employment for Good Reason during the Employment Term (including any extension of the Employment Period pursuant to an Extension Notice), he will be entitled to all payments and benefits as if Company he had been terminated pursuant to Section 5(a). “Good Reason” shall mean:

               (i) The Company commits a material breach of this Agreement, including increasing the Target EBITDA Threshold for the Incentive Bonus in violation of terms set forth in Exhibit 3(b);

               (ii) The assignment of the Executive without his consent to a position, responsibilities, or duties of a materially lesser status or degree of responsibility than his position, responsibilities, or duties set forth in Section 2 or the requirement that the Executive report to any person other than the Reporting Officer;

               (iii) The relocation of the Company’s principal executive offices more than twenty-five miles from its location on the Effective Date; or

               (iv) The requirement by the Company that the Executive be based anywhere other than the Company’s principal executive offices, in either case without the Executive’s consent,

provided that the occurrence of any of the foregoing events shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from the Executive of written notice of such occurrence (provided that such opportunity to cure shall not apply in the event that the Company repeatedly causes the event constituting Good Reason); provided, further, that Good Reason shall cease to exist following the 45 days following the Executive’s actual

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knowledge of its occurrence, unless Executive has given the Company written notice thereof prior to such date. The Company shall be deemed to repeatedly cause the event constituting Good Reason if the Company, in bad faith, repeats the event constituting Good Reason and uses its cure period in a manner so as to negate the spirit of the provisions set forth herein allowing the Executive to terminate his employment for Good Reason.

          (c) Voluntary Resignation. The Executive may terminate his employment with the Company for any reason (or no reason at all) other than for Good Reason at any time by giving the Company sixty (60) days prior written notice of voluntary resignation; provided, however, that the Company may elect that the Executive’s voluntary resignation be effective immediately upon notice of such resignation. In such event, the Company shall pay the Executive the Owed Obligations and have no further obligation to make any other payments to the Executive in accordance with the provisions of Section 3 or otherwise for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary resignation.

          (d) Termination for Cause. The Company shall pay the Executive his accrued salary (as of the date of termination), benefits (including accrued vacation) and unpaid expense reimbursements through the date of termination and shall have no further obligation to make any other payments to the Executive in accordance with the provisions of Section 3 or otherwise for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause. For purposes of this Section 5, the Executive shall be considered terminated for “Cause” if he is discharged by the Company on account of the occurrence of one or more of the following events:

               (i) the Executive discloses confidential information in violation of Section 4(a) which disclosure is intended to harm the Company or has a Company Material Adverse Effect, or engages in competition in violation of Section 4(b);

               (ii) the Executive fails to follow the reasonable, lawful instructions of the Reporting Officer that does not constitute Good Reason (including any reasonable request to cooperate with an investigation by or with respect to the Company) and fails to cure such failure within fifteen (15) days after receipt of written notice from the Company specifying such failure and stating that such failure is grounds for termination for Cause (provided that such opportunity to cure will not apply in the event the Executive repeatedly fails to follow such instruction), it being understood that the failure of the Company or Executive to achieve the results specified in instructions of the Reporting Officer (such as financial performance targets) shall not constitute Cause provided that the Executive pursues in good faith the achievement of such results;

               (iii) the Executive breaches any of the Executive’s obligations under this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice from the Company specifying the breach and that such breach is grounds for a termination for Cause (provided that such opportunity to cure will not apply in the event the Executive repeatedly breaches such obligation);

               (iv) the Company is directed by regulatory or governmental authorities to terminate the employment of the Executive as a result of the acts or alleged acts of the

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Executive, provided that the Company has used its commercially reasonable efforts to challenge or avoid such direction by the applicable regulatory or governmental authority or the Executive engages in activities that cause actions to be taken by regulatory or governmental authorities that have a Company Material Adverse Effect;

               (v) the Executive is convicted of, or enters into a plea of guilty or no contest to, a felony (other than a felony resulting from a minor traffic violation);

               (vi) the Executive misappropriates a material corporate opportunity of the Company or any of its subsidiaries in the health care industry;

               (vii) the Executive engages in willful or intentional misconduct, the purpose or effect of which is to have a Company Material Adverse Effect;

               (viii) the Executive commits fraud, theft, or embezzlement against the Company or any subsidiary or affiliate thereof (other than on account of unintentional and immaterial actions);

               (ix) the Executive materially breaches any material provision under the Company’s code of ethics approved by the Board or under any similar or successor Company policy that is approved by the Board, provided that, if such breach is curable, the Executive fails to cure such breach within (30) days after receipt of written notice from the Company specifying the breach and that such breach is grounds for a termination for Cause; or

               (x) The Executive’s reporting to work under the influence of illegal narcotics or use of (or testing positive for) such substances while at work or scheduled to be at work.

The term “Company Material Adverse Effect” means any event, circumstance, development, condition, change, or effect which, is, either individually or in the aggregate with any other event, circumstance, development, condition, change, or effect, materially adverse to the business, operation, condition (financial or otherwise) assets, liabilities or results of operations of the Company and its subsidiaries, taken as a whole.

The Executive shall be deemed to repeatedly engage in an event constituting Cause if the Executive, in bad faith, repeats the event constituting Cause and uses his cure period in a manner so as to negate the spirit of the provisions set forth herein allowing the Company to terminate his employment for Cause.

          (e) Disability. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Section 3 for periods after the date the Executive’s employment with the Company terminates on account of disability, except payments due and owing through the effective date of termination. For purposes of this Section 5(e), determination of whether the Executive is disabled shall be determined in accordance with the Company’s long term disability plan (if any) and applicable law.

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          (f) Death. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Section 3 for periods after the date of the Executive’s death, except payments due and owing as of such date.

     6. Successors. This Agreement shall be binding on the Company and its successors and assigns, and any person acquiring, whether by merger, consolidation, purchase of all or substantially all of the Company’s assets and business, or otherwise without further action or consent by the Executive, the Company or its successor; Executive hereby agrees, in the event of a sale of all or substantially all of the Company’s assets, the Executive will execute an acknowledgment of assignment if requested to do so by the purchaser; and the Company hereby agrees, in the event of a sale of all or substantially all of the Company’s assets, to cause the purchaser of such assets to execute an acknowledgement of assignment and assumption by the purchaser if requested to do so by the Executive.

     7. Nonalienation. The interests of the Executive under this Agreement are not subject to the claims of his creditors, other than the Company, and may not otherwise be voluntarily or involuntarily assigned, alienated or encumbered except to the Executive’s estate upon his death.

     8. Waiver of Breach. The waiver by either the Company or the Executive of a breach of any provision of this Agreement shall not operate as, or be deemed a waiver of, any subsequent breach by either the Company or the Executive.

     9. Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

     10. Notice. Any notice to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given when received, rejected or refused or, when deposited in the U.S. mail, certified or registered mail, postage prepaid to the parties at the following addresses:

If to the Company, to:

NationsHealth, Inc.
13630 NW 8th Street
Suite 210
Sunrise, Florida 33325
Attention: Chief Executive Officer
Facsimile: (954) 903-5005

with a copy (which shall not constitute notice) to:

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McDermott Will & Emery LLP
201 South Biscayne Boulevard
22nd Floor
Miami, Florida 33131
Attention:

Ira J. Coleman, Esq.

Frederic L. Levenson, Esq.

Harris Siskind, Esq.

Facsimile: (305) 347-6500

and

Foley & Lardner LLP
100 North Tampa Street
Tampa, Florida 33602
Attention:  Steven W. Vazquez
Facsimile:  (813) 221-4217

If to Parent, to:

ComVest Investment Partners III, L.P.
One North Clematis
Suite 300
West Palm Beach, Florida 33401
Attention: Cecilio Rodriguez
Facsimile: (561) 671-3225

with a copy (which shall not constitute notice) to:

Foley & Lardner LLP
100 North Tampa Street
Tampa, Florida 33602
Attention:  Steven W. Vazquez
Facsimile:  (813) 221-4217

If to the Executive to:

Lewis Stone
6618 N.W. 103^rd Lane
Parkland, Florida 33076
Facsimile: (360) 283-7701

with a copy (which shall not constitute notice) to:

Baker & McKenzie, LLP
1111 Brickell Avenue
Suite 1700
Miami, Florida 33131
Attn: Roy J. Larson

Facsimile: (305) 789-8953

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     11. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and no person, other than the parties hereto (and the Executive’s estate upon his death), shall have any rights under or interest in this Agreement or the subject matter hereof. The parties hereby agree that no oral conversations shall be deemed to be a modification of this Agreement and neither party shall assert the same.

     12. Counterparts and Fax Signatures. This Agreement may be executed in two or more counterparts (including by means of fax or electronically transmitted portable document format (PDF) signature pages), each of which shall be deemed to be an original, but all of which together shall constitute and be one and the same instrument; provided that fax or electronically transmitted signatures of this Agreement shall be deemed to be originals. Counterpart signatures need not be on the same page and shall be deemed effective upon receipt.

     13. Applicable Law. The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Florida.

     14. No Assignments. The Executive shall not be permitted to assign this Agreement or any of the Executive’s rights under this Agreement without the prior written consent of the Company. The Company may assign (but not novate) this Agreement and its rights hereunder to any Affiliate, including Parent provided that the Company and the assignee shall be responsible for the obligations of the Company hereunder.

     15. Effectiveness. Notwithstanding anything to the contrary herein, this Agreement shall only be given effect upon the Closing (as defined in the Merger Agreement) (the “Effective Date”). In the event the Merger Agreement is terminated without the Closing having occurred, this Agreement shall be of no force or effect and the Original Agreement shall not be terminated and shall remain in full force and effect. Effective as of the Effective Date, this Agreement shall supersede the Original Agreement and any other prior employment agreements between the Executive and the Company or any of the Company’s affiliates and neither the Company nor any of its affiliates shall have any obligations under, and the Executive shall have no further rights under, the Original Agreement or any other such prior employment agreement; provided, however that nothing in this Section 15 shall be deemed to be a waiver by the Executive of his rights to indemnification from the Company, to rights arising in respect of the Option or rights under any benefit plan or insurance provided to Executive.

     16. Consequences of End of Employment. Following the Employment Term, all of the provisions of this Agreement shall terminate, except that (A) Sections 4(a), (c), (d), and (e) the Company’s payment obligations under Section 5, and Sections 6 through 21 shall survive indefinitely after the expiration of the Employment Term and (B) Section 4(b) shall terminate upon the expiration of the Non-Competition Period pursuant to Section 4(b).

     17. Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and the Executive relating to the subject matter herein and merges all prior discussions between the parties, including but not limited to any and all

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statements made by any officer, employee or representative of the Company. The Executive understands and acknowledges that, except as set forth in this Agreement, (a) no other representation or inducement has been made to Executive, (b) Executive has relied on Executive’s own judgment and investigation in executing this Agreement, and (c) Executive has not relied on any representation or inducement made by any officer, employee or representative of the Company. To the extent there is any conflict between the terms and conditions of this Agreement and the terms and conditions of any prior employment or consulting agreement, the terms and conditions of this Agreement shall control.

     18. Separation from Service. Notwithstanding any provision of this Agreement to the contrary, the Executive’s employment will be deemed to have terminated on the date of the Executives “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company, as reasonably determined by the Board.

     19. 409A. It is intended that this Agreement will comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and any regulations and guideline issued thereunder (“Section 409A”) to the extent that any compensation and benefits provided hereunder constitute deferred compensation subject to Section 409A. This Agreement shall be interpreted on a basis consistent with this intent. The parties will negotiate in good faith to amend this Agreement as necessary to comply with Section 409A in a manner that preserves the original intent of the parties to the extent reasonably possible. No action or failure to act, pursuant to this Section 19 shall subject the Company to any claim, liability, or expense, and the Company shall not have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any taxes pursuant to Section 409A of the Code.

     20. Fees. The Company shall be responsible and pay for the reasonable legal fees and costs incurred by the Executive in connection with the negotiation, execution and delivery of this Agreement and any amendment, extension, or replacement thereof. Such fees and costs will be paid within thirty (30) days following submission to the Company. In the event that there is any dispute under this Agreement, the prevailing party to such dispute shall be entitled to recover from the non-prevailing party and out-of pocket costs reasonably incurred in connection with such dispute.

     21. Indemnification.

     (a) Generally. The Company will, to the fullest extent to which it is empowered to do so under applicable law, as the same now exists or may hereafter be amended (but, in the case of any such amendment only to the extent that such amendment permits the Company to provide broader indemnification rights than the Company may provide immediately prior to such amendment), indemnify and hold harmless the Executive if the Executive is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive was employed by or acted on behalf of the Company (including all periods prior to the Effective Date), against all losses, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and the reasonable fees and expenses of experts and consultants) (collectively, “Damages”) incurred or suffered by Executive in connection with such action, suit or proceeding; provided, however, that (unless the Board of

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Directors otherwise consents) Executive will not be indemnified for any Damages incurred or suffered that are attributable to Executive’s fraud against the Company or its subsidiaries or willful violation of applicable law.

     (b) Expenses. The Company will, to the extent permitted under applicable law, advance to Executive reasonable attorneys’ fees, consulting and expert fees and other costs and expenses incurred in connection with the defense of any action, suit or proceeding if the Executive agrees in writing before any advancement that Executive will reimburse the Company for such fees, costs and expenses to the extent that a judgment or other final adjudication adverse to the Executive establishes that such Executive’s acts or omissions were otherwise of such a character that applicable law would require that such amounts be repaid.

     (c) Non-Exclusive. The rights of Executive under this Section 21 will not exclude any other right to which such Executive may be lawfully entitled.

     (d) Savings Clause; Survival. If this Section 21 or any portion of it is invalidated on any ground by any court of competent jurisdiction, then the Company will nevertheless indemnify the Executive to the fullest extent permitted by any applicable portion of this Section 21 that has not been invalidated and to the fullest extent permitted by applicable law. This Section 21 shall survive the termination of Executive’s employment for any reason.

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IN WITNESS WHEREOF the Executive and the Company have executed this Employment Agreement as of the day and year first above written.

NATIONSHEALTH, INC.
/s/ Glenn Parker
Name:	Glenn Parker
Title:	CEO
EXECUTIVE:
/s/ Lewis Stone
Lewis Stone

Execution Copy

SUPPLEMENTAL AGREEMENT TO
EMPLOYMENT AGREEMENT

     This SUPPLEMENTAL AGREEMENT TO EMPLOYMENT AGREEMENT (the “Supplemental Agreement”) is made and entered into on April 30, 2009, by and between NationsHealth, Inc., a Delaware corporation (the “Company”), and Lewis Stone, an individual residing at 6618 N.W. 103^rd Lane, Parkland, Florida 33076 (the “Executive”).

     WHEREAS, the Executive and the Company entered into that certain Employment Agreement, dated as of the date hereof (the “Employment Agreement”), which agreement sets forth the terms of Executive’s employment with the Company;

     WHEREAS, unless the context requires otherwise, capitalized terms that are not defined in this Supplemental Agreement shall have the meaning assigned to such terms in the Employment Agreement;

     WHEREAS, the Executive and the Company desire to set forth certain additional terms that will be incorporated into the terms of the Employment Agreement;

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

     1. Position. The Executive Position is Chief Information Officer.

     2. Base Salary. The Base Salary is Two Hundred Fifty Thousand Dollars ($250,000) per year.

     3. Option Percentage. The Option Percentage is 3.0%.

     4. Option Exercise Price. The Option Exercise Price is $0.12 per share.

     5. Reporting Officer. The Reporting Officer means the Chief Executive Officer of the Company and the Chief Operating Officer of the Company.

IN WITNESS WHEREOF the Executive and the Company have executed this Supplemental Agreement as of the day and year first above written.

NATIONSHEALTH, INC.
By:	/s/ Glenn Parker
Name:		Glenn Parker
Title:		CEO
EXECUTIVE:
/s/ Lewis Stone
Lewis Stone

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EX-10.85

Exhibit 10.85

Letter Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc.

NATIONSHEALTH, INC.
13630 NW 8th Street, Suite 210

Sunrise, Florida 33325
(954) 903-5000

April 30, 2009

Mark Lama
225 Potter Road
West Palm Beach, Florida 33405

          Re:      Interim Employment Letter

Dear Mark:

As you know, you and NationsHealth, Inc., a Delaware corporation (the “Company”) entered into that certain Employment Agreement, dated as of the date hereof (the “Employment Agreement”) and such Employment Agreement shall not become effective until the “Effective Date” as defined in Section 15 of the Employment Agreement.

     Term. This letter sets forth the terms and conditions of your employment with the Company from April 16, 2009, which was the start date of your employment with the Company, and the Letter Termination Date (as defined below).

     Position. During the term of your employment under this letter agreement, you shall be employed as a Senior Vice President of the Company.

     Compensation. During the term of your employment under this letter, you will receive the following:

          Salary. A base salary at the rate of $300,000 per year, payable in accordance with the Company’s payroll policies, but in no event less frequently than monthly (the “Executive’s Salary”).

          Benefits. You shall be eligible to participate in the employee benefit plans available to executives of the Company, including without limitation the Company’s health insurance plans. Under the terms of the Company’s health insurance plan, you will be eligible to participate in such plan, without limitations as to pre-existing conditions, on June 1, 2009.

          Expenses. You will be entitled to reimbursement for business expenses in accordance with the Company’s expense reimbursement policies in effect from time to time. In addition, you shall be entitled to a commuting expense of $63.00 per day for each day that you commute to the Company’s principal executive offices.

     Termination of Employment Letter. This employment letter shall automatically terminate on the earliest of (i) the Effective Date or (ii) the termination of the Merger Agreement (“Letter Termination Date”).

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     Employment Following the Letter Termination Date. In the event that your employment extends beyond the Letter Termination Date, then such employment shall be on an at will basis following the Letter Termination Date, provided, however, except as set forth in the Termination of Employment Section below, if the Effective Date occurs after the Letter Termination Date, then the Employment Agreement shall be in effect from and after the Effective Date.

     Termination of Employment. The parties intend that you will be employed by the Company through the Letter Termination Date and neither party intends to terminate your employment prior to the Letter Termination Date. In the event that (a) the Company terminates your employment with the Company other than for Cause prior to the Letter Termination Date or (b) you terminate your employment with the Company for Good Reason prior to the Letter Termination Date, the Company shall continue to pay the Executive’s Salary until the Letter Termination Date. In the event that either you or the Company terminates your employment with the Company after the Letter Termination Date, then (A) neither the Company nor you will owe the other party anything (except that the Company will owe you any accrued but unpaid salary, benefits and expense reimbursement through the date of termination of your employment with the Company) and (B) the Employment Agreement will become null and void and not be effective even if the Effective Date ultimately occurs.

     Definitions. Capitalized terms used herein but not defined shall have the meanings given such terms in the Employment Agreement.

The terms of this letter agreement are confidential. The provisions set forth in Sections 4(a) (Confidential Information), 8 (Waiver of Breach), 9 (Severability), 10 (Notice), 11 (Amendment), 12 (Counterparts and Fax Signatures), 13 (Applicable Law), 14 (No Assignments), 17 (Entire Agreement), 18 (Separation from Service) and 19 (409A) of the Employment Agreement are incorporated herein by reference.

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If the foregoing correctly reflects our agreement as to the matters discussed herein, please indicate your acceptance by signing in the indicated space below.

By:	/s/ Glenn Parker Glenn Parker Chief Executive Officer
	NationsHealth, Inc.

Acknowledged and Agreed:

   /s/ Mark Lama Mark Lama

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EX-10.86

Exhibit 10.86

Employment Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc. (as supplemented by that certain Supplemental Agreement to Employment Agreement, dated April 30, 2009, by and between Mr. Mark Lama and NationsHealth, Inc.)

Execution Copy

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into on April 30, 2009, by and between NationsHealth, Inc., a Delaware corporation (the “Company”), and Mark Lama, an individual residing at 225 Potter Road, West Palm Beach, Florida 33405 (the “Executive”).

     WHEREAS, the Executive and the Company entered into that certain Interim Employment Letter Agreement, dated as of the date hereof (the “Original Agreement”), pursuant to which the Executive is entitled to certain compensation and benefits;

     WHEREAS, in connection with the closing of the transactions contemplated under that certain Merger Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 30, 2009, by and among ComVest NationsHealth Holdings, LLC, a Delaware limited liability company (“Parent”), NationsHealth Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent, and the Company, the Company and the Executive have entered into this Agreement;

     WHEREAS, the Company and the Executive have agreed to amend, restate and supersede the Original Agreement in its entirety as set forth herein on the Effective Date (as defined herein);

     WHEREAS, the execution and delivery of this Agreement was an inducement and a condition precedent to the Merger Agreement;

     WHEREAS, after consummation of the transactions contemplated by the Merger Agreement, the Company desires to continue to employ the Executive in the capacity hereinafter stated, and the Executive desires to continue in the employ of the Company in such capacity for the period and on the terms and conditions set forth herein;

     WHEREAS, the Company shall provide the Executive with certain severance benefits should the Executive’s employment with the Company terminate under certain circumstances, such benefits to provide the Executive with enhanced financial security and sufficient incentive and encouragement to remain employed by the Company;

     WHEREAS, the Company’s Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware provides that the Company shall, under certain circumstances, indemnify the Executive for certain expenses, fees, judgments, fines, amounts paid in settlement, and other expenses by reason of the fact that he is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise;

     WHEREAS, concurrently in connection with the execution of this Agreement, the Company and the Executive are entering into that certain Supplemental Agreement to Employment Agreement attached as Exhibit A (the “Supplemental Agreement”), the terms of which are incorporated into the terms of this Agreement; and

     WHEREAS, the Executive acknowledges that he has had an opportunity to consider this Agreement and consult with an independent advisor or advisors of his choosing with regard to the terms of this Agreement, and enters this Agreement voluntarily and with a full understanding of its terms.

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

     1. Employment Term. Subject to Section 5 of this Agreement, the Executive shall be employed by the Company in the position (the “Executive Position”) set forth in the Supplemental Agreement, and the Executive, in such capacity, shall provide services to the Company for the period beginning on the Effective Date (as defined below) and ending on the fourth (4th) anniversary of the Effective Date. This Agreement shall automatically renew for additional one (1) year periods unless either party provides written notice of non-renewal no less than sixty (60) days prior to the scheduled expiration of the applicable employment period. For purposes of this Agreement, the term “Employment Term” shall mean the period in which the Executive is employed by the Company.

     2. Performance of Duties. During the Employment Term, (i) the Executive shall devote, on a full-time basis, his energies and talents to serving in the capacity of the Executive Position of the Company, shall in good faith seek to act in the best interests of the Company, and shall perform the duties assigned to him by the Reporting Officer (as defined in the Supplemental Agreement) faithfully, efficiently and in a professional manner, (ii) the Company shall not assign the Executive, without his consent, duties that would be inconsistent with those of the Executive Position, and (iii) the Executive shall not, without prior written consent from the Reporting Officer:

          (a) serve as or be a consultant to or employee or officer of any corporation, partnership or other entity other than the Company (other than civic, charitable, or other public service organizations); or

          (b) have more than a five percent (5%) ownership interest in any enterprise other than the Company if such ownership interest would adversely impact in any material respect the ability of the Executive to perform his duties hereunder.

     3. Compensation. Subject to the terms and conditions of this Agreement, during the Employment Term, the Executive shall be compensated by the Company for his services as follows:

          (a) The Executive shall receive, for each twelve (12) consecutive month period commencing as of the Effective Date and each anniversary thereof, a base rate of salary that is not less than the base salary set forth in the Supplemental Agreement (the “Base Salary”), payable in substantially equal monthly or more frequent installments and subject to normal tax withholding. During the Employment Term, the Executive’s Base Salary shall not be reduced unless agreed by the Executive in writing, and shall be reviewed by the Chief Executive Officer

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and the Board of Directors of the Company (the “Board”) on or before each anniversary of the Effective Date to determine whether an increase in the Executive’s Base Salary is appropriate.

          (b) The Executive will be eligible to receive an annual incentive bonus payment (the “Incentive Bonus”) based on the Company’ achievement of certain performance objectives, in accordance the terms and conditions set forth on Exhibit 3(b) attached hereto. The Incentive Bonus shall be paid as soon as practical after the completion of the audit of the Company’s financial statements for the calendar year in which the Incentive Bonus is being determined, but in no event after April 15 following the applicable bonus year.

          (c) On the Effective Date, the Company shall grant to the Executive an option (the “Option”), under the NationsHealth, Inc. 2009 Stock Incentive Plan (the “Plan”), to purchase a number of shares of the Company’s common stock (the “Common Stock”), at the exercise price set forth in the Supplemental Agreement (the “Option Exercise Price”), equal to a percentage (the “Option Percentage”), that is set forth in the Supplemental Agreement, of the Fully Diluted Common Stock on the Effective Date. The term “Fully Diluted Common Stock on the Effective Date” shall mean the number of issued and outstanding shares of Common Stock on the Effective Date, plus the number of shares of Common Stock issuable upon conversion of all shares of preferred stock of the Company that are outstanding on the Effective Date, plus the number of shares of Common Stock that can be purchased upon exercise of stock options that may be issued under the Company’ 2009 Equity Incentive Plan, plus the number of shares of Common Stock that can be purchased upon exercise of all warrants that are outstanding on the Effective Date (including the MHR Warrants, as defined in the Merger Agreement), but excluding all shares of Common Stock that may be issued upon conversion of any debt or promissory notes of the Company that is or are outstanding on the Effective Date. Attached Exhibit 3(c) sets forth an example of the calculation of the number of shares of Common Stock that will be subject to the Option.

          (d) The Company and the Executive will enter into an award agreement relating to the Option (the “Award Agreement”) which shall provide, among other things, that:

               (i) twenty five (25%) of such Option shall vest on the first anniversary of the Effective Date and the remaining seventy-five (75%) of such Option shall vest in equal installments every six months commencing on the date that is 18 months after the Effective Date and ending on the fourth (4^th) anniversary of the Effective Date;

               (ii) the Option shall become fully vested on the termination of Executive’s employment with the Company for any reason (including as a result death or disability), other than (A) if the Executive terminates his employment with the Company for any reason other than Good Reason (in which case the Executive shall retain any part of such Option that has vested as of such termination date) or (B) if the Company terminates the Executive for Cause pursuant to Section 5(d) of this Agreement;

               (iii) any unvested portion of the Option shall immediately terminate, and the Executive will have no further right to exercise any unvested portion of the Option, if the Executive’s employment with the Company is terminated by the Executive other than for Good Reason (but in such case, the Executive shall retain any part of such Option that has vested as of

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such termination date) or by the Company for Cause pursuant to Section 5(d) of this Agreement; and

               (iv) the Option shall become fully vested on a Change in Control of the Company (as defined in the Plan); and

               (v) the exercise period for the Option shall be ten (10) years from the date of grant of the Option.

          (e) During the Employment Term, the Executive shall be entitled to participate in the Company’s health and welfare benefit plans, as maintained by the Company from time to time, on substantially the same terms and conditions as other senior executives of the Company.

          (f) In the event that Parent purchases additional shares of the Company’s preferred stock pursuant to the Preferred Stock Investment Option (as defined in the Merger Agreement), the Company shall issue the Executive an additional option to purchase shares of Common Stock, on terms that are the substantially the same as the Option, including an exercise price equal to the Option Exercise Price, as adjusted for stock splits, stock dividends, recapitalizations or similar events (the “Additional Option”), such that the combined number of shares subject to the Option and the Additional Option shall be an amount equal to the Option Percentage of (i) the Fully Diluted Common Stock on the Effective Date plus (ii) the shares of Common Stock into which the preferred stock purchased by Parent pursuant to the Preferred Stock Investment Option is convertible.

          (g) Dividend Equivalent Bonus Rights. In the event that the Company makes any dividends or distributions with respect to the Common Stock of the Company, the Company shall pay the Executive an amount equal to the amount of dividends or other distributions the Executive would have received if all of the shares of stock subject to the Option, without regard to whether the Option has vested, had been issued to Executive and were outstanding (the “DE Bonus”). Executive and Company agree that fifty percent (50%) of the DE Bonus (the “50 Percent Amount”) shall be used by the Executive to exercise the Option (or applicable portion thereof), provided, however, that in the event that the Option (or applicable portion thereof) has not vested with respect to all the shares of Common Stock that can be purchased by the payment of the 50 Percent Amount, then (I) the 50 Percent Amount shall be used to purchase the maximum number of shares purchasable upon the exercise of the vested portion of the Option, (II) the remaining portion of 50 Percent Amount shall be put into escrow (on terms reasonably satisfactory to Executive and the Company), and (III) such escrowed amounts shall be released when additional shares subject to the Option vest and, upon release, will be used to exercise such newly vested shares of stock that can be purchased under the Option.

          (h) Further Assurance Regarding Taxes. The Company agrees to cooperate with the Executive and its tax advisors in setting the terms and conditions of the Options.

          (i) Option Plan. The terms of the Plan (as applicable to the Executive) and the Option Agreement shall be consistent with the terms set forth in this Agreement, and the

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Company and its successors shall not have the right to amend the Plan or the Option Agreement in a manner that adversely affects the Executive without the Executive’s prior written consent.

     4. Restrictive Covenants. The Executive acknowledges and agrees that the Executive has a major responsibility for the operation, development and growth of the Company’s business, the Executive’s work for the Company has brought him and will continue to bring him into close contact with confidential information of the Company and its customers, and the agreements and covenants contained in this Section 4 are essential to protect the business interests of the Company and that the Company will not enter into this Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the following:

          (a) Confidential Information. Except as may be required under applicable law, including by the lawful order of a court or agency of competent jurisdiction, the Executive agrees to keep secret and confidential, both during the Employment Term and indefinitely after the Executive’s employment with the Company terminates, all non-public information concerning the Company and its affiliates that was acquired by, or disclosed to, the Executive during the course of his employment by the Company or any of its affiliates, including trade secrets, know-how, research and development, software, databases, inventions, processes, technology, and information relating to customers (including, without limitation, credit history, repayment history, financial information and financial statements), costs, operations, sales, pricing, suppliers, vendors, compensation, marketing, advertising, promotions, financial data, plans, and government and regulatory activities, whether past, current or planned and not to disclose the same, either directly or indirectly, to any other person, firm or business entity, or to use it in any way; provided, however, that the provisions of this Section 4(a) shall not apply to information that (i) was, is now, or becomes generally available to the public (but not as a result of a breach of any duty of confidentiality by which the Executive is bound); (ii) was disclosed to the Executive by a third party not subject to any duty of confidentiality to the Company known to Executive prior to its disclosure to the Executive; (iii) is disclosed by the Executive in the ordinary course of the Company’s business as a proper part of his employment in connection with communications with customers, vendors and other proper parties, provided that it is for a proper purpose solely for the benefit of the Company, and (iv) the Company agrees in writing was available to the Executive on a nonconfidential basis prior to disclosure. If the Executive is requested or required by law to disclose any such information, to the extent not legally prohibited, he will notify the Company promptly so that the Company may seek any appropriate protective order, seek to obtain confidential treatment of such information and/or take any other action related to the protection of such information, and the Executive shall, at the expense of the Company, use commercially reasonable efforts to assist the Company in its efforts.

          (b) Non Competition.

     (i) For the Non Competition Period (as defined below), the Executive shall not directly or indirectly, alone or as a partner, officer, director, employee, consultant, agent, independent contractor, member or stockholder of any person or entity (“Person”), (A) engage, anywhere in the United States or its territories, in the Business of the Company (as defined below) or in any business activity that is directly or indirectly in competition with the Business of the Company; provided, however, that the record or

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beneficial ownership by the Executive of five percent (5%) or less of the outstanding publicly traded capital stock of any company for investment purposes shall not be deemed to be in violation of this Section 4(b) so long as the Executive is not an officer, director, employee or consultant of such Person; or (B) enter the employ of, render any services to, or acquire a financial interests in, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in the Business of the Company.

     The “Non Competition Period” means (A) in the event that the Executive’s employment terminates as a result of the Company’s election not to renew this Agreement under Section 1, the Non-Competition Period shall be the Employment Term, or (B) in all other circumstances, the Non-Competition Period shall be the Employment Term and during the one (1) year period following the Employment Term; provided, however that the Company may elect to increase the Non-Competition Period to include a period of up to two (2) years following the Employment Term by (I) providing the Executive with written notice of such election within ten (10) days after the Employment Term, which notice specifies the duration of the Non-Competition Period and (II) increasing the Severance Period described in Section 5(a) so that such Severance Period (and corresponding Severance Payments) run until the end of the Non-Competition Period..

     The “Business of the Company” means the businesses in which the Company and its subsidiaries are engaged on the date that the Executive’s employment with the Company is terminated and any other businesses that the Company is actively pursuing on such date (provided that the Company engages in such business within six (6) months thereafter), which currently includes without limitation the providing of medical products to Medicare and managed care beneficiaries and the providing of certain services, including marketing, insurance agent training and licensing, member enrollment and service, distribution and billing and collections, to Medicare Part D prescription drug plan providers and other Medicare benefit sponsors.

     (ii) During the Non Competition Period, the Executive shall not, directly or indirectly, in any capacity, either separately or in association with others (A) employ or solicit for employment or endeavor in any way to entice away from employment with the Company or its affiliates any employee of the Company or its affiliates; provided, however, that this restriction shall not apply to general solicitations of employment conducted by the Executive in newspapers, trade journals, the Internet, through recruiters or by any similar media and in each case not directed at the Company’s employees or to the employment of, or employment discussions with, any person who responds to any such general solicitations; (B) solicit, induce or influence any supplier, customer, agent, consultant or other person or entity that has a business relationship with the Company to discontinue, reduce or modify such relationship with the Company; or (C) solicit any of the Company’s identified potential acquisition candidates.

          (c) Remedies. If the Executive breaches, or threatens to commit a breach of any of the provisions contained in Section 4(a) and/or Section 4(b) (collectively, the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which shall be

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enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.

               (i) The Executive shall account for and pay over to the Company all compensation, profits, and other benefits which inure to the Executive’s benefit which are derived or received by the Executive or any person or business entity controlled by the Executive, or his relatives, resulting from any action or transactions constituting a breach of any of the Restrictive Covenants.

               (ii) Notwithstanding the provisions of Section 4(c)(i) above, the Executive acknowledges and agrees that in the event of a violation or threatened violation of any of the Restrictive Covenants, the Company shall have no adequate remedy at law and shall therefore be entitled to enforce each such provision by temporary or permanent injunction or mandatory relief obtained in any court of competent jurisdiction without the necessity of proving damages, posting any bond or other security, and without prejudice to any other rights and remedies that may be available at law or in equity, and the Company may also be entitled to recover its attorneys’ fees and costs incurred to enforce any of the Restrictive Covenants from the Executive pursuant to Section 20.

          (d) Severability. If any of the Restrictive Covenants, or any part thereof, are held to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid or unenforceable portions. Without limiting the generality of the foregoing, if any of the Restrictive Covenants, or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties hereto agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, such provision shall then be enforceable.

          (e) Proprietary Rights. The Executive acknowledges and agrees that all know-how, documents, reports, plans, proposals, marketing and sales plans, client lists, client files, and any materials made by the Executive during the Employment Term and within the scope of his duties under this Agreement or by the Company are the property of the Company and shall not be used by the Executive in any way adverse to the Company’s interests. The Executive shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any third party unless such delivery or reproduction is (i) made by Executive in the proper performance of his duties hereunder or (ii) approved by the Company’s Board or the Reporting Officer. The Executive hereby assigns to the Company any rights which he may have in any such trade secret or proprietary information.

     5. Termination and Compensation Due Upon Termination. The Employment Term may be terminated by the Company at any time and for any reason (and by the Executive pursuant to Section 5(c)) and the Executive’s right to compensation for periods after the date of the Employment Term shall be determined in accordance with the following:

          (a) Termination Without Cause or Resignation with Good Reason. In the event the Executive’s employment with the Company is terminated during the Employment Term by the Company without Cause (as defined below), including a termination in connection

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with a sale of the Company, the Company shall pay the Executive any compensation, benefits (including accrued vacation) and expense reimbursement the Company owes to the Executive through the effective date of termination, including the payment of any Incentive Bonus pursuant to Section 3(b) that has been earned and not paid as of the effective date of the Executive’s termination (i.e., the effective date of termination occurs after December 31st of a given year and an Incentive Bonus pursuant to Section 3(b) has been earned for such year but has not been paid as of the effective date of the Executive’s termination) (collectively, the “Owed Obligations”). Additionally, and conditioned upon the Executive’s voluntary execution of a written release substantially to the form of Exhibit 5(a) (the “Release”) (to be drafted and provided by the Company within 10 days after termination of employment) within sixty (60) days of the Executive’s termination date that is not revoked before the expiration of such sixty (60) day period the Executive shall be entitled to receive continued payment of Base Salary (the “Severance Payments”) during the one (1) year following the Employment Term (“Severance Period”), subject to adjustment in accordance with Section 4(b)(i).

     If the Executive does not voluntarily execute the Release or the Release is deemed not to be effective within sixty (60) days of the date the Release is executed by the Executive, the Executive shall not be entitled to the Severance Payments.

          (b) Resignation With Good Reason. Executive shall have the right to terminate his employment during the Employment Term for Good Reason. In the event Executive terminated his employment for Good Reason during the Employment Term (including any extension of the Employment Period pursuant to an Extension Notice), he will be entitled to all payments and benefits as if Company he had been terminated pursuant to Section 5(a). “Good Reason” shall mean:

               (i) The Company commits a material breach of this Agreement, including increasing the Target EBITDA Threshold for the Incentive Bonus in violation of terms set forth in Exhibit 3(b);

               (ii) The assignment of the Executive without his consent to a position, responsibilities, or duties of a materially lesser status or degree of responsibility than his position, responsibilities, or duties set forth in Section 2 or the requirement that the Executive report to any person other than the Reporting Officer;

               (iii) The relocation of the Company’s principal executive offices more than twenty-five miles from its location on the Effective Date; or

               (iv) The requirement by the Company that the Executive be based anywhere other than the Company’s principal executive offices, in either case without the Executive’s consent,

provided that the occurrence of any of the foregoing events shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from the Executive of written notice of such occurrence (provided that such opportunity to cure shall not apply in the event that the Company repeatedly causes the event constituting Good Reason); provided, further, that Good Reason shall cease to exist following the 45 days following the Executive’s actual

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knowledge of its occurrence, unless Executive has given the Company written notice thereof prior to such date. The Company shall be deemed to repeatedly cause the event constituting Good Reason if the Company, in bad faith, repeats the event constituting Good Reason and uses its cure period in a manner so as to negate the spirit of the provisions set forth herein allowing the Executive to terminate his employment for Good Reason.

          (c) Voluntary Resignation. The Executive may terminate his employment with the Company for any reason (or no reason at all) other than for Good Reason at any time by giving the Company sixty (60) days prior written notice of voluntary resignation; provided, however, that the Company may elect that the Executive’s voluntary resignation be effective immediately upon notice of such resignation. In such event, the Company shall pay the Executive the Owed Obligations and have no further obligation to make any other payments to the Executive in accordance with the provisions of Section 3 or otherwise for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary resignation.

          (d) Termination for Cause. The Company shall pay the Executive his accrued salary (as of the date of termination), benefits (including accrued vacation) and unpaid expense reimbursements through the date of termination and shall have no further obligation to make any other payments to the Executive in accordance with the provisions of Section 3 or otherwise for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause. For purposes of this Section 5, the Executive shall be considered terminated for “Cause” if he is discharged by the Company on account of the occurrence of one or more of the following events:

               (i) the Executive discloses confidential information in violation of Section 4(a) which disclosure is intended to harm the Company or has a Company Material Adverse Effect, or engages in competition in violation of Section 4(b);

               (ii) the Executive fails to follow the reasonable, lawful instructions of the Reporting Officer that does not constitute Good Reason (including any reasonable request to cooperate with an investigation by or with respect to the Company) and fails to cure such failure within fifteen (15) days after receipt of written notice from the Company specifying such failure and stating that such failure is grounds for termination for Cause (provided that such opportunity to cure will not apply in the event the Executive repeatedly fails to follow such instruction), it being understood that the failure of the Company or Executive to achieve the results specified in instructions of the Reporting Officer (such as financial performance targets) shall not constitute Cause provided that the Executive pursues in good faith the achievement of such results;

               (iii) the Executive breaches any of the Executive’s obligations under this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice from the Company specifying the breach and that such breach is grounds for a termination for Cause (provided that such opportunity to cure will not apply in the event the Executive repeatedly breaches such obligation);

               (iv) the Company is directed by regulatory or governmental authorities to terminate the employment of the Executive as a result of the acts or alleged acts of the

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Executive, provided that the Company has used its commercially reasonable efforts to challenge or avoid such direction by the applicable regulatory or governmental authority or the Executive engages in activities that cause actions to be taken by regulatory or governmental authorities that have a Company Material Adverse Effect;

               (v) the Executive is convicted of, or enters into a plea of guilty or no contest to, a felony (other than a felony resulting from a minor traffic violation);

               (vi) the Executive misappropriates a material corporate opportunity of the Company or any of its subsidiaries in the health care industry;

               (vii) the Executive engages in willful or intentional misconduct, the purpose or effect of which is to have a Company Material Adverse Effect;

               (viii) the Executive commits fraud, theft, or embezzlement against the Company or any subsidiary or affiliate thereof (other than on account of unintentional and immaterial actions);

               (ix) the Executive materially breaches any material provision under the Company’s code of ethics approved by the Board or under any similar or successor Company policy that is approved by the Board, provided that, if such breach is curable, the Executive fails to cure such breach within (30) days after receipt of written notice from the Company specifying the breach and that such breach is grounds for a termination for Cause; or

               (x) The Executive’s reporting to work under the influence of illegal narcotics or use of (or testing positive for) such substances while at work or scheduled to be at work.

The term “Company Material Adverse Effect” means any event, circumstance, development, condition, change, or effect which, is, either individually or in the aggregate with any other event, circumstance, development, condition, change, or effect, materially adverse to the business, operation, condition (financial or otherwise) assets, liabilities or results of operations of the Company and its subsidiaries, taken as a whole.

The Executive shall be deemed to repeatedly engage in an event constituting Cause if the Executive, in bad faith, repeats the event constituting Cause and uses his cure period in a manner so as to negate the spirit of the provisions set forth herein allowing the Company to terminate his employment for Cause.

          (e) Disability. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Section 3 for periods after the date the Executive’s employment with the Company terminates on account of disability, except payments due and owing through the effective date of termination. For purposes of this Section 5(e), determination of whether the Executive is disabled shall be determined in accordance with the Company’s long term disability plan (if any) and applicable law.

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          (f) Death. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Section 3 for periods after the date of the Executive’s death, except payments due and owing as of such date.

     6. Successors. This Agreement shall be binding on the Company and its successors and assigns, and any person acquiring, whether by merger, consolidation, purchase of all or substantially all of the Company’s assets and business, or otherwise without further action or consent by the Executive, the Company or its successor; Executive hereby agrees, in the event of a sale of all or substantially all of the Company’s assets, the Executive will execute an acknowledgment of assignment if requested to do so by the purchaser; and the Company hereby agrees, in the event of a sale of all or substantially all of the Company’s assets, to cause the purchaser of such assets to execute an acknowledgement of assignment and assumption by the purchaser if requested to do so by the Executive.

     7. Nonalienation. The interests of the Executive under this Agreement are not subject to the claims of his creditors, other than the Company, and may not otherwise be voluntarily or involuntarily assigned, alienated or encumbered except to the Executive’s estate upon his death.

     8. Waiver of Breach. The waiver by either the Company or the Executive of a breach of any provision of this Agreement shall not operate as, or be deemed a waiver of, any subsequent breach by either the Company or the Executive.

     9. Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

     10. Notice. Any notice to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given when received, rejected or refused or, when deposited in the U.S. mail, certified or registered mail, postage prepaid to the parties at the following addresses:

If to the Company, to:

NationsHealth, Inc.
13630 NW 8th Street
Suite 210
Sunrise, Florida 33325
Attention: Chief Executive Officer
Facsimile: (954) 903-5005

with a copy (which shall not constitute notice) to:

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McDermott Will & Emery LLP
201 South Biscayne Boulevard
22nd Floor
Miami, Florida 33131

Attention:	Ira J. Coleman, Esq.
	Frederic L. Levenson, Esq.
	Harris Siskind, Esq.

Facsimile: (305) 347-6500

and

Foley & Lardner LLP
100 North Tampa Street
Tampa, Florida 33602
Attention: Steven W. Vazquez
Facsimile: (813) 221-4217

If to Parent, to:

ComVest Investment Partners III, L.P.
One North Clematis
Suite 300
West Palm Beach, Florida 33401
Attention: Cecilio Rodriguez
Facsimile: (561) 671-3225

with a copy (which shall not constitute notice) to:

Foley & Lardner LLP
100 North Tampa Street
Tampa, Florida 33602
Attention: Steven W. Vazquez
Facsimile: (813) 221-4217

If to the Executive to:

Mark Lama
225 Potter Road
West Palm Beach, Florida 33405
Facsimile:                     

with a copy (which shall not constitute notice) to:

Baker & McKenzie, LLP
1111 Brickell Avenue
Suite 1700
Miami, Florida 33131
Attn: Roy J. Larson
Facsimile: (305) 789-8953

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     11. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and no person, other than the parties hereto (and the Executive’s estate upon his death), shall have any rights under or interest in this Agreement or the subject matter hereof. The parties hereby agree that no oral conversations shall be deemed to be a modification of this Agreement and neither party shall assert the same.

     12. Counterparts and Fax Signatures. This Agreement may be executed in two or more counterparts (including by means of fax or electronically transmitted portable document format (PDF) signature pages), each of which shall be deemed to be an original, but all of which together shall constitute and be one and the same instrument; provided that fax or electronically transmitted signatures of this Agreement shall be deemed to be originals. Counterpart signatures need not be on the same page and shall be deemed effective upon receipt.

     13. Applicable Law. The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Florida.

     14. No Assignments. The Executive shall not be permitted to assign this Agreement or any of the Executive’s rights under this Agreement without the prior written consent of the Company. The Company may assign (but not novate) this Agreement and its rights hereunder to any Affiliate, including Parent provided that the Company and the assignee shall be responsible for the obligations of the Company hereunder.

     15. Effectiveness. Notwithstanding anything to the contrary herein, this Agreement shall only be given effect upon the Closing (as defined in the Merger Agreement) (the “Effective Date”). In the event the Merger Agreement is terminated without the Closing having occurred, this Agreement shall be of no force or effect and the Original Agreement shall not be terminated and shall remain in full force and effect. Effective as of the Effective Date, this Agreement shall supersede the Original Agreement and any other prior employment agreements between the Executive and the Company or any of the Company’s affiliates and neither the Company nor any of its affiliates shall have any obligations under, and the Executive shall have no further rights under, the Original Agreement or any other such prior employment agreement; provided, however that nothing in this Section 15 shall be deemed to be a waiver by the Executive of his rights to indemnification from the Company, to rights arising in respect of the Option or rights under any benefit plan or insurance provided to Executive.

     16. Consequences of End of Employment. Following the Employment Term, all of the provisions of this Agreement shall terminate, except that (A) Sections 4(a), (c), (d), and (e) the Company’s payment obligations under Section 5, and Sections 6 through 21 shall survive indefinitely after the expiration of the Employment Term and (B) Section 4(b) shall terminate upon the expiration of the Non-Competition Period pursuant to Section 4(b).

     17. Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and the Executive relating to the subject matter herein and merges all prior discussions between the parties, including but not limited to any and all

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statements made by any officer, employee or representative of the Company. The Executive understands and acknowledges that, except as set forth in this Agreement, (a) no other representation or inducement has been made to Executive, (b) Executive has relied on Executive’s own judgment and investigation in executing this Agreement, and (c) Executive has not relied on any representation or inducement made by any officer, employee or representative of the Company. To the extent there is any conflict between the terms and conditions of this Agreement and the terms and conditions of any prior employment or consulting agreement, the terms and conditions of this Agreement shall control.

     18. Separation from Service. Notwithstanding any provision of this Agreement to the contrary, the Executive’s employment will be deemed to have terminated on the date of the Executives “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company, as reasonably determined by the Board.

     19. 409A. It is intended that this Agreement will comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and any regulations and guideline issued thereunder (“Section 409A”) to the extent that any compensation and benefits provided hereunder constitute deferred compensation subject to Section 409A. This Agreement shall be interpreted on a basis consistent with this intent. The parties will negotiate in good faith to amend this Agreement as necessary to comply with Section 409A in a manner that preserves the original intent of the parties to the extent reasonably possible. No action or failure to act, pursuant to this Section 19 shall subject the Company to any claim, liability, or expense, and the Company shall not have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any taxes pursuant to Section 409A of the Code.

     20. Fees. The Company shall be responsible and pay for the reasonable legal fees and costs incurred by the Executive in connection with the negotiation, execution and delivery of this Agreement and any amendment, extension, or replacement thereof. Such fees and costs will be paid within thirty (30) days following submission to the Company. In the event that there is any dispute under this Agreement, the prevailing party to such dispute shall be entitled to recover from the non-prevailing party and out-of pocket costs reasonably incurred in connection with such dispute.

     21. Indemnification.

     (a) Generally. The Company will, to the fullest extent to which it is empowered to do so under applicable law, as the same now exists or may hereafter be amended (but, in the case of any such amendment only to the extent that such amendment permits the Company to provide broader indemnification rights than the Company may provide immediately prior to such amendment), indemnify and hold harmless the Executive if the Executive is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive was employed by or acted on behalf of the Company (including all periods prior to the Effective Date), against all losses, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and the reasonable fees and expenses of experts and consultants) (collectively, “Damages”) incurred or suffered by Executive in connection with such action, suit or proceeding; provided, however, that (unless the Board of

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Directors otherwise consents) Executive will not be indemnified for any Damages incurred or suffered that are attributable to Executive’s fraud against the Company or its subsidiaries or willful violation of applicable law.

     (b) Expenses. The Company will, to the extent permitted under applicable law, advance to Executive reasonable attorneys’ fees, consulting and expert fees and other costs and expenses incurred in connection with the defense of any action, suit or proceeding if the Executive agrees in writing before any advancement that Executive will reimburse the Company for such fees, costs and expenses to the extent that a judgment or other final adjudication adverse to the Executive establishes that such Executive’s acts or omissions were otherwise of such a character that applicable law would require that such amounts be repaid.

     (c) Non-Exclusive. The rights of Executive under this Section 21 will not exclude any other right to which such Executive may be lawfully entitled.

     (d) Savings Clause; Survival. If this Section 21 or any portion of it is invalidated on any ground by any court of competent jurisdiction, then the Company will nevertheless indemnify the Executive to the fullest extent permitted by any applicable portion of this Section 21 that has not been invalidated and to the fullest extent permitted by applicable law. This Section 21 shall survive the termination of Executive’s employment for any reason.

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IN WITNESS WHEREOF the Executive and the Company have executed this Employment Agreement as of the day and year first above written.

NATIONSHEALTH, INC.
By:	/s/ Glenn Parker
Name:		Glenn Parker
Title:		CEO
EXECUTIVE:
/s/ Mark Lama
Mark Lama

Execution Copy

SUPPLEMENTAL AGREEMENT TO
EMPLOYMENT AGREEMENT

     This SUPPLEMENTAL AGREEMENT TO EMPLOYMENT AGREEMENT (the “Supplemental Agreement”) is made and entered into on April 20, 2009, by and between NationsHealth, Inc., a Delaware corporation (the “Company”), and Mark Lama, an individual residing at 225 Potter Road, West Palm Beach, Florida 33405 (the “Executive”).

     WHEREAS, the Executive and the Company entered into that certain Employment Agreement, dated as of the date hereof (the “Employment Agreement”), which agreement sets forth the terms of Executive’s employment with the Company;

     WHEREAS, unless the context requires otherwise, capitalized terms that are not defined in this Supplemental Agreement shall have the meaning assigned to such terms in the Employment Agreement;

     WHEREAS, the Executive and the Company desire to set forth certain additional terms that will be incorporated into the terms of the Employment Agreement;

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

     1. Position. The Executive Position is Chief Operating Officer.

     2. Base Salary. The Base Salary is Three Hundred Thousand Dollars ($300,000) per year.

     3. Option Percentage. The Option Percentage is 2.5%.

     4. Option Exercise Price. The Option Exercise Price is $0.12 per share.

     5. Reporting Officer. The Reporting Officer is the Chief Executive Officer of the Company.

     6. Initial Period. The initial term of employment referenced in Section 1 shall be three (3) years instead of four (4) years. The term will renew in accordance with Section 1 of the Employment Agreement.

     7. Changes to the Terms of the Option and the Additional Option. Notwithstanding the terms set forth in the Employment Agreement, the option agreement reflecting the Management Option and the Additional Management Option shall provide

          (a) such Management Option and Additional Management Option shall vest over three (3) years in equal monthly installments,

          (b) in the event that the Executive’s employment is terminated by the Company without Cause, unvested portions of the Option and the Additional Option shall be forfeited and the Executive shall retain the vested portions of the Option and the Additional Option;

          (c) in the event that the Executive’s employment is terminated by the Company with Cause, the Executive shall forfeit the entire Option and the Additional Option (including the vested portions of such Option and Additional Option) on such termination;

          (d) in the event that the Executive’s employment is terminated by the Company as a result of a disability, the Option and the Additional Option shall fully vest on such termination;

          (e) in the event that the Executive’s employment terminates as a result of the death of the Executive, the Option and the Additional Option shall fully vest on such death;

          (f) in the event that the Executive’s employment is terminated by the Executive for Good Reason, the unvested portions of the Option and the Additional Option shall be forfeited and the Executive shall retain the vested portions of the Option and the Additional Option; and

          (g) in the event that the Executive’s employment is terminated by the Executive without Good Reason, the Executive shall forfeit the entire Option and the Additional Option (including the vested portions of such Option and Additional Option).

     8. Second Option. On the Effective Date, the Company shall issue the Executive an additional option (the “Second Option”) to purchase a number of shares of Common Stock equal to two percent (2.0%) of the Fully Diluted Common Stock on the Effective Date at an exercise price equal to $0.12 per share. In the event that Parent purchases additional shares of the Company’s preferred stock pursuant to the Preferred Stock Investment Option (as defined in the Merger Agreement), the Company shall issue the Executive an additional option to purchase shares of Common Stock, on terms that are the substantially the same as the Second Option, including an exercise price equal to the Option Exercise Price, as adjusted for stock splits, stock dividends, recapitalizations or similar events (the “Additional Second Option”), such that the combined number of shares subject to the Second Option and the Second Additional Option shall be an amount equal to the Two Percent (2%) of (i) the Fully Diluted Common Stock on the Effective Date plus (ii) the shares of Common Stock into which the preferred stock purchased by Parent pursuant to the Preferred Stock Investment Option is convertible. The option agreement reflecting the Second Option shall provide:

          (a) such Second Option and the Additional Second Option shall vest over one (1) year in equal monthly installments,

          (b) in the event that the Executive’s employment is terminated by the Company without Cause, the Second Option and the Additional Second Option shall fully vest on such termination;

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          (c) in the event that the Executive’s employment is terminated by the Company with Cause, the Executive shall forfeit the entire Second Option and the Additional Second Option (including the vested portions of such Second Option and the Additional Second Option) on such termination;

          (d) in the event that the Executive’s employment is terminated by the Company as a result of a disability, the Second Option and the Additional Second Option shall fully vest on such termination;

          (e) in the event that the Executive’s employment terminates as a result of the death of the Executive, the Second Option and the Additional Second Option shall fully vest on such death;

          (f) in the event that the Executive’s employment is terminated by the Executive for Good Reason, the Second Option and the Additional Second Option shall fully vest; and

          (g) in the event that the Executive’s employment is terminated by the Executive without Good Reason, the Executive shall forfeit the entire Second Option and the Additional Second Option (including the vested portions of such Second Option and Additional Second Option).

     9. Severance Payments on Termination Without Cause or for Good Reason. Notwithstanding the terms set forth in the Employment Agreement, in the event that the Executive is terminated by the Company without Cause or the Executive Terminates his Employment for Good Reason (A) if the such termination occurs prior to the date that is six (6) months after the Effective Date, the Severance Period shall run until the first anniversary of the Effective Date, subject to extension in accordance with Section 4(b)(i) of the Employment Agreement and (B) if such termination occurs after the date is six (6) months after the Effective Date, the Severance Period shall be six (6) months, subject to extension in accordance with Section 4(b)(i) of the Employment Agreement; provided, however, if the Executive relocates his residence to a location within 25 miles of the Company’s headquarters upon a joint request of the Chief Executive Officer and the Board of Directors, and the Executive’s employment is terminated on or after the first anniversary of the Closing Date, the Severance Period and Severance Payments shall be those set forth in Section 5(a) of the Employment Agreement, subject to extension in accordance with Section 4(b)(i) of the Employment Agreement. If the Executive is required to relocate, the Company shall reimburse Executive for reasonable relocations expenses.

     10. Non-Compete Period. Notwithstanding the terms set forth in the Employment Agreement, the Non-Compete Period shall be the same as the Severance Period.

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IN WITNESS WHEREOF the Executive and the Company have executed this Supplemental Agreement as of the day and year first above written.

NATIONSHEALTH, INC.
By:	/s/ Glenn Parker
Name: Glenn Parker
Title: CEO
EXECUTIVE:
/s/ Mark Lama
Mark Lama

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