CREDIT AND SECURITY AGREEMENT

EXHIBIT 10.2









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CREDIT AND SECURITY AGREEMENT

Dated as of January 9, 2007

PETROHUNTER ENERGY CORPORATION, a Maryland corporation, and its
wholly-owned subsidiary, PETROHUNTER OPERATING COMPANY, a Maryland corporation
(collectively, the "Borrower"), and GLOBAL PROJECT FINANCE AG (the "Lender"),
hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and

(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.

"Accounts" means any "account," as such term is defined in the
Uniform Commercial Code, and, in any event, shall include, without limitation,
"supporting obligations" as defined in the Uniform Commercial Code.

"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrower, including (without
limitation) any Subsidiary of the Borrower. For purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.

"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.

"As-extracted Collateral" means any "as-extracted collateral,"
as such term is defined in the Uniform Commercial Code.

"Availability Period" means the period commencing upon the
Funding Date and ending eighteen (18) months after the date of this Agreement.

"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in Denver,
Colorado.

"Base Rate" means the Prime Rate of interest as published in
the WALL STREET JOURNAL.



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"Chattel Paper" means any "chattel paper," as such term is
defined in the Uniform Commercial Code.

"Collateral" means all of the Borrower's Instruments (together
with all payments thereon or thereunder), Accounts, Inventory, General
Intangibles (including payment intangibles (as defined in the Uniform Commercial
Code) and Software), Equipment, Documents, Contracts, Goods, Investment
Property, As-extracted Collateral, Trademarks, Patents and Copyrights, and all
other tangible and intangible property of Borrower, including, without
limitation, all Proceeds, tort claims, products, accessions, rents, profits,
income, benefits, substitutions, additions and replacements of and to any of the
property of Borrower described above (including, without limitation, any
proceeds of insurance thereon, insurance claims and all rights, claims and
benefits against any Person relating thereto), other rights to payments not
otherwise included in the foregoing, and all books, correspondence, files,
records, invoices and other papers, including without limitation all tapes,
cards, computer runs, computer programs, computer files and other papers,
documents and records in the possession or under the control of Borrower or any
computer bureau or service company from time to time acting for Borrower.

"Commitment" means the Lender's commitment to make Advances to
or for the Borrower's account pursuant to Article II.

"Contracts" means all contracts, undertakings, or other
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which the Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.

"Copyrights" means any copyrights, rights and interests in
copyrights, works protectable by copyrights, copyright registrations and
copyright applications, including, without limitation, the copyright
registrations and applications listed on SCHEDULE 1.1 attached hereto, and all
renewals of any of the foregoing, all income, royalties, damages and payments
now and hereafter due and/or payable under or with respect to any of the
foregoing, including, without limitation, damages and payments for past, present
and future infringements of any of the foregoing and the right to sue for past,
present and future infringements of any of the foregoing.

"Credit Facility" means the discretionary credit facility being
made available to the Borrower by the Lender pursuant to Article II.

"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of that Person
as of the date as of which Debt is to be determined. For purposes of determining
a Person's aggregate Debt at any time, "Debt" shall also include the aggregate
payments required to be made by such Person at any time under any lease that is
considered a capitalized lease under GAAP.

"Default" means an event that, with giving of notice or passage
of time or both, would constitute an Event of Default.


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"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has occurred
and ending on the date the Lender notifies the Borrower in writing that such
Default or Event of Default has been cured or waived.

"Documents" means any "documents," as such term is defined in
the Uniform Commercial Code, and shall include, without limitation, all
documents of title (as defined in the Uniform Commercial Code), bills of lading
or other receipts evidencing or representing Inventory or Equipment.

"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.

"Environmental Laws" has the meaning specified in Section 5.12.

"Equipment" means any "equipment," as such term is defined in
the Uniform Commercial Code and, in any event, shall include, Motor Vehicles.

"Event of Default" has the meaning specified in Section 8.1.

"Floating Rate" means an annual rate equal to the sum of the
Base Rate plus six and three-fourths percent (6.75%), which annual rate shall
change when and as the Base Rate changes.

"Funding Date" has the meaning given in Section 2.1.

"Funds From Operations" for a given period means the sum of (i)
Net Income, (ii) depreciation and amortization, (iii) deferred income taxes, and
(iv) other non-cash items, each as determined for such period in accordance with
GAAP.

"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the financial
statements described in Section 5.5, except for any change in accounting
practices to the extent that, due to a promulgation of the Financial Accounting
Standards Board changing or implementing any new accounting standard, the
Borrower either (i) is required to implement such change, or (ii) for future
periods will be required to and for the current period may in accordance with
generally accepted accounting principles implement such change, for its
financial statements to be in conformity with generally accepted accounting
principles (any such change is herein referred to as a "Required GAAP Change"),
provided that the Borrower shall fully disclose in such financial statements any
such Required GAAP Change and the effects of the Required GAAP Change on the
Borrower's income, retained earnings or other accounts, as applicable.

"General Intangibles" means any "general intangibles," as such
term is defined in the Uniform Commercial Code, and, in any event, shall
include, without limitation, all right, title and interest in or under any
Contract, models, drawings, materials and records, claims,


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literary rights, goodwill, rights of performance, Copyrights, Trademarks,
Patents, warranties, rights under insurance policies and rights of
indemnification.

"Goods" means any "goods", as such term is defined in the
Uniform Commercial Code, including, without limitation, fixtures and embedded
Software to the extent included in "goods" as defined in the Uniform Commercial
Code .

"Instruments" means any "instrument," as such term is defined
in the Uniform Commercial Code, and shall include, without limitation,
promissory notes, drafts, bills of exchange, trade acceptances, letters of
credit, letter of credit rights (as defined in the Uniform Commercial Code), and
Chattel Paper.

"Inventory" means all of the Borrower's inventory, as such term
is defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or materials,
whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.

"Investment Property" means any "investment property", as such
term is defined in the Uniform Commercial Code.

"Loan Documents" means this Agreement, the Note and the
Security Documents.

"Maturity Date" means thirty (30) months from the date of this
Agreement.

"Maximum Line" means Fifteen Million Dollars ($15,000,000.00).

"Motor Vehicles" means motor vehicles for which ownership is
evidenced by a Certificate of Title.

"Note" means the Borrower's promissory note, payable to the
order of the Lender in substantially the form of EXHIBIT A hereto, as the same
may hereafter be amended, supplemented or restated from time to time, and any
note or notes issued in substitution therefor, as the same may hereafter be
amended, supplemented or restated from time to time and any note or notes issued
in substitution therefor.

"Patents" means any patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein, all patentable inventions and those patents and patent applications
listed on Schedule 1.1 attached hereto, and the reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any of the
foregoing, and all income, royalties, damages and payments now or hereafter due
and/or payable under or with respect to any of the foregoing, including, without
limitation, damages and payments for past, present and future infringements of
any of the foregoing and the right to sue for past, present and future
infringements of any of the foregoing.

"Permitted Lien" has the meaning given in Section 7.1.


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"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

"PetroHunter Stock" means the common stock of PetroHunter
Energy Corporation, a Maryland corporation.

"Plan" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.

"Proceeds" means "proceeds," as such term is defined in the
Uniform Commercial Code and, in any event, includes, without limitation, (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable with
respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental body, authority, bureau or agency (or
any person acting under color of governmental authority), and (c) any and all
other amounts from time to time paid or payable under, in respect of or in
connection with any of the Collateral.

"Properties" means the Borrower's oil and gas mineral interests
owned as set forth on Schedule 1.1.

"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, out of a loan, out
of the overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently transfers such
person's interest to the Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and
security interests) which the Borrower may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such payment
or against any property of such account debtor or other obligor; all including
but not limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt instruments,
tax refunds and rights to payment in the nature of general intangibles.

"Reportable Event" shall have the meaning assigned to that term
in Title IV of ERISA.

"Security Documents" means this Agreement and any other
document delivered to the Lender from time to time to secure the repayment of
the Note, as the same may hereafter be amended, supplemented or restated from
time to time.

"Security Interest" has the meaning given in Section 3.1.


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"Software" means all "software" as such term is defined in the
Uniform Commercial Code, now owned or hereafter acquired by the Borrower, other
than software embedded in any category of Goods, including, without limitation,
all computer programs and all supporting information provided in connection with
a transaction related to any program.

"Subsidiary" means any corporation or entity of which more than
50% of the equity is at the time directly or indirectly owned by the Borrower,
by the Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.

"Termination Date" means the earliest of (i) the end of the
Availability Period, (ii) the date the Borrower terminates the Credit Facility,
or (iii) the date the Lender demands payment of the Note.

"Trademarks" means any trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos, other business identifiers, prints and labels on which any
of the foregoing have appeared or appear, all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, the trademarks and applications listed in SCHEDULE 1.1 attached
hereto and renewals thereof, and all income, royalties, damages and payments now
or hereafter due and/or payable under or with respect to any of the foregoing,
including, without limitation, damages and payments for past, present and future
infringements of any of the foregoing and the right to sue for past, present and
future infringements of any of the foregoing.

"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.13 as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.

Section 1.2 CROSS REFERENCES. All references in this Agreement to
Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.

ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY

Section 2.1 ADVANCES. The Lender shall make five (5) advances of Three
Million Dollars ($3,000,000.00) each to the Borrower from time to time from the
date all of the conditions set forth in Section 4.1 are satisfied (the "Funding
Date") to the Termination Date, on the terms and subject to the conditions
herein set forth (the "Advances"). The Borrower's obligation to pay the Advances
shall be evidenced by the Note and shall be secured by the Collateral as
provided in Article III. The Borrower agrees to comply with the following
procedures in requesting Advances under this Section 2.1:

(a) The Borrower shall make each request for an Advance to the
Lender in writing, specifying the date of the requested Advance and the amount
thereof. Each request shall be by (i) any officer of either of the entities
constituting the Borrower; or (ii) any person designated as the Borrower's agent
by any officer of either of the entities constituting the


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Borrower in a writing delivered to the Lender; or (iii) any person whom the
Lender reasonably believes to be an officer of the Borrower or such a designated
agent.

(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested Advance
within five (5) days by wiring the same to the Borrower's account identified in
the Advance request. Any request for an Advance shall be deemed to be a
representation by the Borrower that the conditions set forth in Section 4.2 have
been satisfied as of the time of the request.

Section 2.2 INTEREST; USURY. Interest accruing on the Note shall be due
and payable in arrears on the last day of each calendar quarter, beginning March
31, 2007.

(a) NOTE. Except as set forth in Section 2.2(b), the
outstanding principal balance of the Note shall bear interest at the Floating
Rate. Advances shall be added to the principal balance of the Note upon receipt
of the Advance by the Borrower. An Advance shall be deemed to be received by the
Borrower when it is credited to the account identified in the Borrower's wiring
instructions.

(b) USURY. In any event no rate change shall be put into effect
which would result in a rate greater than the highest rate permitted by law.
Notwithstanding anything to the contrary contained in any Loan Document, all
agreements which either now are or which shall become agreements between the
Borrower and the Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and other charges exceed the applicable limits imposed by
the usury laws of the State of Colorado. If any payments in the nature of
interest, additional interest and other charges made under any Loan Document are
held to be in excess of the applicable limits imposed by the usury laws of the
State of Colorado, it is agreed that any such amount held to be in excess shall
be considered payment of principal hereunder, and the indebtedness evidenced
hereby shall be reduced by such amount so that the total liability for payments
in the nature of interest, additional interest and other charges shall not
exceed the applicable limits imposed by the usury laws of the State of Colorado,
in compliance with the desires of the Borrower and the Lender. This provision
shall never be superseded or waived and shall control every other provision of
the Loan Documents and all agreements between the Borrower and the Lender, or
their successors and assigns.

Section 2.3 ADVANCE FEES. The Borrower hereby agrees to pay the Lender
an Advance fee equal to one percent (1%) of the amount of the Advance, payable
when the Lender makes the Advance to Borrower.

Section 2.4 WARRANTS. The Borrower shall issue to the Lender warrants
to purchase one million (1,000,000) shares of PetroHunter Stock upon the
execution of this Agreement and warrants to purchase six hundred thousand
(600,000) shares of PetroHunter Stock upon each Advance of Three Million Dollars
($3,000,000.00). The warrants will be exercisable until five (5) years of the
date of this Agreement. The exercise price of the warrants shall be a price
equal to one hundred twenty percent (120%) of the weighted average price of the
PetroHunter Stock for the thirty (30) days immediately prior to each warrant
issuance date.


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Section 2.5 COMPUTATION OF INTEREST; WHEN INTEREST DUE AND PAYABLE.
Interest accruing on the outstanding principal balance of the Advances
outstanding from time to time shall be computed on the basis of actual number of
days elapsed in a year of 365 days. Interest shall be payable in arrears on the
last day of each calendar quarter beginning March 31, 2007 and on the Maturity
Date.

Section 2.6 VOLUNTARY PREPAYMENT; TERMINATION OF THE CREDIT FACILITY BY
THE BORROWER. Except as otherwise provided herein, the Borrower may prepay the
Advances in whole or in part at any interest payment date without notice,
penalty, or bonus. The Borrower may terminate the Credit Facility at any time if
it (i) gives the Lender at least 30 days' prior written notice. Subject to
termination of the Credit Facility and payment and performance of the Note, the
Lender shall release or terminate the Security Interest and the Security
Documents to which the Borrower is entitled by law.

Section 2.7 MANDATORY PREPAYMENT. If the Properties are sold in whole
or in part, Borrower agrees to make a mandatory prepayment in an amount equal to
such sales proceeds, not to exceed the outstanding balances under the Credit
Facility only with respect to that portion of the Properties sold.

Section 2.8 MANDATORY REPAYMENT. Beginning at the end of the first
quarter following the end of the Availability Period, the Borrower shall
commence making principal payments. Principal payments shall be made in such
amounts as may be agreed upon by the Borrower and the Lender based on the then
outstanding principal balance in order to repay the Advances by the Maturity
Date.

Section 2.9 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such extension
of time shall in such case be included in the computation of interest on the
Advances, as the case may be.

Section 2.10 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances to provide funds for drilling, development, installation and operation
of facilities all related to Borrower's interest in its Piceance Basin
properties in Colorado, and other mineral interests owned and to be acquired by
Borrower, as well as ongoing working capital needs.

ARTICLE III
SECURITY INTEREST

Section 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a first priority perfected mortgage and
security interest (collectively referred to as the "Security Interest") in the
Properties and Collateral, as security for the payment of the Note and its
performance under the Loan Documents, limited to the specific portion of the
Properties and Collateral to which the Advances are applied by the Borrower and
hereafter acquired by the Borrower.

Section 3.2 VENDOR AND OTHER FINANCING. The Lender hereby agrees to
cooperate and work with the Borrower to the fullest extent possible to
accommodate vendor


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financing and other potential facilities by which the Borrower shall seek to
finance supplementally stand-alone development activities on the Properties.

Section 3.3 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. During
any Default Period, the Lender may notify any account debtor or other person
obligated to pay the amount due that such right to payment has been assigned or
transferred to the Lender for security and shall be paid directly to the Lender.
The Borrower will join in giving such notice if the Lender so requests. At any
time after the Borrower or the Lender gives such notice to an account debtor or
other obligor, the Lender may, but need not, in the Lender's name or in the
Borrower's name, demand, sue for, collect or receive any money or property at
any time payable or receivable on account of, or securing, any such right to
payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including
collateral obligations) of any such account debtor or other obligor.

Section 3.4 ASSIGNMENT OF INSURANCE. As additional security for the
payment of the Note, the Borrower hereby assigns to the Lender any and all
monies (including, without limitation, proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.

Section 3.5 LICENSE. The Borrower hereby grants to the Lender a non-
exclusive, worldwide and royalty-free license to use or otherwise exploit all
trademarks, franchises, trade names, copyrights and patents of the Borrower for
the purpose of selling, leasing or otherwise disposing of any or all Collateral
during any Default Period.

Section 3.6 FINANCING STATEMENT. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:

Name and address of Debtor:

PetroHunter Energy Corporation
1875 Lawrence Street, Suite 1400
Denver, CO 80202
Federal Tax Identification No. 98-0431245



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Name and address of Secured Party:

Global Project Finance AG
Tuerlacherstrasse 40
6060 Sarnen
Switzerland

ARTICLE IV
CONDITIONS OF LENDING

Section 4.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
the Lender to make the initial Advance hereunder shall be subject to the
following conditions:

(a) Receipt of the following, each in form and substance
satisfactory to the Lender:

(i) This Agreement, properly executed by the Borrower.

(ii) The Note, properly executed by the Borrower.

(iii) Such financial statements of the Borrower as
requested by the Lender.

(iv) Current searches of appropriate filing offices
showing that (A) no state or federal tax liens have been filed and remain in
effect against the Borrower, (B) no financing statements or assignments of
patents, trademarks or copyrights have been filed and remain in effect against
the Borrower except those financing statements and assignments of patents,
trademarks or copyrights relating to Permitted Liens or to liens held by Persons
who have agreed in writing that upon receipt of proceeds of the Advances, they
will deliver UCC releases and/or terminations and releases of such assignments
of patents, trademarks or copyrights satisfactory to the Lender, and (C) the
Lender has duly filed all financing statements necessary to perfect the Security
Interest, to the extent the Security Interest is capable of being perfected by
filing.

(v) A certificate of the Borrower's Secretary or
Assistant Secretary certifying as to (A) the resolutions of the Borrower's
directors and, if required, shareholders, authorizing the execution, delivery
and performance of the Loan Documents, (B) the Borrower's articles of
incorporation and bylaws, and (C) the signatures of the Borrower's officers or
agents authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance requests, on the
Borrower's behalf.

(vi) A current certificate issued by the Secretary of
State of Colorado certifying that Borrower is in compliance with all applicable
organizational requirements of the State of Colorado.


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(vii) Evidence that the Borrower is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary.

(viii) A certificate of an officer of Borrower confirming,
in his personal capacity, the representations and warranties set forth in
Article V.

(ix) An opinion of counsel to the Borrower, addressed to
the Lender.

(x) Such other documents as the Lender in its sole
discretion may require.

(b) Receipt of reimbursement for all reasonable agreed-upon
expenses for which invoices have been presented to the Borrower.

(c) The Lender's completion and satisfaction of the business,
gas market, financial, legal, title, engineering and environmental due diligence
on the Properties, the Collateral and the Borrower conducted by the Lender.

(d) Title review of the Properties, including the Borrower's
right to produce oil and gas from wells held under oil and gas leases,
satisfactory to the Lender and its counsel.

(e) No material adverse changes in the Borrower or the
Properties shall have occurred.

Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The Lender will not
fund further requests for an Advance unless on such date:

(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance as though made on and as of
such date, except to the extent that such representations and warranties relate
solely to an earlier date; and

(b) no event has occurred and is continuing, or would result
from such Advance which constitutes a Default or an Event of Default.

ARTICLE V
REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lender as follows:

Section 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE
OFFICE; INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER. Each
Borrower is a corporation, duly organized, validly existing and in good standing
under the laws of the State of Maryland and is duly licensed or qualified to
transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by it makes


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such licensing or qualification necessary. The Borrower has all requisite power
and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. During its existence, the Borrower has done business
solely under the names set forth in Schedule 5.1 hereto. The Borrower's chief
executive office and principal place of business is located at the address set
forth in Schedule 5.1 hereto, and all of the Borrower's records relating to its
business or the Collateral are kept at that location. All Inventory and
Equipment is located at that location or at one of the other locations set forth
in Schedule 5.1 hereto. The Borrower's tax identification numbers are correctly
set forth in Section 3.6 hereto.

Section 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's stockholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Borrower's articles of incorporation or bylaws; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.

Section 5.3 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.

Section 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4, the
Borrower has no Subsidiaries.

Section 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
heretofore furnished to the Lender consolidated unaudited financial statements
of the Borrower for the nine months ended June 30, 2006, and those statements
fairly present the Borrower's financial condition on the dates thereof and the
results of its operations and cash flows for the periods then ended and were
prepared in accordance with generally accepted accounting principles. Since the
date of the most recent financial statements, there has been no material adverse
change in the Borrower's business, properties or condition (financial or
otherwise).



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Section 5.6 LITIGATION. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, t