Exhibit 10.1
LOAN AGREEMENT
Dated as of: October 20, 2010
Between
METRO BANK
as Lender
and
UNILIFE CROSS FARM LLC
as Borrower

 

 

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LOAN AGREEMENT
This LOAN AGREEMENT made and entered into October 20, 2010, by and between METRO
BANK, as Lender, and UNILIFE CROSS FARM LLC, a Delaware Limited Liability
Company, as Borrower.
SECTION I. DEFINITIONS.
General Provisions. Unless expressly provided otherwise in this Agreement or in
the Loan Documents, or unless the context requires otherwise:
(a) all accounting terms used in this Agreement and in the Loan Documents not
otherwise defined herein or therein shall have the meanings given to them in
accordance with Generally Accepted Accounting Principles;
(b) all terms used herein and in the Loan Documents not otherwise defined herein
or therein that are defined in the Pennsylvania Uniform Commercial Code, as
amended from time to time, shall have the meanings set forth therein;
(c) all capitalized terms defined in this Agreement shall have the defined
meanings when used in the Loan Documents and in any other documents made or
delivered pursuant to this Agreement;
(d) the singular shall mean the plural, the plural shall mean the singular, and
the use of any gender shall include all genders;
(e) all references to any particular party defined herein shall be deemed to
refer to each and every person defined herein as such party individually, and to
all of them, collectively, jointly and severally, as though each were named
wherever the applicable defined term is used;
(f) all references to “Sections,” “Subsections,” “Paragraphs” and
“Subparagraphs” shall refer to provisions of this Agreement;
(g) all references to time herein shall mean Eastern Standard Time or Eastern
Daylight Time, as then in effect; and
(h) all references to sections, subsections, paragraphs or other provisions of
statutes or regulations shall be deemed to include successor, amended,
renumbered and replacement provisions.
Defined Terms. As used herein, the following terms shall have the meanings
indicated, unless the context otherwise requires:
“Agreement” shall mean this loan agreement and any future amendments,
restatements, modifications or supplements hereof or hereto.

 

 

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“Applicable Rate” shall mean the stated rate of interest due and payable, from
time to time, as more fully set forth in the Notes.
“Bankruptcy Code” shall mean the United States Bankruptcy Code, Title 11 of the
United States Code, as amended, or any successor law thereto, and any rules
promulgated in connection therewith.
“Borrower” shall mean Unilife Cross Farm LLC, a Delaware limited liability
company.
“Business Assets” shall mean any real, personal, mixed tangible or intangible
property of any nature, including cash on hand, cash in bank or other accounts,
readily marketable securities, and other cash-equivalent liquid assets,
prepayments, deposits, escrows, accounts receivable, tangible property,
software, contract rights, intangibles and goodwill, claims, causes of action
and other legal rights and remedies.
“Business Day” shall mean a day other than a Saturday, Sunday or legal holiday
recognized as such under the laws of the Commonwealth of Pennsylvania.
“Closing Date” shall mean the date hereof.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, or any successor law thereto, and any regulations promulgated thereunder.
“Collateral” shall mean:
(a) a valid title-insured first mortgage lien on the real property and all
improvements thereon located at 250 Cross Farm Lane, Conewago Township, York
County, Pennsylvania as security for Facility A;
(b) a valid title-insured second mortgage lien on the real property and all
improvements thereon located at 250 Cross Farm Lane, Conewago Township, York
County, Pennsylvania as security for Facility B;
(c) an assignment of all present and future rents and leases associated with the
real property located at 250 Cross Farm Lane, Conewago Township, York County,
Pennsylvania as security for Facility A and Facility B;
(d) a collateral assignment of agreements affecting real estate associated with
the real property located at 250 Cross Farm Lane, Conewago Township, York
County, Pennsylvania as security for Facility A;
(e) a valid security interest in the Business Assets of Borrower and Guarantors
as security for Facility A and Facility B; and
(f) a valid first priorty security interest in sixty-five percent (65%) of
Unilife Corporation’s capital stock in Unilife Medical Solutions, Ltd.

 

 

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All Collateral is being granted to Lender as collateral security for the
performance of this Agreement, the payment of the principal of and interest on
the Notes and all other advances made by Lender for the benefit of Borrower
under this Agreement, the Notes, the Collateral Documents or any instrument
delivered to Lender pursuant to any of the foregoing and for the performance of
Borrower of any obligation or agreement of Borrower to Lender.
“Commitment Letters” shall mean the two (2) letters dated October 14, 2010 from
Lender to Borrower and any amendments, restatements, modifications or
supplements thereof or thereto.
“Construction Period” shall mean the first eighteen (18) months following the
Closing Date or upon the certified completion of construction by an independent
third party engineer agreed upon between the parties, whichever occurs first.
“Contamination” shall mean the presence of any Hazardous Substance that would
require Remedial Actions under applicable law.
“Debt” shall mean:
(a) all items of indebtedness or liability that in accordance with Generally
Accepted Accounting Principles would be included in determining total
liabilities as shown on the liabilities side of a balance sheet as of the date
as of which Debt is to be determined;
(b) all indebtedness secured by any mortgage, pledge, lien or security interest
existing on any real or personal property owned by the Person whose Debt is
being determined, regardless whether the indebtedness secured thereby is a
recourse or nonrecourse obligation of that Person or any Subsidiaries; and
(c) all guaranties, endorsements (other than for purposes of collection in the
ordinary course of business), other contingent obligations with respect to, or
to purchase or to otherwise acquire, indebtedness of others, and all other
contingent obligations.
“Debt Service Reserve” shall have the meaning as set forth in Section 5.14.
“Default” shall mean any event specified in Subsection 7.1, whether or not any
requirement for notice or lapse of time or any other condition has been
satisfied.
“Event of Default” shall mean any event specified in Subsection 7.1, provided
that any requirement for notice or lapse of time or any other condition has been
satisfied.
“Facility A” shall mean the term loan given by Lender to Borrower in the
principal amount of $14,250,000.00.

 

 

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“Facility B” shall mean the term loan given by Lender to Borrower in the
principal amount of $3,750,000.00.
“Financial Covenants” for Borrower shall mean:
(a) For Borrower:
(i) The Borrower’s minimum cash flow, based upon year end financial statements
and defined as (net income + depreciation + amortization + interest expense +
non-cash items — unfunded capital expenditures — distributions — withdraws —
gain on the sale of fixed assets) / (interest expense + scheduled principal
payments on long term debt), shall not fall below 1.10x.
(ii) The Borrower’s current ratio, based upon year end financial statements and
as defined by GAAP, shall not fall below 1.10x.
(iii) The Borrower’s debt-to-net worth, based upon year end financial statements
and as defined by GAAP, shall not exceed 2.00x.
(b) For Unilife Corporation: Unilife Corporation shall maintain a minimum cash
balance of not less than $5,000,000.00, which shall include any amount deposited
in Borrower’s Debt Service Reserve account with Lender.
“Generally Accepted Accounting Principles” shall mean, at any particular time,
generally accepted accounting principles as in effect at such time; provided,
however, that, if employment of more than one principle shall be permissible at
such time in respect of a particular accounting matter, “Generally Accepted
Accounting Principles” shall refer to the principle that is then employed by
Borrower with the agreement of its independent certified public accountants.
“Guarantors” shall mean Unilife Medical Solutions, Inc. and Unilife Corporation.
“Hazardous Substances” shall mean any chemical, solid, liquid, gas, or other
substance having the characteristics identified in, listed under, or designated
pursuant to:
(a) the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. §9601(14), as a “hazardous substance;”
(b) the Clean Water Act, 33 U.S.C. §1321(b)(2)(A), as a “hazardous substance;”
(c) the Clean Water Act, 33 U.S.C. §§1317(a) and 1362(13), as a “toxic
pollutant;”

 

 

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(d) Table 1 of Committee Print Numbered 95-30 of the Committee on Public Works
and Transportation of the United States House of Representatives, as a “toxic
pollutant;”
(e) the Clean Air Act, 42 U.S.C. §7412(a)(1), as a “hazardous air pollutant;”
(f) the Toxic Substances Control Act, 15 U.S.C. §2606(f), as an “imminently
hazardous chemical substance or mixture;”
(g) the Resource, Conservation and Recovery Act, 42 U.S.C. §§6903(5) and 6921,
as a “hazardous waste;” or
(h) any other laws, regulations or governmental publications, as presenting an
imminent and substantial danger to the public health or welfare or to the
environment, or as otherwise requiring special handling, collection, storage,
treatment, disposal, or transportation.
The term “Hazardous Substances” shall also include: (w) petroleum, crude oil,
gasoline, natural gas, liquefied natural gas, synthetic fuel, and all other
petroleum, oil, or gas based products; (x) nuclear, radioactive, or atomic
substances, mixtures, wastes, compounds, materials, elements, products or
matters; (y) asbestos, asbestos-containing materials, polychlorinated biphenyls,
and (z) any other substance, mixture, waste, compound, material, element,
product or matter that presents an imminent and substantial danger to the public
health or welfare or to the environment upon its Release.
“IFIP” shall mean the Infrastructure and Facilities Improvement Program.
“Lender” shall mean Metro Bank.
“Loan” or “Loans” shall mean individually and collectively Facility A and
Facility B.
“Loan Documents” shall mean the Notes, this Agreement and the other Security
Documents and all other documents and instruments executed and delivered to
Lender by or on behalf of Borrower in connection therewith and any
modifications, amendments, restatements, substitutions and replacements of or
for any of the foregoing.
“Mortgages” shall mean the Open-End Commercial Mortgage and Security Agreement
for the real property located at 250 Cross Farm Lane, Conewago Township, York
County, Pennsylvania and the Commercial Mortgage and Security Agreement for the
real property located at 250 Cross Farm Lane, Conewago Township, York County,
Pennsylvania dated as of October 20, 2010 executed by Borrower.
“Notes” shall mean Borrower’s Term Note, in the principal amount of
$14,250,000.00, dated as of October 20, 2010 and Borrower’s Term Note, in the
principal amount of $3,750,000.00, dated as of October 20, 2010.

 

 

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“Obligations” shall mean all liabilities, duties and obligations of Borrower to
Lender with respect to any covenants, representations or warranties herein or in
the other Loan Documents, with respect to the principal of and interest on the
Note(s), and all other present and future fixed and/or contingent obligations of
Borrower to Lender hereunder, under the other Loan Documents, and otherwise
relating to the Loan, including, without limitation, obligations with respect to
interest accruing (or which would accrue but for §502 of the Bankruptcy Code)
after the date of any filing by Borrower of any petition in Bankruptcy or the
commencement of any Bankruptcy, insolvency or similar proceedings with respect
to Borrower.
“Person” shall mean an individual, a corporation, a partnership, a limited
liability company, a joint venture, a trust or unincorporated organization, a
joint stock company or other similar organization, a government or any political
subdivision thereof, or any other legal entity.
“Prime Rate” (sometimes called “Wall Street Journal Prime Rate”) shall mean the
interest rate per annum announced or published from time to time in various
business journals and publications such as the Wall Street Journal, Eastern
Edition, or its successor publication as the “Prime Rate.” If the Wall Street
Journal or its successor publication ceases to publish a rate or rates of
interest as the Base Rate, the term “Prime Rate” shall mean the rate which
Lender establishes as its “Prime Rate” whether or not published. If Lender has
more than one Prime Rate in effect simultaneously, “Prime Rate” shall mean the
highest of such prime rates then simultaneously in effect. The utilization of
“Prime Rate” herein is solely for the purpose of defining the rate of interest
applicable hereunder. Its utilization shall in no way preclude or limit Lender
from lending to certain borrowers, from time to time, at a rate of interest less
than the “Prime Rate” as defined hereunder.
“Real Property” shall mean the real estate located at 250 Cross Farm Lane,
Conewago Township, York County, Pennsylvania.
“Regulatory Change” shall mean (a) any change on or after the date of this
Agreement in United States federal, state, or any foreign, laws or regulations
(including Regulation D of the Board of Governors of the Federal Reserve System)
applying to the class of Lenders including Lender or (b) the adoption or making
on or after such date of any interpretations, directives or requests applying to
a class of Lenders including Lender of or under any United States federal or
state, or any foreign, laws or regulations (whether or not having the force of
law) by any court or governmental or monetary Borrower charged with the
interpretation or administration thereof.
“Release” shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, or dumping.
“Remedial Actions” shall mean:
(a) clean-up or removal of Hazardous Substances;

 

 

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(b) such actions as may be necessary to monitor, assess, or evaluate the Release
or threatened Release of Hazardous Substances;
(c) proper disposal or removal of Hazardous Substances;
(d) the taking of such other actions as may be necessary to prevent, minimize,
or mitigate the damages caused by a Release or threatened Release of Hazardous
Substances to the public health or welfare or to the environment; and
(e) the providing of emergency assistance after a Release.
Remedial Actions include, but are not limited to, such actions at the location
of a Release as: storage; confinement; perimeter protection using dikes,
trenches, or ditches; clay cover; neutralization; clean-up of Hazardous
Substances or contaminated materials; recycling or reuse; diversion;
destruction; segregation of reactive wastes; dredging or excavations; repair or
replacement of leaking containers; collection of leachate and runoff; onsite
treatment or incineration; providing alternative water supplies; and any
monitoring reasonably required to assure that such actions protect the public
health and welfare and the environment.
“Security Documents” shall mean, individually and collectively, this Agreement,
the Mortgages, the Security Agreements, the Assignment of Rents and Leases, any
UCC financing statements, and any other instruments now or hereafter executed
and delivered to Lender to secure, or to assure, payment or performance, of the
Obligations, and any future amendments, restatements, modifications or
supplements thereof or thereto.
“UCC” shall mean the Uniform Commercial Code as in effect in the Commonwealth of
Pennsylvania, as amended from time to time.
“USDA” shall mean the United States Department of Agriculture.
SECTION 2. AMOUNT AND TERMS OF NOTES; AND SECURITY AGREEMENT.
2.1 The Notes.
(a) Facility A. Lender has made a term loan to Borrower, in the principal amount
of Fourteen Million Two Hundred Fifty Thousand Dollars ($14,250,000.00) and
Borrower has executed and delivered to Lender that certain Term Note (the
“Facility A Note”). The Facility A Note shall be secured by the Loan Documents.
The principal balance of the Facility A Note shall be payable at maturity in
twenty (20) years from the completion of the Construction Period (the “Facility
A Maturity Date”). The interest rate shall be a fluctuating rate at the Prime
Rate plus one and one half of one percent (1.5%) per annum, to be adjusted not
more than quarterly, with a floor of four and one half of one percent (4.5%) per
annum, during the Construction Period, followed by a fixed rate at the five
(5) year T-bill plus three hundred (300) basis points per annum, with a floor of
six percent (6%) per annum, for a period of five (5) years, followed by a
fluctuating rate at the Prime Rate plus one percent (1%) per annum, to be
adjusted not more than quarterly, with a floor to be determined unless a new
fixed rate has been negotiated. Interest only, at the Applicable Rate of
interest, as adjusted from time to time, shall be payable monthly during the
Construction Period. Thereafter, principal and interest, at the Applicable Rate
of interest, as adjusted from time to time, shall be payable monthly in
consecutive level payments calculated by assuming a twenty (20) year
amortization until the Facility A Maturity Date, at which time all remaining
principal and accrued interest shall be payable in full. Lender shall have the
absolute right to adjust the monthly payments quarterly during any fluctuating
rate period to allow the Loan to amortize over the term to maturity and shall
provide to Borrower a copy of its analysis thereof.

 

 

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(b) Facility B. Lender has made a term loan to Borrower, in the principal amount
of Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000.00) and
Borrower has executed and delivered to Lender that certain Term Note (the
“Facility B Note”). The Facility B Note shall be secured by the Loan Documents.
The principal balance of the Facility B Note shall be payable at maturity in ten
(10) years from the date of the Facility B Note (the “Facility B Maturity
Date”). The interest rate shall be a fluctuating rate at the Prime Rate plus one
and one half of one percent (1.5%) per annum, to be adjusted not more than
quarterly, with a floor of four and one half of one percent (4.5%) per annum,
during the Construction Period, followed by a fixed rate at the five (5) year
T-bill plus three hundred (300) basis points per annum, with a floor of six
percent (6%) per annum, for a period of five (5) years, followed by a
fluctuating rate at the Prime Rate plus one percent (1%) per annum, to be
adjusted not more than quarterly, with a floor to be determined unless a new
fixed rate has been negotiated. Principal and interest, at the Applicable Rate
of interest, as adjusted from time to time, shall be payable monthly in
consecutive level payments calculated by assuming a ten (10) year amortization
until the Facility B Maturity Date, at which time all remaining principal and
accrued interest shall be payable in full. Lender shall have the absolute right
to adjust the monthly payments quarterly during any fluctuating rate period to
allow the Loan to amortize over the term to maturity and shall provide to
Borrower a copy of its analysis thereof.
2.2 Purpose. The proceeds from the Notes shall be used for the construction and
permanent financing of a new 165,000 square foot manufacturing facility located
within the Greenspring Industrial Park located at 250 Cross Farm Lane, Conewago
Township, York County, Pennsylvania.
2.3 Computation of Interest. Interest shall be calculated on the basis of a
360-day year for actual days elapsed. Any change in the interest rate on the
Notes resulting from a change in the Prime Rate shall become effective
immediately and automatically with each such change in the Prime Rate without
further action by Lender and without notice to Borrower; provided, Lender will
notify Borrower of any change in the amount of Borrower’s monthly payment as a
result of a change in the Prime Rate.
2.4 Payments. All payments (including prepayments) by Borrower hereunder shall
be made at any office of Lender, or such other place or places as Lender may
direct, prior to 10:00 A.M. on the date of payment, in lawful money of the
United States of America, and in immediately available funds, and, when due or
upon instruction from Borrower, may be made by debit to any of Borrower’s
general accounts with Lender.

 

 

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2.5 Late Payment Charges. If Borrower shall fail to pay any installment of
interest due under the Notes or any other sum due to Lender under any of the
Loan Documents within ten (10) days of the date it is due, Borrower shall pay to
the order of Lender, immediately, without notice or demand, a late charge equal
to five percent (5%) of the amount overdue to defray part of the additional
expense incurred by Lender in connection with the delinquency and collection of
the overdue amount. The provision for such late charge shall not be construed to
permit Borrower to make any payment after its due date, obligate Lender to
accept any overdue installment, or affect Lender’s rights and remedies upon the
occurrence of an Event of Default.
2.6 Default Rate. Notwithstanding anything to the contrary herein or in any of
the other Loan Documents, on the occurrence of any Default or Event of Default,
the interest rate otherwise applicable to any Notes outstanding shall
automatically increase by four percent (4%) per annum above the Applicable Rate
(the “Default Rate”). Borrower recognizes and acknowledges that: (i) this
Section 2.6 is a material inducement for Lender to extend credit to Borrower;
(ii) Lender would not have extended credit to Borrower in the absence of the
provisions of this Section 2.6; (iii) amounts required to be paid by Borrower
under this Section 2.6 represents compensation for increased risk to Lender that
the Debt evidenced hereby will not be repaid; and (iv) amounts required to be
paid by Borrower under this Section 2.6 is not a penalty and represents a
reasonable estimate of (x) the cost to Lender in allocating its resources (both
personnel and financial) to the on-going review, monitoring, administration, and
collection of the Debt evidenced hereby, and (y) compensation to Lender for
losses that are difficult to ascertain.
2.7 Prepayment Penalty. If Borrower makes prepayments to the Loan, Lender is
entitled to collect and Borrower shall pay a prepayment penalty in the amount of
two percent (2%) during the first three (3) years of any fixed rate period.
2.8 Right to Inspect. Lender (through any of its officers, employees, or agents)
shall have the right, upon reasonable prior notice, from time to time during
Borrower’s usual business hours to inspect Borrower’s Books applicable to its
business and to make copies thereof and to check, test, and appraise the
Collateral in order to verify Borrower’s financial condition or the amount,
condition of, or any other matter relating to, the Collateral.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Agreement and to make the Loan, Borrower
represents and warrants to Lender that:
3.1 Organization and Qualification. Borrower is a Delaware Limited Liability
Company and is in good standing under the laws of the State of Delaware. Unilife
Medical Solutions, Inc. is a Delaware Corporation and is in good standing under
the laws of the State of Delaware. Unilife Medical Solutions, Ltd. is an
Australian Corporation and is in good standing under the laws of Australia.
Unilife Corporation is a Delaware Corporation and is in good standing under the
laws of the State of Delaware.

 

 

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3.2 Power and Borrower. Borrower has the power to execute, deliver and perform
its obligations under the Loan Documents, to borrow under this Agreement and to
create, or cause the creation of, the collateral security interests for which
the Security Documents provide, and has taken all necessary action to authorize
the borrowings hereunder on the terms and conditions of this Agreement and the
execution and delivery of, and performance under, the Loan Documents. No
consent, license, approval or authorization of, or registration or declaration
with, any governmental Borrower, bureau, agency or other Person, is required in
connection with the execution, delivery, performance, validity or enforceability
of the Loan Documents
3.3 Enforceability. The Loan Documents, when executed and delivered to Lender
pursuant to the provisions of this Agreement, will constitute valid obligations
of Borrower legally binding upon Borrower and enforceable in accordance with
their respective terms, except as enforceability of the foregoing may be limited
by Bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors’ rights.
3.4 Conflict with Other Instruments. The execution and delivery of, and
performance under, the Loan Documents by Borrower will not violate or contravene
any provision of any existing law or regulation or decree of any court,
governmental authority, bureau or agency having jurisdiction in the Collateral
or of the organizational documents of Borrower or of any mortgage, indenture,
security agreement, contract, undertaking or other agreement to which Borrower
is a party or which purports to be binding upon Borrower or any of its
properties or assets, and will not result in the creation or imposition of any
lien, charge, encumbrance on, or security interest in, any of its properties or
assets pursuant to the provisions of any such mortgage, indenture, security
agreement, contract, undertaking or other agreement other than the first
priority lien in the Collateral in favor of Lender provided for herein.
3.5 Litigation. No actions, suits or proceedings before any court or
governmental department or agency (whether or not purportedly on behalf of
Borrower) are pending or, to the knowledge of Borrower, threatened (a) with
respect to any of the transactions contemplated by this Agreement or (b) against
or affecting Borrower or any of its properties that, if adversely determined,
could reasonably be expected to have a material adverse effect upon the
financial condition or operations of Borrower, or Borrower’s ability to perform
any of its obligations under the Loan Documents.
3.6 Default. Borrower is not in default under any material existing agreement,
and no Default or Event of Default hereunder has occurred and is continuing.
3.7 Taxes. Borrower has filed or caused to be filed all tax returns (including,
without limitation, those relating to federal and state income taxes) required
to be filed and has paid all taxes shown to be due and payable on said returns
or on any assessments made against it (other than those being contested in good
faith by appropriate proceedings for which adequate reserves have been provided
on its books). No tax liens have been filed against Borrower, or against any of
the Collateral of Borrower, and no claims are being asserted with respect to
taxes which could have a material adverse effect upon the financial condition,
business or operations of Borrower.

 

 

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3.8 Financial Condition. All balance sheets, profit and loss statements, and
other financial statements of Borrower in each case which have heretofore been
delivered to Lender, and all financial statements and data of Borrower which
will hereafter be furnished to Lender, are or will be (when furnished) true and
correct and do or will (when furnished) present fairly, accurately and
completely the financial position of Borrower and the results of Borrower’s
operations in each case as of the dates and for the periods for which the same
are furnished. All such financial statements have been prepared in accordance
with Generally Accepted Accounting Principles applied on a consistent basis.
Except as set forth on Schedule 3.9, Borrower does not possess any “loss
contingency” (as that term is defined in Financial Accounting Standards Board,
Statement of Financial Accounting Standards No. 5 — “FASB 5”) which is not
accrued, reflected, or reserved against in its balance sheet or disclosed in the
footnote to such balance sheet. There has been no material adverse change in the
business, properties, operations or condition (financial or otherwise) of
Borrower since the date of the financial statements which were most recently
furnished by Borrower to Lender. No event has occurred that could reasonably be
expected to interfere substantially with the normal business operations of
Borrower, except as disclosed in writing to Lender heretofore or concurrently
herewith.
3.9 Use of Proceeds. The proceeds of the Notes shall be used solely for the
purposes set forth in Section 2.2
3.10 Regulation U. Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of the loan will be used to purchase or carry any margin
stock or to reduce or retire any indebtedness incurred for such purpose or to
extend credit to others for such purpose.
3.11 No Notices; No Violations. Except as disclosed in writing to Lender
heretofore or concurrently herewith, Borrower has not received any notice from
any federal, state or local authority or any insurance or inspection body to the
effect that the fails to comply with any applicable law, ordinance, regulation,
building or zoning law, judicial or administrative determination, or any other
requirements of any such authority or body, and, to its knowledge, the Real
Property is in full compliance with all such laws, ordinances, determinations,
regulations and requirements.
3.12 Environmental Matters.
The Real Property is not being, and except as disclosed in writing to Lender
heretofore or concurrently herewith, to Borrower’s knowledge have not been, used
to make, store, handle, treat, dispose of, generate, or transport Hazardous
Substances in violation of any applicable law. To Borrower’s knowledge, there
has never been a Release of Hazardous Substances on, from, or near the Real
Property or any other property owned or used by Borrower in violation of any
applicable law or that caused or might cause Contamination, and no Contamination
exists on any such property.

 

 

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Borrower has never received any notification, citation, complaint, violation or
notice of any kind from any Person relating or pertaining to the making,
storing, handling, treating, disposing, generating, transporting or Release of
any Hazardous Substances, and neither Borrower nor any property owned or used by
Borrower is under any investigation with respect to any such matters.
There are no underground storage tanks on the Real Property except as disclosed
in the Environmental Questionnaire executed by Borrower and delivered to Lender.
3.13 Title to Collateral. Borrower is the owner of the Real Property and all
improvements thereon, or to be constructed thereon, which real property is free
and clear of all liens and encumbrances of any kind except as set forth on
Schedule 3.13 hereto.
SECTION 4. CONDITIONS OF CLOSING AND BORROWING.
4.1 Closing. As a condition precedent to Lender’s obligation to close, the
following conditions shall all be satisfied:
(a) Loan Documents. Borrower shall have delivered or caused to be delivered to
Lender duly executed copies of each of the Loan Documents.
(b) Borrower’s Authorizations.
(i) Borrower shall have delivered to Lender:
(A) a copy, certified by the Members of Borrower, of the minutes or resolutions
of Borrower authorizing and approving the execution and delivery of and
performance under this Agreement and the other Loan Documents to which Borrower
is a party, the borrowings provided for hereunder and the creation of the
collateral security interests for which the Security Documents provide;
(B) a copy of Borrower’s Operating Agreement and all supplements and amendments
thereto;
(C) a copy of Borrower’s Certificate of Formation, filed with the State of
Delaware and certified by all parties thereto;
(D) Tax Lien Certificates evidencing no tax liens against Borrower or
Guarantors; and
(E) a current incumbency certificate, setting forth the names and titles of the
incumbent members of Borrower.
(ii) Borrower shall have delivered to Lender on behalf the Guarantors:
(A) a copy, certified by the Secretary of each Guarantor, of the minutes or
resolutions of each Guarantor authorizing and approving the execution and
delivery of and performance under this Agreement and the other Loan Documents by
each Guarantor, the borrowings provided for hereunder and the creation of the
collateral security interests for which the Security Documents provide;

 

 

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(B) a copy of each Guarantor’s Articles of Incorporation and any amendments
filed with the State of Delaware and certified copies of each Guarantor’s
Bylaws;
(C) Tax Lien Certificates evidencing no tax liens against each Guarantor; and
(D) current incumbency certificates, setting forth the names and titles of the
incumbent officers of each Guarantor.
(iii) Borrower shall have delivered to Lender on behalf Unilife Medical
Solutions, Ltd.: a copy of Unilife Medical Solutions, Ltd.’s Articles of
Incorporation, or the Austrialian equivalent, and a certified copy of Unilife
Medical Solutions, Ltd.’s Bylaws, or the Austrialian equivalent.
(c) Legal Opinions. Counsel for Borrower shall have delivered to Lender a
favorable opinion, dated the date of this Agreement, addressed to Lender, and
satisfactory in form and substance to Lender, addressing such matters as Lender
shall require.
(d) Representations. The representations and warranties contained in Section 3
hereof shall be true and correct on and as of the date hereof and no Event of
Default or Default shall be in existence on the date of this Agreement or shall
occur as a result of Borrower’s execution and delivery of this Agreement.
(e) Lien Searches and Title Insurance. Lender shall have received such title
searches, title commitments on the Real Property, secured transaction, judgment
and docket searches as it deems appropriate and as required by the Commitment
Letters.
(f) Insurance. Lender shall have received certificates or policies evidencing
the insurance coverage required under Subsection 5.6 hereof.
(g) Legal Matters. All legal matters incident to the transactions contemplated
by this Agreement shall be satisfactory to Smigel, Anderson & Sacks, LLP,
counsel for Lender.
(h) Compliance with Law; Litigation; Material Adverse Change. Lender shall have
received evidence satisfactory to Lender in its sole reasonable discretion that:
(i) the Real Property has been maintained and will be improved in compliance
with applicable state and municipal statutes, regulations, codes and ordinances,
including but not limited to, requirements related to building permits and
approvals of federal and state environmental protection agencies; (ii) there is
no action or proceeding pending or threatened against or affecting Borrower or
the Guarantors which, if adversely determined, would impair the validity or
enforceability of the Loan Documents or have a material adverse effect on the
financial condition of Borrower; (iii) there has not been any material adverse
change in the value of the Collateral, the financial condition of Borrower or
the Guarantors or in the actual or prospective operating condition of Borrower
or the Guarantors, between the date of the Commitment Letters and the Closing
Date.

 

 

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(i) Financial Statements. Borrower shall have provided to Lender the annual
consolidated financial statements of Unilife Corporation (or its predecessor),
meeting the requirements of Section 5.1 herein, for the last two (2) fiscal
years preceding the date of this Agreement.
(j) Phase I Environmental Audit. Borrower shall have delivered to Lender a
professionally structured Phase I Environmental Audit on the Real Property, in a
format and type satisfactory to Lender and USDA. Lender reserves the right to
approve the qualifications of the environmental consultant.
(k) Appraisal. Borrower shall have delivered to Lender a professionally
structured appraisal, in a format and type satisfactory to Lender, indicating a
value of not less Nineteen Million Dollars ($19,000,000.00) on the Real
Property. Lender reserves the right to approve the qualifications of the
appraiser.
(l) USDA Guaranty. Lender shall have received a full and acceptable USDA
guaranty. In the event that the USDA guaranty has not been obtained by the
Closing Date, each loan advance shall be further secured by sixty percent (60%)
cash until such time that the USDA guaranty is sufficiently placed.
(m) Existing Bank Debt. Lender shall have received a reaffirmation of the USDA
guaranty on Borrower’s existing debt with Lender.
(n) Redomiciliation of Unilife Medical Solutions, Ltd. and its Subsidiaries.
Borrower shall deliver to Lender evidence of the completion of the schemes of
arrangement pursuant to which Unilife Medical Solutions, Ltd. and its
subsidiaries redomiciled into the State of Delaware and Unilife Corporation
became the parent company of Unilife Medical Solutions, Ltd. and its
subsidiaries.
(o) Exclusivity/Industrialization Agreement with Pharmaceutical Companies.
Borrower shall deliver to Lender full, complete and unredacted copies of its
Exclusivity/Industrialization Agreements with Sanofi-Aventis, and any
amendments, restatements, modifications or supplements thereof or thereto.
(p) Miscellaneous. Borrower shall have delivered to Lender:
(i) a copy of the approved final land development plan (the “Land Development
Plan”) for the Real Property;
(ii) a copy of the approved building plans (the “Building Plans”) for the Real
Property; and

 

 

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(iii) copies of all required governmental permits and approvals.
4.2 Approval of Construction Management Firm. All construction advances and
inspections of the Real Property may be managed by a third party construction
management firm, provided, however, that the third party construction management
firm shall be approved by Lender.
4.3 Approval of and Contract with General Contractor. Borrower shall enter into
a guaranteed maximum price or fixed price contract with a general contractor
(“Contract with General Contractor”) that is acceptable to and approved by
Lender and shall assign such guaranteed maximum price or fixed price contract to
Lender. Borrower shall require the General Contractor to provide a performance
bond in favor of Lender through a bonding company that is acceptable to and
approved by Lender.
SECTION 5. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that from and after the effective date of this
Agreement and so long as any of the Obligations remain outstanding and unpaid,
in whole or in part, Borrower will observe the following covenants, unless
Lender shall otherwise consent in writing:
5.1 Financial Statements and Tax Returns. Borrower will furnish to Lender:
(a) Annual Consolidating Financial Statements and Tax Returns of Unilife
Corporation: as soon as available, but in any event not later than one hundred
twenty (120) days after the close of each fiscal year of Unilife Corporation,
audited consolidating financial statements and federal income tax returns
prepared by an independent certified public accountant, reasonably satisfactory
to Lender, in such detail as Lender may require, prepared in accordance with
Generally Accepted Accounting Principles applied on a consistent basis. Lender
reserves the right to request financial statements at more frequent intervals;
(b) Monthly Financial Statements of Guarantors: as soon as available, but in any
event not later than the thirtieth (30th) day of each month’s end, internally
prepared financial statements reasonably satisfactory to Lender, in such detail
as Lender may require, prepared in accordance with Generally Accepted Accounting
Principles applied on a consistent basis to include a balance sheet, a profit
and loss statement and a cash flow statement; and
(c) Other Information: from time to time, such additional financial and other
information as Lender may reasonably request.
5.2 Liabilities. Borrower will pay and discharge, at or before their maturity,
all its obligations and liabilities (including, without limitation, tax
liabilities and all employee wages as provided in the Fair Labor Standards Act,
29 U.S.C. §§206-207 and any successor statute), except those which may be
contested in good faith, and maintain adequate reserves for any of the same in
accordance with Generally Accepted Accounting Principles. Upon Borrower’s
failure to pay such wages, or cause such wages to be paid, Lender shall have the
right, but not the duty, at any time and from time to time, to pay all or part
of such wages directly or indirectly on behalf of and for the account of
Borrower. Borrower’s obligations with respect to such advance shall be evidenced
by the Notes and shall be secured and guaranteed, as the case may be, by the
Security Documents.

 

 

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5.3 Notices. Borrower will promptly give notice in writing to Lender, of the
occurrence of any of the following:
(a) any Event of Default or Default under this Agreement, or any event of
default or similar occurrence under any instrument or other agreement of
Borrower entitling any Person to accelerate the maturity of any obligation of
Borrower or to exercise any other remedy against Borrower;
(b) any strike, lock-out, boycott or any other labor trouble;
(c) the commencement of any litigation, proceeding or dispute affecting the
Collateral, or any dispute between Borrower and any Person, if such litigation,
proceeding or dispute might interfere with the normal business operations of
Borrower, or, if resolved other than in the favor of Borrower, such litigation,
proceeding or dispute would have a material adverse effect on the financial
condition of the Collateral; or
(d) any material and adverse change in the financial position, operations,
business or prospects of Borrower.
5.4 Environmental Matters; Compliance with Laws.
(a) Borrower shall:
(i) immediately notify Lender (and any other person that Borrower is required to
notify pursuant to any applicable laws) once it is aware of a Release or
threatened Release of Hazardous Substances on or from the Real Property that
might cause Contamination;
(ii) immediately notify Lender once an environmental investigation or clean-up
proceeding is instituted by any Person in connection with the Real Property;
(iii) fully comply with and assist any such environmental investigation and
clean-up proceeding;
(iv) promptly execute and complete any Remedial Actions necessary to ensure that
such properties are in compliance with all applicable laws and free from
Contamination, and to ensure that no environmental liens or encumbrances are
levied against or exist with respect to the Real Property, and provide Lender
with a certification from each agency having jurisdiction that such Remedial
Actions have been completed to all such agencies’ satisfaction;

 

 

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(v) immediately notify Lender of any citation, notification, complaint, or
violation which Borrower receives from any Person which relates to or pertains
to the making, storing, handling, treating, disposing, generating, transporting
or Release of any Hazardous Substances;
(vi) promptly upon the written request of Lender if there is a change in
circumstances regarding the Real Property which Lender reasonably believes
requires further environmental site assessments or reports, provide Lender, from
time to time, with an environmental site assessment or report, in form and
substance satisfactory to Lender, or at Lender’s option, permit Lender, its
agents, contractors and other representatives, to enter into the Real Property
in order to make such report or assessment, and at such other times and as often
as Lender may reasonably request, Borrower will make available at its offices to
Lender or its representatives such historical and operational information
(including the results of all samples sent for analysis), correspondence with
official bodies, and environmental reviews conducted prior to and after the date
of this Agreement regarding the Real Property as are within the possession,
custody or control of Borrower or which are reasonably available to it, and will
make appropriate personnel employed by Borrower having knowledge of such matters
available for meetings with Lender or its representatives; and
(vii) comply, and cause the Real Property to comply, with all applicable
federal, state, local and other environmental, zoning, occupational safety,
health, employment, discrimination, labor and other laws and regulations.
(b) If Lender acquires equitable or legal title to any of the Real Property
hereunder or under the Loan Documents, Lender does not accept and shall not bear
(nor shall any assignee or transferee of Lender accept or bear) any
responsibility for any Hazardous Substances in or about the Real Property or for
the actual or threatened Release thereof from the Real Property. No provisions
of the Loan Documents shall be interpreted to absolve or release Borrower from
any liability or responsibility which it may have to any Person, under any
local, state or federal statute or regulation, for Remedial Actions with respect
to any such Hazardous Substances or for the actual or threatened Release of any
such Hazardous Substances.
(c) If any action or claim is brought by the Environmental Protection Agency or
any other regulatory agency against Borrower arising from the presence in, or
about the Real Property, of Hazardous Substances or from the actual or
threatened Release of such Hazardous Substances, Borrower shall immediately
provide Lender, as Lender deems necessary, with a bond, in form and substance
satisfactory to Lender, against any and all damages or liabilities that may
arise from any such action or claim.
(d) Borrower shall defend, indemnify Lender and hold Lender harmless from and
against all loss, liability, damage, cost, and expense, including without
limitation, reasonable attorneys’ fees, fines, or other civil and criminal
penalties or payments, for failure of the Real Property to comply in all
respects with all environmental and other laws, caused, in whole or in part,
regardless of fault, by Borrower, or by any past, present or future owner,
occupier, tenant, subtenant, licensee, guest or other person. The provisions of
this Paragraph 5.5(e) shall survive payoff, release, foreclosure, or other
disposition of this Agreement, the Real Property, the Collateral, or such other
properties hereunder or otherwise. Borrower shall remain liable hereunder
regardless of any other provisions hereof which may limit Borrower’s liability.

 

 

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(e) All sums advanced or paid by Lender under this Subsection 5.4, including
sums so advanced or paid in connection with any judicial or administrative
investigation or proceeding relating thereto, and including, without limitation,
reasonable attorneys’ fees, fines, or other penalties or payments, and all of
Borrower’s obligations to defend, indemnify and hold harmless Lender, shall be
deemed to be advances under the Notes and shall be at once repayable. Borrower’s
obligations with respect thereto shall be evidenced by, and shall bear interest
at the default rate provided in, the Notes and shall be secured and guaranteed,
as the case may be, by the Security Documents.
5.5 Existence; Properties. Borrower will notify Lender at least thirty (30) days
before any change of name of Borrower and will maintain:
(a) its limited liability company existence and its qualification to do business
and good standing in each jurisdiction in which qualification is necessary for
the proper conduct of its businesses;
(b) all licenses, permits and other authorizations necessary for the ownership
and operation of the Real Property; and
(c) the Real Property in good repair, working order and condition and will make
all necessary or appropriate repairs, renewals, replacements and substitutions,
so that the value and efficiency of all such Collateral shall at all times be
properly preserved and maintained.
5.6 Insurance.
(a) The Borrower shall continuously maintain the following insurance:
(i) General liability, hazard, casualty, and fire insurance on all of the Real
Property;
(ii) Business interruption insurance and, whenever any of the Real Property are
being leased, loss of “rental value” insurance for a period of at least twelve
(12) months;
(iii) Workers’ compensation insurance (including employer’s liability insurance,
if required by Lender) for all employees of the Borrower in an amount equal to
the higher of the amounts required by Lender or the amounts required by law;
(iv) During the course of any construction or repair of Improvements, builder’s
completed value risk insurance against “all risks of physical loss,” including
collapse and transit coverage in non-reporting form, covering the total value of
work performed and equipment, supplies and materials furnished. If required by
Lender, any policy of such insurance shall contain a “permission to occupy upon
completion of work or occupancy” endorsement; and

 

 

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(v) Flood insurance, if the Real Property is in an area designated as a flood
risk area by the United States Department of Housing and Urban Development.
(b) The full amount of any casualty and/or flood insurance, as applicable,
carried on the Real Property shall be made payable to the Lender under the
standard mortgagee clause or loss payee clause or additional insurance clause,
as applicable.
(c) All policies shall be written in such forms, in such amounts and with such
companies as are satisfactory to Lender, including, without limitation as to
coverage limits and deductibles, and the insurer must agree to provide at least
thirty (30) days’ prior notice to Lender of (i) cancellation, (ii) decision not
to renew, and (iii) any modification reducing the amount or type of coverage.
The amounts of the insurance policies shall at all times satisfy any coinsurance
requirements thereof. If said insurance or any part thereof shall expire, be
withdrawn, become void by breach of any condition thereof by Borrower or become
void or unsafe by reason of the failure or impairment of the capital of any
insurer, or if for any other reason whatsoever said insurance shall become
unsatisfactory to Lender, Borrower shall immediately obtain new or additional
insurance satisfactory to Lender. Borrower shall pay as they become due all
premiums for such insurance, shall renew or replace each policy, shall deliver
to Lender evidence of the payment of the full premium therefore at least fifteen
(15) days prior to the expiration date of each policy, and shall deliver to
Lender all original policies marked “premium paid.”
(d) Borrower shall deliver to Lender, at the time of each renewal of the policy
(but at least once every two years), a statement satisfactory to Lender as to
the then replacement and insurable values of the Collateral as determined by the
underwriter of its insurance on the Collateral or, if such underwriter will not
act, by a qualified appraiser satisfactory to Lender.
(e) Borrower shall promptly comply with and conform to (i) all provisions of
each such insurance policy and (ii) all requirements of the insurers thereunder,
applicable to Borrower or any of the Collateral or to the use, manner of use,
occupancy, possession, operation, maintenance, alteration or repair of any of
the Collateral, even if such compliance necessitates structural changes or
improvements or results in interference with the use or enjoyment of any of the
Collateral. Borrower shall not use any of the Collateral in any manner which
would permit the insurer to cancel or increase the premium for any insurance
policy.
5.7 Books and Records. Borrower will maintain accurate and complete records and
books of account in accordance with Generally Accepted Accounting Principles,
and will permit officers or representatives of Lender to examine and make
excerpts from such books and records and to visit and inspect its properties,
both real and personal, at all reasonable times upon reasonable prior notice.

 

 

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5.8 Location of Business. Borrower will notify Lender in advance of any change
in the location of any place of business of Borrower, whether the establishment
of a new place of business or the discontinuance of a present place of business.
5.9 Construction.
(a) Borrower warrants that all work performed on the Real Property shall be
performed in a good and workmanlike manner utilizing materials which are free
from material defects. Borrower shall proceed with the construction in
accordance with the approved Final Land Development plans and the approved
Building Plans.
(b) Upon written reasonable notice from Lender, Borrower shall proceed with due
diligence, at Borrower’s own expense, properly to replace or cause the
replacement of any defective material and the performance of any labor necessary
to correct any material defect in the work.
(c) Facility A and Facility B shall be repaid in full by the maturity date
thereof irrespective of delays caused by governmental restrictions, weather
conditions, defaults by contractors or sub-contractors, strikes or other labor
disputes, shortages of labor or materials or for any other reasons, time being
of the essence.
(d) The construction shall be performed strictly in accordance with an approved
Land Development Plan and approved Building Plans, and all applicable statutes,
laws and ordinances, and in accordance with the rules, regulations and
requirements of all regulatory authorities having jurisdiction over the
geographic areas in which the Real Property is situated, or any other body now
or hereafter constituted exercising similar functions; provided, in the event of
any material conflict between the Land Development Plan and the Building Plans
and the provisions of any statute, law, ordinance, rule, regulation or
requirement as aforesaid, and any material departure from the Land Development
Plan by reason thereof, Borrower shall use its best efforts obtain the approval
of Lender to any necessary revisions in the Land Development Plan and Building
Plans.
(e) The improvements when erected will be wholly within the building restriction
lines, however established, and will not violate applicable use or other
restrictions contained in prior conveyances, zoning laws or regulations and
shall not encroach upon or overhang any easements, rights-of-way, or land of
others.
(f) Borrower shall comply with or cause the applicable party to comply with all
of its or their obligations for construction and installation of certain on-site
and/or off-site facilities, and Borrower shall promptly deliver to Lender copies
of all notices given to, or received from, the other party or parties to any
such agreements.

 

 

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(g) Borrower shall use the Loan proceeds solely for the payment of costs
contained in the Contract with General Contractor or as permitted by
Section 5.10(b) below, as the same may be amended from time to time with the
prior written consent of Lender or as otherwise permitted by the Lender.
(h) Borrower shall promptly notify Lender of any material change in any fact or
circumstances represented or warranted by Borrower in this Agreement or in any
other Loan Document and of any other material adverse change in the business or
operations of Borrower.
(i) Borrower agrees to provide and cause to be provided to Lender and its
authorized agents, at all times, facilities commonly made available by
responsible general contractors for the inspection of the Real Property and the
improvements, and to afford full and free access to Lender and its authorized
agents to all plans, drawings and records with respect to the construction.
Borrower further agrees to send monthly to Lender a copy of all construction
inspection reports made by any architect or engineer employed by Borrower.
Lender reserves the right to request such construction inspection reports at
more frequent intervals. Borrower acknowledges that Lender will inspect
construction periodically as it progresses relative to the completion and
quality of the work completed and the materials suitably stored on site, and the
amount of construction funds eligible for disbursements of the Loan.
5.10 Disbursement of Loan Proceeds — Facility A.
(a) All advances made hereunder shall be disbursed by Lender from time to time
as the work progresses upon written application of, and pursuant to requests for
advances (“Vouchers”) in the form attached hereto as Exhibit “_____” signed by,
the person or persons specified as Borrower’s authorized representatives.
Advances shall be disbursed no more than twice each month. Each such Voucher
shall specify the amount of the Loan disbursement requested, the percentage of
construction completed and the date on which such percentage was completed. Each
Voucher shall be subject to the approval of Lender but the approval of such
Voucher by Lender shall not constitute an approval or acceptance of the work or
materials, nor be binding upon Lender, except to the extent that the facts
actually are as so represented when so approved, nor shall such approval give
rise to, any liability or responsibility relating to (i) the quality of the
work, the quantity of the work, the rate of progress in completion of the work,
or the sufficiency of materials or labor being supplied in connection therewith,
or (ii) any errors, omissions, inconsistencies or other defects of any nature in
the Land Development Plan and the Building Plans. Any inspection of the work
that Lender may choose to make, whether during the progress of the work shall be
solely for Lender’s information and under no circumstances will they be deemed
to have been made for the purpose of supervising or superintending the work, or
for the information or protection of any right or interest of any person or
entity other than Lender.

 

 

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(b) At option of Lender but after reasonable notice to Borrower, disbursements
may be made directly by Lender to Borrower, Borrower’s contractor,
sub-contractors, and/or materialmen, or by way of a co-pay treasurer’s check to
Borrower, and/or to any architect or any engineer engaged by Borrower to
superintend or supervise the work or any part thereof, any contractor or
sub-contractors and materialmen, or some or any of them, as Lender may elect
from time to time. At discretion of Lender, such payments may be made to
governmental bodies pursuant to an arrangement securing obligations of the
Borrower with such entities. It is understood that this provision shall not
create any privity of contract or any trustee, beneficiary or guarantor
relationship of any kind between said parties and the Lender. Anything to the
contrary in this Agreement notwithstanding, Lender shall have the right, at its
option, not to make any advance after its initial advance unless it is furnished
(i) an endorsement by the title company insuring the lien of the Mortgage, that
the amount of the advance in question is insured as being secured by the
Mortgage with no exceptions for mechanics liens or any other exceptions other
than those reasonably agreed to by Lender and/or (ii) a full or partial release
of liens for all work performed or materials furnished through the date of the
Voucher from any and all contractors, subcontractors, materialmen, architects,
engineers or others who may be entitled to a lien on the Real Estate or
Improvements. Borrower shall, on request of Lender, deliver this title
endorsement and releases to Lender each time that funds are requested in
accordance with the terms of this Agreement.
(c) Vouchers (and, if Lender so requests, certificates of Borrower’s engineer or
architect in support thereof, and in such form as Lender may reasonably specify)
shall be delivered to Lender from time to time as the work progresses,
specifying the work and materials for which costs were incurred for payment of
which an advance is requested. Such Vouchers shall be issued only for work
completed and materials, free of any chattel mortgage, conditional sale,
security interest or any other lien or encumbrance, physically incorporated into
the construction. Each such Voucher, when approved by the person(s) named as
Borrower’s authorized representatives shall constitute a representation, with
respect to the work and materials for which payment is requested, that (i) they
have been physically incorporated into the construction free of liens and
encumbrances as aforesaid, that the value is as estimated, (ii) that they have
been performed or installed in a good and workmanlike manner, (iii) that the
work and materials conform to the Land Development Plans and the Building Plans
and to all applicable statutes, laws or ordinances, administrative rules,
regulations and requirements, and (iv) that all improvements are wholly with the
building restrictions (however established) of the Real Property.
(d) Upon approval of each Voucher by Lender, Lender shall make disbursements of
the amount called for by Voucher, at Lender’s option either (i) by its check in
the requisite amount to the person entitled thereto, pursuant to the Voucher or
(ii) by depositing such sum in an account of Borrower maintained with Lender or
to such other bank account designated by Borrower at a bank approved, in
writing, by Lender, or (iii) by depositing such sum with the title insurance
company insuring the lien of the Mortgage and acting as disbursing agent for the
Loan proceeds.
(e) No payment shall be due pursuant to the Voucher unless in the reasonable
judgment of Lender, whose decision shall be final in such matters, all work
usually done and all materials usually furnished at the stage of construction
when the payment is to be made has been done and furnished in accordance with
this Agreement.

 

 

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(f) No disbursements on account of the Loan shall be made by Lender at any time
when Borrower is not entitled thereto hereunder.
(g) Lender shall have the right to apply any funds which it agrees to advance
hereunder to bring the completion of the improvements or to the payment of any
taxes, special assessments or any other charges which could be a lien on the
Real Property, or any interest on the Loan, or any premium on any insurance
policy required hereunder affecting the Real Property or the improvements, and
if such funds so agreed to be advanced are insufficient, Borrower agrees to
deliver and pay to Lender, such sum(s) of money as Lender may demand from time
to time for the purpose of completing the improvements or of paying any of the
aforesaid charges or premiums, or any other charge or expense which may have
been incurred or assumed by Lender under or in performance of this Agreement. In
making disbursements, Lender shall draw first upon such additional deposits made
by Borrower until such funds have been exhausted, and then upon the Loan.
(h) Borrower agrees that by making a request for an advance hereunder, Borrower
shall be deemed to be reconfirming to Lender that all representations and
warranties of Borrower set forth in Section 3 of this Agreement and all related
instruments, agreements and documents remain true and correct in all material
respects as of the date of each request.
5.11 Compliance with Laws. Borrower shall comply with the laws of the
Commonwealth of Pennsylvania and the ordinances, regulations, rules, and
directions of any federal or state agency and of any municipal or public entity,
which apply to or affect Borrower, and Borrower shall save Lender harmless from
all annoyances and fines and shall give the proper authorities all requisite
notice relative to the work and shall procure and pay for all necessary licenses
and permits with respect thereto.
5.12 Financial Covenants. Borrower and Guarantors shall maintain the Financial
Covenants measured annually beginning June 30, 2011; provided, however, if
Borrower and Lender are unable to agree on revised Financial Covenants by
September 30, 2011, the Debt Service Reserve Account shall remain in place until
such time the Financial Covenants are agreed upon by the parties. Lender may, at
its sole discretion, postpone the date on which Borrower and Guarantors must
comply with the Financial Covenants.
5.13 Deposit Accounts. Borrower and Guarantors shall maintain their primary
deposit relationships with Lender.
5.14 Debt Service Reserve Account. Borrower shall establish a debt service
reserve account with Lender in the amount of $2,400,000.00. Borrower shall
assign such debt service reserve account to Lender. Borrower shall be permitted
to use such debt service reserve account for debt payments, provided however,
that Borrower shall replenish such debt service reserve account every six
(6) months to equal twelve (12) months of debt payments. The balance in such
debt service reserve account shall in no event be less than $1,600,000.00. In
the event that a reasonably satisfactory supply agreement is established with a
pharmaceutical company, such debt service reserve account shall be released
provided, however, that Section 5.12 has been satisfied. Lender, at its sole
discretion, shall annually establish the cash flow threshold of such debt
service reserve account.

 

 

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5.15 IFIP Grants. In the event that Borrower obtains an IFIP grant, all grant
funds shall be released to Lender by IFIP through the York County Industrial
Redevelopment Authority and Lender shall reimburse Borrower up to $200,000 per
year for such grant funds.
5.16 USDA Loan Guaranty. Borrower shall at all times during the loan hereunder
comply with all terms, conditions and requirements to keep the USDA Loan
Guaranty in effect.
5.17 Regulator Approval and Compliance of RTF Syringe. Upon notice to Borrower
of the regulator approval and compliance of the RTF Syringe, Borrower shall
immediately provide a copy of such approval and compliance to Lender.
SECTION 6. NEGATIVE COVENANTS.
Borrower covenants and agrees that from and after the effective date of this
Agreement and so long as any of the Obligations remain outstanding and unpaid,
in whole or in part, Borrower will observe the following covenants unless Lender
shall otherwise consent in writing:
6.1 Mergers, Consolidations. Borrower will not enter into any transaction of
merger or consolidation or sell of dispose of any significant portion of its
assets or sell, assign, redeem, or dispose of the Borrower’s membership interest
or the Borrower’s ownership interest in any entity without the prior written
approval of Lender.
6.2 Liens. Borrower will not create, assume, or suffer to exist, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind upon the
Collateral without the prior written consent of the Lender, which will not be
unreasonably withheld, except:
(a) the liens and security interests created or permitted by the Security
Documents;
(b) liens for taxes not yet payable or being contested in good faith by
appropriate proceedings and for which adequate reserves have been provided on
the books of Borrower;
(c) mechanics’, materialmen’s, warehousemen’s, carriers’ or other like liens
arising in the ordinary course of business of Borrower, if any, arising with
respect to obligations which are not overdue for a period longer than thirty
(30) days or which are being contested in good faith by appropriate proceedings
and for which adequate reserves have been provided on the books of Borrower;
(d) deposits or pledges to secure the performance of bids, tenders, contracts,
leases, public or statutory obligations, surety or appeal bonds or other
deposits or pledges for purposes of a like general nature or given in the
ordinary course of business by Borrower.

 

 

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6.3 Disposition of Assets. Borrower will not liquidate or dissolve (or suffer
any liquidation or dissolution), or convey, sell, lease, pledge, or otherwise
transfer or dispose of all or any substantial part of the Collateral.
6.4 Handling of Hazardous Substances. Borrower will not permit the use of, nor
use, nor produce as a result or as a by-product of its business or operations,
nor store or hold at its premises, any Hazardous Substance unless Borrower
strictly and fully complies with all requirements of any applicable law,
regulation, decision or edict relating to the special handling, collection,
storage, treatment, disposal, or transportation of such Hazardous Substance.
Borrower will not permit the Release or threatened Release of any Hazardous
Substance on, from, or near its premises that would cause Contamination.
6.5 Use of Proceeds. Borrower will not directly or indirectly apply any part of
the proceeds of the Loan to the purchasing or carrying of any “margin stock”
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, or any regulations, interpretations or rulings thereunder.
SECTION 7. EVENTS OF DEFAULT, REMEDIES.
7.1 Events of Default. The following shall constitute Events of Default:
(a) Non-Payment. (i) Failure by Borrower to pay the principal of or accrued
interest on either of the Notes or any other instrument evidencing the
Obligations to Lender within ten (10) days of when due, or (ii) the failure of
Borrower to pay any other amount payable to Lender, whether under this Agreement
or otherwise, within, in each case, ten (10) days after notice by Lender
thereof.
(b) Falsity of Representations and Warranties. Any representation or warranty
made by Borrower in this Agreement or in any other Loan Document or in any
certificate, financial or other statement furnished at any time under or in
connection with this Agreement or any other Loan Document shall be false or
misleading in any material respect.
(c) Failure to Perform Certain Covenants. Failure by Borrower to observe or
perform any other covenants, conditions or provisions contained in this
Agreement or in any other Loan Document, provided that, except with respect to a
violation of the covenants contained in Subsection 6.1 which shall be an
immediate Event of Default, such failure shall continue for a period of thirty
(30) days after written notice thereof from Lender to Borrower.
(d) Voluntary Bankruptcy, Etc. The commencement by Borrower of a voluntary case
under the Bankruptcy Code, as now constituted or hereafter amended, or any other
applicable federal or state Bankruptcy, insolvency, reorganization,
rehabilitation or other similar law, or the consent by Borrower to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of Borrower for the
Collateral or the making by Borrower of any assignment for the benefit of
creditors, or the failure of Borrower generally to pay its or his debts as such
debts become due, or the taking of action by Borrower in furtherance of any of
the foregoing.

 

 

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(e) Involuntary Bankruptcy, Etc. The entry of a decree or order for relief by a
court in respect of Borrower in an involuntary case under the Bankruptcy Code,
as now or hereafter constituted, or any other applicable federal or state
Bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
Borrower for the Collateral, or ordering the winding-up or liquidation of
Borrower’s affairs and the continuance of any such decree or order unstayed and
in effect for a period of sixty (60) days.
(f) Default Under Other Documents. An “Event of Default” or similar event shall
have occurred and be continuing under any other Loan Document.
(g) Judgments. One or more judgments are entered against Borrower with respect
to the Collateral or claims involving the Collateral in the aggregate amount of
Fifty Thousand Dollars ($50,000) or more, and Borrower shall not obtain the
satisfaction, release, stay or dismissal thereof within sixty (60) days thereof.
(h) Cross-Collateral/Cross-Default. Any Event of Default under the Loan
Documents or an event of Default under any other loan with Lender shall
constitute a default under all loans to Borrower, and further, the Collateral
for the loan to Borrower shall serve as Collateral for all loans to Borrower.
7.2 Acceleration. Upon the occurrence of an Event of Default specified in
Subsection 7.1, Lender may, by written notice to Borrower, terminate immediately
and irrevocably any obligation of Lender to make any advances to or for the
account of Borrower, and declare the Notes and all other instruments evidencing
the Obligations to be due and payable, whereupon the principal amount of the
Notes and all outstanding Obligations, together with accrued interest thereon
and all other amounts payable thereunder, shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the documents
evidencing the same to the contrary notwithstanding.
7.3 Right of Setoff. Upon the occurrence of a Default or an Event of Default,
Lender shall have the right, in addition to all other rights and remedies
available to it, to set off against the unpaid balance of the Notes, and any
other Obligations, any debt owing to Borrower by Lender and any funds in any
deposit account maintained by Borrower with Lender.
7.4 No Marshalling, Etc., Required. If an Event of Default shall have occurred
and be continuing, Lender shall not be required to marshal any present or future
security for, or guarantees of, the Obligations or to resort to any such
security or guarantee in any particular order and Borrower waives, to the
fullest extent that it lawfully can, (a) any right it might have to require
Lender to pursue any particular remedy before proceeding against it, and (b) any
right to the benefit of, or to direct the application of the proceeds of, any
Collateral until the Obligations have been paid in full.

 

 

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7.5 Site Assessments. In connection with Lender’s consideration of enforcement
or preservation of rights under any Loan Document, if an Event of Default shall
occur if there is a change in circumstances regarding the Real Property which
Lender reasonably believes requires further environmental site assessments or
reports, Borrower shall permit such persons (“Site Reviewers”) as Lender may
select to visit the Real Property and perform such environmental and other site
investigations and assessments thereof (“Site Assessments”) for the purpose of
determining whether the Real Property is subject to any Contamination or other
condition which could result in any liability, cost or expense to the owner or
occupier thereof relating to Hazardous Substances or otherwise. Such Site
Assessments may include both above-and below-the-ground sampling and/or testing
for Contamination and such other tests as may be necessary in the opinion of the
Site Reviewers. Borrower shall supply to the Site Reviewers such historical and
operational information, including the results of all samples sent for analysis,
correspondence with official bodies and previous environmental audits or
environmental reviews regarding its properties as are within its possession,
custody or control or which are reasonably available to it, and will make
available for meetings with the Site Reviewers appropriate personnel employed by
Borrower having knowledge of such matters. The cost of performing all Site
Assessments shall be paid by Borrower within ten (10) days after demand by
Lender, together with interest thereon at the default rate specified in the
Notes from and after such tenth day until paid. The provisions of this
Subsection 7.5 are in addition to all rights of Lender under this Agreement and
the other Loan Documents. Copies of all reports shall be promptly provided to
Borrower at Borrower’s request.
SECTION 8. MISCELLANEOUS.
8.1 No Waiver; Cumulative Remedies. No failure or delay on the part of Lender in
exercising any right, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude or
require any other or further exercise thereof or the exercise of any other
right, power or privilege. Lender shall not be deemed, by any act of omission or
commission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by Lender, and then only to the extent
specifically set forth in writing. A waiver with respect to one event shall not
be construed as continuing or as a bar to or a waiver of any right or remedy
with respect to a subsequent event. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
8.2 Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given (a) when
delivered, if delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, (b) three business days
after mailing, if mailed by certified or registered mail with postage prepaid,
(c) on the next business day after dispatch, if delivered by Federal Express or
other reputable overnight mail service, or (d) on the date transmitted (if
transmitted before 5:00 p.m., prevailing time at the recipient’s location,
otherwise on the next business day), if telecopied and followed by written
confirmation thereof addressed as follows or to such other address as may be
hereafter designated in writing by the respective parties hereto:

     
Lender:
  Metro Bank
3801 Paxton Street
Harrisburg, PA 17111
Facsimile: 717-909-0589

Attn: Michael J. Bunn, Vice President, Commercial Loan Officer

 

 

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with a copy to:
  Smigel, Anderson & Sacks, LLP
4431 North Front Street
Harrisburg, PA 17110
Facsimile: 717-234-3611

Attn: Stuart J. Magdule, Esquire
 
   
Borrower:
  Unilife Cross Farm LLC
633 Lowther Road
Lewisberry, PA 17339

Attn: Alan D. Shortall, CEO

After December 31, 2010
250 Cross Farm Lane
York, PA 17406
 
   
with a copy to:
  McNees Wallace & Nurick LLC
100 Pine Street, PO Box 1166
Harrisburg, Pennsylvania 17108-1166
Facsimile: 717-260-1687

Attn: Shaun Eisenhauer, Esquire

8.3 Reimbursement of Lender. Borrower hereby agrees to reimburse Lender for its
out-of-pocket expenses, including, without limitation, reasonable counsel fees,
incurred by Lender in connection with the development, preparation, execution
and enforcement of this Agreement and all the Loan Documents, including, without
limitation, all counsel fees in connection with any Bankruptcy or insolvency
proceeding involving Borrower, this Agreement or any of the other Loan
Documents. Such expenses and counsel fees shall be paid simultaneously with the
execution of this Agreement and all such expenses hereafter incurred shall be
paid within ten (10) days after notice by Lender.

 

 

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8.4 Payment of Expenses and Taxes. In addition to payment of the expenses and
counsel fees provided for in Section 8.3, Borrower agrees to pay, and to save
Lender harmless from any delay in paying, stamp and other similar taxes, if any,
including, without limitation, all levies, impositions, duties, charges or
withholdings, together with any penalties, fines or interest thereon or other
additions thereto, which may be payable or determined to be payable in
connection with the execution and delivery of this Agreement and the other Loan
Documents or any modification of any thereof or any waiver or consent under or
in respect of any thereof.
8.5 Survival of Representations and Warranties. All representations, warranties,
covenants and agreements made in this Agreement and all other Loan Documents
shall survive the execution and delivery of the Loan Documents and the making of
the Loan hereunder. The provisions of Subsections 5.4(e), 7.5, 8.3, 8.4, 8.5,
8.8, 8.9, and 8.10 hereof shall survive payment of the Obligations.
8.6 Successors. This Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns, except that
Borrower may not assign or transfer its rights hereunder without the prior
written consent of Lender.
8.7 Construction. This Agreement, and the rights and obligations of the parties
hereunder and thereunder shall be governed by, and construed and interpreted in
accordance with, the domestic internal laws of the Commonwealth of Pennsylvania
without regard to its rules pertaining to conflict of laws. The Section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
8.8 Severability. Any provision contained in this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Indemnity. Borrower hereby agrees, whether or not any of the transactions
contemplated in the Loan Documents shall be consummated, to pay, assume
liability for, and indemnify, protect, defend, save and keep harmless Lender
from and against, any and all liabilities, obligations, losses, damages,
settlements, claims, actions, suits, penalties, costs and expenses (including,
but not limited to, legal and investigative fees and expenses) of whatsoever
kind and nature, including, but not limited to claims based upon negligence,
strict or absolute liability, liability in tort, latent and other defects
(whether or not discoverable), and any claim for patent, trademark or copyright
infringement which may from time to time be imposed on, incurred by or asserted
against Lender (whether or not any such claim is also indemnified or insured
against by any other person) in any way relating to or resulting from this
Agreement or any other Loan Document, or any of the transactions contemplated
herein or therein, except if claim is the result of the gross negligence or
willful misconduct of Lender. The provisions of this subsection shall survive
the payoff, release, foreclosure or other disposition, as applicable, of this
Agreement, the Obligations or the Collateral.

 

 

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8.10 Waiver of Trial by Jury; Jurisdiction.
(a) Each party to this Agreement agrees that any suit, action, or proceeding,
whether claim or counterclaim, brought or instituted by either party hereto or
any successor or assign of any party on or with respect to this Agreement or any
other Loan Document or which in any way relates, directly or indirectly, to the
Loans or any event, transaction, or occurrence arising out of or in any way
connection with the Loans, or the dealings of the parties with respect thereto,
shall be tried only by a court and not by a jury. EACH PARTY HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.
BORROWER ACKNOWLEDGES AND AGREES THAT THIS SUBSECTION 8.10 IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AGREEMENT BETWEEN THE PARTIES AND THAT LENDER WOULD NOT
EXTEND THE LOANS TO BORROWER IF THIS WAIVER OF JURY TRIAL SECTION WERE NOT A
PART OF THIS AGREEMENT.
(b) For the purpose of any suit, action or proceeding arising out of or relating
to this Agreement, the Notes or the Loans, Borrower hereby irrevocably consents
and submits to the jurisdiction and venue of any of the following: the Court of
Common Pleas of Dauphin County or the Federal District Court for the Middle
District of Pennsylvania. Borrower irrevocably waives any objection which it may
now or hereinafter have to the laying of the venue of any suit, action or
proceeding brought in such court and any claim that such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
The provisions of this Paragraph 8.10(b) shall not limit or otherwise affect the
right of Lender to institute and conduct action in any other appropriate manner,
jurisdiction or court.
8.11 Actions Against Lender; Release.
(a) Any action brought by Borrower against Lender which is based, directly or
indirectly, or on this Agreement or any other Loan Document or any matter in or
related to this Agreement or any other Loan Document, including but not limited
to the making of the Loan or the administration or collection thereof, shall be
brought only in the courts of the Commonwealth of Pennsylvania. Borrower may not
file a counterclaim against Lender in a suit brought by Lender against Borrower
in a state other than the Commonwealth of Pennsylvania unless under the rules of
procedure of the court in which Lender brought the action the counterclaim is
mandatory and will be considered waived unless filed as a counterclaim in the
action instituted by Lender.
(b) Upon full payment and satisfaction of the Loan and the interest thereon, as
provided in Section 2 hereof, the parties shall thereupon automatically each be
fully, finally, and forever released and discharged from any further claim,
liability or obligation in connection with the Loans except as expressly set
forth herein, except to the extent an payment received by Lender is determined
to be a preference or similar voidable transfer.

 

 

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8.12 Performance by Lender. If Borrower shall fail to observe or perform any of
the terms, agreements or covenants contained in this Agreement, or in any other
Loan Document, Lender may, in its discretion, but without any obligation or duty
to do so, and without waiving any Default, or Event of Default, perform any of
such terms, agreements or covenants, in part or in whole, and any money advanced
or expended by Lender in or toward the fulfillment of such terms, agreements or
covenants, shall be due on demand and become a part of and be added to the
indebtedness due under the Notes and secured as herein provided with interest
thereon at the rate specified in such Notes from the date of the respective
advance or expenditure. Lender’s rights contained in this Subsection 8.12 shall
be in addition to all of Lender’s rights under any other provision of this
Agreement, and Lender may, at its sole election, exercise any one or more, or
all, of such rights alternatively or concurrently.
8.13 Further Actions. Borrower shall execute and deliver such documents and
instruments, and take such other actions, as Lender deems necessary to
consummate the transactions described in this Agreement, even if such actions
shall be required after the Closing Date.
8.14 Entire Agreement. This Agreement and the Loan Documents represent the
entire agreement between Lender and Borrower with respect to the financing
transactions to which they relate, and cannot be changed or amended except by an
agreement in writing signed by the party against whom enforcement of the change
or amendment is sought.
[Remainder of Page Intentionally Left Blank]
[Signature Page to Follow]

 

 

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IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed
and delivered by their proper and duly authorized officers as of the day and
year first above written

                  WITNESS/ATTEST:       UNILIFE CROSS FARM LLC    
 
               
/s/ J. Christopher Naftzger 
      By:   /s/ R. Richard Wieland     
 
J. Christopher Naftzger, Corporate Secretary
         
 
R. Richard Wieland, Executive Vice    
 
          President and Treasurer    
 
                        METRO BANK    
 
               
 
      By:   /s/ Michael J. Bunn     
 
         
 
Michael J. Bunn, Vice President,    
 
          Commercial Loan Officer