EXHIBIT 10.1

 

BB&T

 

LOAN AGREEMENT

 

4310032897/00004

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Account Number

 

This Loan Agreement (the “Agreement”) is made this 6th day of August, 2003 by
and between BRANCH BANKING AND TRUST COMPANY, a North Carolina banking
corporation (“Bank”), and:

 

Embrex, Inc., a North Carolina corporation (“Borrower”), having its chief
executive office at Durham, North Carolina, and Embrex Poultry Health, LLC, a
North Carolina limited liability company (“Pledgor”), having its manager office
at Durham, North Carolina.

 

The Borrower has applied to Bank for and the Bank has agreed to make, subject to
the terms of this Agreement, the following loan (hereinafter referred to,
singularly or collectively, if more than one, as “Loan”):

 

Term Loan (“Term Loan”) in the principal amount of $9,000,000.00 for the purpose
of constructing and equipping a biological manufacturing plant for the
production of Inovocox™ which shall be evidenced by the Borrower’s Promissory
Note dated of even date herewith payable in 18 consecutive monthly interest only
installments followed by a repayment schedule of principal and interest
beginning March 5, 2005 in the amount of $80,246.64 and shall bear interest at a
rate as described more particularly in such note, the terms of which are
incorporated herein by reference. The Term Loan shall mature on February 5,
2015, when the entire unpaid principal balance then outstanding plus accrued
interest thereon shall be paid in full.

 

Additional terms, conditions and covenants of this Agreement are described in
Schedule CC, and the Rider to Loan Agreement attached hereto, the terms of which
are incorporated herein by reference. The promissory note evidencing the Term
Loan is referred to herein as the “Note” and shall include all extensions,
renewals, modifications and substitutions thereof. The Term Loan shall be
secured by the collateral described in the security documents described below.

 

Section 1 Conditions Precedent

 

The Bank shall not be obligated to make any disbursement of Loan proceeds until
all of the following conditions have been satisfied by proper evidence,
execution, and/or delivery to the Bank of the following items in addition to
this Agreement, all in form and substance satisfactory to the Bank and the
Bank’s counsel in their sole discretion:

 

Note: The Note evidencing the Loans [sic] duly executed by the Borrower.

 

Deed of Trust: The Deed of Trust in which Borrower or other owner thereof shall
grant to a Trustee for the benefit of Bank a deed of trust lien on the specified
real property and improvements thereon (“Mortgaged Property”).

 

Title Insurance: A Standard ALTA mortgage policy from a company or companies
approved by the Bank, providing coverage for the aggregate principal amount of
the Note and insuring the appropriate lien priority of the Deed of Trust and
which shall not contain any title exceptions or policy exclusions not approved
by the Bank and Bank’s counsel.

 

Survey: A certified copy of a recent survey of the Mortgaged Property prepared
by a registered land surveyor or a civil engineer.

 

Flood Hazard Certification: Evidence satisfactory to Bank and Bank’s counsel as
to whether the Mortgaged Property is located within an area identified as having
“special flood hazards” as such term is used in the Federal Flood Disaster
Protection Act of 1973.

 

Environmental Audit Report: A favorable “Phase I” unedited environmental audit
covering the Mortgaged Property from an independent environmental engineering
firm satisfactory to Bank which reflects that no hazardous waste, toxic
substances, or other hazardous materials have contaminated the Mortgaged
Property or, if the Mortgaged Property has been so contaminated, that it has
been satisfactorily cleaned up in accordance with all Environmental Laws. The
Bank shall be fully authorized to discuss all aspects of the audit with the
engineering firm.

 

Security Agreement: Security Agreement in which Borrower and any other owner (a
“Debtor”) of personal property collateral shall grant to Bank a first priority
security interest in the personal property specified therein. (If Bank has or
will have a security interest in any collateral which is inferior to the
security interest of another creditor, Borrower must fully disclose to Bank any
and all prior security interests, and Bank must specifically approve any such
security interest which will continue during the Loan.)

 

UCC Financing Statements: Acknowledged copies of UCC Financing Statements duly
filed in Borrower’s or other owner’s state of incorporation, organization or
residence, and in all jurisdictions necessary, or in the opinion of the Bank
desirable, to perfect the security interests granted in the Security
Agreement(s), and certified copies of Information Requests identifying all
previous financing statements on record for the Borrower or other owner, as
appropriate from all jurisdictions indicating that no security interest has
previously been granted in any of the collateral described in the Security
Agreement(s), unless prior approval has been given by the Bank.

 

Authorization and Certificate: An Authorization and Certificate executed by each
Debtor under which such Debtor authorizes Bank to file a UCC Financing Statement
describing collateral owned by such Debtor.

 

Commitment Fee: A commitment fee of $20,000 payable to the Bank on the date of
execution of the Loan Documents.

 

Corporate Resolution: A Corporate Resolution duly adopted by the Board of
Directors of the Borrower authorizing the execution, delivery, and performance
of the Loan Documents on or in a form provided by or acceptable to Bank.

 

Articles of Incorporation: A copy of the Articles of Incorporation and all other
charter documents of the Borrower all filed with and certified by the Secretary
of State of the State of the Borrower’s incorporation.

 

By-Laws: A copy of the By-Laws of the Borrower, certified by the Secretary of
the Borrower as to their completeness and accuracy.

 

Certificate of Incumbency: A certificate of the Secretary of the Borrower
certifying the names and true signatures of the officers of the Borrower
authorized to sign the Loan Documents.

 

Certificate of Existence: A certification of the Secretary of State (or other
government authority) of the State of the Borrower’s Incorporation or
Organization as to the existence or good standing of the Borrower and its
charter documents on file.

 

Opinion of Counsel: An opinion of counsel for the Borrower satisfactory to the
Bank and the Bank’s counsel.

 

Appraisal: Two (2) copies of an appraisal ordered by the Bank of the estimated
market value of the real and/or personal property offered as collateral for the
Loan(s) referenced herein. The appraisal(s) must be addressed to the Bank and
must conform to the Uniform Standards of Professional Appraisal Practice
(“USPAP”) adopted by the Appraisal Standards Board of the Appraisal Foundation.
Any deviation from the USPAP must be explained in the appraisal(s). The
appraiser(s) must be licensed and/or certified if required by applicable Federal
Deposit Insurance Corporation regulations or state laws.

 

Additional Documents: Receipt by the Bank of other approvals, opinions, or
documents as the Bank may reasonably request.

 

Section 2 Representations and Warranties

 

The Borrower represents and warrants to Bank that:

 

2.01. Financial Statements. The balance sheet of the Borrower and its
subsidiaries, if any, and the related Statements of Income and Retained Earnings
of the Borrower and its subsidiaries, the accompanying footnotes together with
the accountant’s opinion thereon, and all other financial information previously
furnished to the Bank, are true and correct in all material respects and fairly
reflect the financial condition of

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LOAN AGREEMENT

 

the Borrower and its subsidiaries as of the dates thereof, including all
contingent liabilities of every type, and the financial condition of the
Borrower and its subsidiaries as stated therein has not changed materially and
adversely since the date thereof.

 

2.02. Name, Capacity and Standing. The Borrower’s exact legal name is correctly
stated in the initial paragraph of the Agreement. If the Borrower and/or any
Guarantor is a corporation, general partnership, limited partnership, limited
liability partnership, or limited liability company, each warrants and
represents that it is duly organized and validly existing under the laws of its
respective state of incorporation or organization; that it and/or its
subsidiaries, if any, are duly qualified and in good standing in every other
state in which the nature of their business shall require such qualification,
and are each duly authorized by their board of directors, general partners or
member/manager(s), respectively, to enter into and perform the obligations under
the Loan Documents.

 

2.03. No Violation of Other Agreements. The execution of the Loan Documents, and
the performance by the Borrower, by any and all pledgors (whether the Borrower
or other owners of collateral property securing payment of the Loan (hereinafter
sometimes referred to as the “Pledgor”)) or by the Guarantor(s) thereunder will
not violate any provision, as applicable, of its articles of incorporation,
by-laws, articles of organization, operating agreement, agreement of
partnership, limited partnership or limited liability partnership, or, of any
law, other agreement, indenture, note, or other instrument binding upon the
Borrower, Pledgor, or give cause for the acceleration of any of the respective
obligations of the Borrower.

 

2.04. Authority. All authority from and approval by any federal, state, or local
governmental body, commission or agency necessary to the making, validity, or
enforceability of this Agreement and the other Loan Documents has been obtained.

 

2.05. Asset Ownership. The Borrower has good and marketable title to all of the
properties and assets reflected on the balance sheets and financial statements
furnished to the Bank, and all such properties and assets are free and clear of
mortgages, deeds of trust, pledges, liens, and all other encumbrances except as
otherwise disclosed by such financial statements. In addition, each other owner
of collateral has good and marketable title to such collateral, free and clear
of any liens, security interests and encumbrances, except as otherwise disclosed
to Bank.

 

2.06. Discharge of Liens and Taxes. The Borrower and its subsidiaries, if any,
and each Guarantor have filed, paid, and/or discharged all taxes or other claims
which are due and payable and which may become a lien on any of their respective
properties or assets, excepting to the extent that such items are being
appropriately contested in good faith and for which an adequate reserve (in an
amount reasonably acceptable to Bank) for the payment thereof is being
maintained.

 

2.07. Regulation U. None of the Loan proceeds shall be used directly or
indirectly for the purpose of purchasing or carrying any margin stock in
violation of the provisions of Regulation U of the Board of Governors of the
Federal Reserve System.

 

2.08. ERISA. Each employee benefit plan, as defined by the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), maintained by the Borrower or
by any subsidiary of the Borrower or Guarantor(s) meets, as of the date hereof,
the minimum funding standards of Section 302 of ERISA, all applicable
requirements of ERISA and of the Internal Revenue Code of 1986, as amended, and
no “Reportable Event” nor “Prohibited Transaction” (as defined by ERISA) has
occurred with respect to any such plan.

 

2.09. Litigation. There is no claim, action, suit or proceeding pending,
threatened or reasonably anticipated before any court, commission,
administrative agency, whether State or Federal, or arbitration which will
materially adversely affect the financial condition, operations, properties, or
business of the Borrower or its subsidiaries, if any, or the Guarantor(s), or
the ability of the Borrower or the Guarantor(s) to perform their obligations
under the Loan Documents.

 

2.10. Other Agreements. The representations and warranties made by Borrower to
Bank in the other Loan Documents are true and correct in all material respects
on the date hereof.

 

2.11. Binding and Enforceable. The Loan Documents, when executed, shall
constitute valid and binding obligations of the Borrower and Guarantors,
respectively, the execution of such Loan Documents has been duly authorized by
the parties thereto, and are enforceable in accordance with their terms, except
as may be limited by bankruptcy, insolvency, moratorium, or similar laws
affecting creditors’ rights generally.

 

2.12. Commercial Purpose. The Loan is not “consumer transactions”, as defined in
the North Carolina Uniform Commercial Code, and none of the collateral was or
will be purchased or held primarily for personal, family or household purposes.

 

Section 3 Affirmative Covenants

 

The Borrower covenants and agrees that from the date hereof and until payment in
full of all indebtedness and performance of all obligations owed under the Loan
Documents, Borrower shall:

 

3.01. Maintain Existence and Current Legal Form of Business. (a) Maintain its
existence and good standing in the state of its incorporation or organization,
(b) maintain its current legal form of business indicated above, and, (c), as
applicable, qualify and remain qualified as a foreign corporation, general
partnership, limited partnership, limited liability partnership or limited
liability company in each jurisdiction in which such qualification is required.

 

3.02. Maintain Records. Keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Borrower.

 

3.03. Maintain Properties. Maintain, keep, and preserve all of its properties
(tangible and intangible) including the collateral necessary or useful in the
conduct of its business in good working order and condition, ordinary wear and
tear and insured casualty excepted.

 

3.04. Conduct of Business. Continue to engage in an efficient, prudent, and
economical manner in a business of the same general type as now conducted.

 

3.05. Maintain Insurance. Maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or a similar
business, and business interruption insurance if required by Bank, which
insurance may provide for reasonable deductible(s). The Bank shall be named as
loss payee (Long Form) on all policies which apply to the Bank’s collateral, and
the Borrower shall deliver certificates of insurance at closing evidencing same.
All such insurance policies shall provide, and the certificates shall state,
that no policy will be terminated without 20 days prior written notice to Bank.

 

3.06. Comply With Laws. Comply in all respects with all applicable laws, rules,
regulations, and orders including, without limitation, paying before the
delinquency of all taxes, assessments, and governmental charges imposed upon it
or upon its property, and all Environmental Laws.

 

3.07. Right of Inspection. Permit the officers and authorized agents of the
Bank, at any reasonable time or times in the Bank’s sole discretion, to examine
and make copies of the records and books of account of, to visit the properties
of the Borrower, subject to Borrower’s reasonable security requirements, and to
discuss such matters with any officers, directors, managers, members or
partners, limited or general of the Borrower and the Borrower’s independent
accountant as the Bank deems necessary and proper.

 

3.08. Reporting Requirements. Furnish to the Bank:

 

Annual Financial Statements: As soon as available and not more than 120 days
after the end of each fiscal year, balance sheets, statements of income, and
retained earnings for the period ended and a statement of changes in the
financial position, all in reasonable detail, and all prepared in accordance
with GAAP consistently applied. The annual financial statements must be of the
following quality or better: Audited.

 

Notice of Litigation: Promptly after the receipt by the Borrower, or by any
Guarantor of which Borrower has knowledge, of notice or complaint of any action,
suit, and proceeding before any court or administrative agency of any type
which, if determined adversely, could have a material adverse effect on the
financial condition, properties, or operations of the Borrower or Guarantor, as
appropriate.

 

Tax Returns: As soon as available each year, complete copies (including all
schedules) of all state and federal tax returns filed by Borrower.

 

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LOAN AGREEMENT

 

Notice of Default: Promptly upon discovery or knowledge thereof, notice of the
existence of any event of default under this Agreement or any other Loan
Documents.

 

Other Information: Such other information as the Bank may from time to time
reasonably request.

 

3.09. Deposit Accounts. Maintain substantially all of its demand
deposit/operating accounts with the Bank.

 

3.10. Affirmative Covenants from other Loan Documents. All affirmative covenants
contained in any Deed of Trust, Security Agreement, Assignment of Leases and
Rents, or other security document executed by the Borrower which are described
in paragraph 2 hereof are hereby incorporated by reference herein.

 

Section 4 Guarantor(s) Covenants Not Applicable

 

Section 5 Financial Covenants

 

The Borrower covenants and agrees that from the date hereof until payment in
full of all indebtedness and the performance of all obligations under the Loan
Documents, the Borrower shall maintain the following financial covenants and
ratios to be tested at fiscal yearend and, if the Bank elects, at the end of
each fiscal quarter all in accordance with GAAP unless otherwise specified:

 

Current Ratio. A ratio of total current assets to total current liabilities of
not less than 2.0 to 1.0.

 

Tangible Net Worth. A minimum tangible net worth of not less than $32,000,000.
Tangible Net Worth is defined as net worth minus goodwill and other intangible
assets.

 

Debt to Tangible Net Worth. Maximum of .85 to 1.0.

 

Cash Flow Coverage. Minimum of 2.0 times Debt Service. Cash Flow is defined as
net profit after taxes, plus depreciation and amortization and interest minus
dividends. Debt Service is defined as current maturities of long term debt plus
interest expense.

 

Section 6 Negative Covenants

 

The Borrower covenants and agrees that from the date hereof and until payment in
full of all indebtedness and performance of all obligations under the Loan
Documents, the Borrower shall not, without the prior written consent of the
Bank:

 

6.01. Liens. Create, incur, assume, or suffer to exist any lien upon or with
respect to any of Pledgor’s properties securing payment of the Loan, now owned
or hereafter acquired, except:

 

  a. Liens and security interests in favor of the Bank;

 

  b. Liens for taxes not yet due and payable or otherwise being contested in
good faith and for which appropriate reserves are maintained;

 

  c. Other liens imposed by law not yet due and payable, or otherwise being
contested in good faith and for which appropriate reserves are maintained;

 

  d. Purchase money security interests on any property hereafter acquired,
provided that such lien shall attach only to the property acquired.

 

6.02. Change of Legal Form of Business; Purchase of Assets. Change Borrower’s
name or the legal form of Borrower’s business as shown above, whether by merger,
consolidation, conversion or otherwise, and Borrower shall not purchase all or
substantially all of the assets or business of any Person without prior
notification to the Bank.

 

6.03. Disposition of Assets. Sell, lease, or otherwise dispose of any of its
assets or properties of the Pledgor except in the ordinary and usual course of
its business.

 

6.04. Negative Covenants from other Loan Documents. All negative covenants
contained in any Deed of Trust, Security Agreement, Assignment of Leases or
Rents, or other security document executed by the Borrower which are described
in paragraph 2 hereof are hereby incorporated by reference herein.

 

Section 7 Hazardous Materials and Compliance with Environmental Laws

 

7.01. Investigation. Borrower hereby certifies that it has exercised due
diligence to ascertain whether its real property, including without limitation
the Mortgaged Property, is or has been affected by the presence of asbestos,
oil, petroleum or other hydrocarbons, urea formaldehyde, PCBs, hazardous or
nuclear waste, toxic chemicals and substances, or other hazardous materials
(collectively, “Hazardous Materials”), as defined in applicable Environmental
Laws. Borrower represents and warrants that based solely on such due diligence
and its actual knowledge, there are no such Hazardous Materials contaminating
its real property, nor have any such materials been released on or stored on or
improperly disposed of on its real property during its ownership, occupancy or
operation thereof, except as disclosed in reports delivered to Bank. Borrower
hereby agrees that, except in strict compliance with applicable Environmental
Laws, it shall not knowingly permit any release, storage or contamination as
long as any indebtedness or obligations to Bank under the Loan Documents remains
unpaid or unfulfilled. In addition, Borrower does not have or use any
underground storage tanks on any of its real property, including the Mortgaged
Property which are not registered with the appropriate Federal and/or State
agencies and which are not properly equipped and maintained in accordance with
all Environmental Laws. If requested by Bank, Borrower shall provide Bank with
all necessary and reasonable assistance required for purposes of determining the
existence of Hazardous Materials on the Mortgaged Property, including allowing
Bank access to the Mortgaged Property, and access to Borrower’s employees having
knowledge of, and to files and records within Borrower’s control relating to the
existence, storage, or release of Hazardous Materials on the Mortgaged Property.

 

7.02. Compliance. Borrower agrees to comply with all applicable Environmental
Laws, including, without limitation, all those relating to Hazardous Materials.
Borrower further agrees to provide Bank, and all appropriate Federal and State
authorities, with immediate notice in writing of any release of Hazardous
Materials on the Mortgaged Property and to pursue diligently to completion all
appropriate and/or required remedial action in the event of such release.

 

7.03. Remedial Action. Bank shall have the right, but not the obligation, to
undertake all or any part of such remedial action in the event of a release of
Hazardous Materials on the Mortgaged Property after notice to Borrower and after
giving the Borrower a reasonable opportunity to undertake such remedial
measures, and to add any expenditures so made to the principal indebtedness
secured by the Deed(s) of Trust. Borrower agrees to indemnify and hold Bank
harmless from any and all loss or liability arising out of any violation of the
representations, covenants, and obligations contained in this Section 7, or
resulting from the recording of the Deed(s) of Trust.

 

Section 8 Events of Default

 

The following shall be “Events of Default” by Borrower or Pledgor:

 

8.01. The failure to make prompt payment of any installment of principal or
interest on any of the Note(s) when due or payable and after passage of
applicable grace or cure period.

 

8.02. Should any representation or warranty made in the Loan Documents prove to
be false or misleading in any material respect.

 

8.03. Should any report, certificate, financial statement, or other document
furnished prior to the execution of or pursuant to the terms of this Agreement
prove to be false or misleading in any material respect.

 

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LOAN AGREEMENT

 

8.04. Should the Borrower or Pledgor default on the performance of any other
obligation of indebtedness to Bank when due or in the performance of any
obligation to Bank incurred in connection with money borrowed.

 

8.05. Should the Borrower or any Pledgor breach any covenant, condition, or
agreement made under any of the Loan Documents, and such breach not be cured
during any applicable grace or cure period.

 

8.06. Should a custodian be appointed for or take possession of any or all of
the assets of the Borrower or Pledgor, or should the Borrower or Pledgor either
voluntarily or involuntarily become subject to any insolvency proceeding,
including becoming a debtor under the United States Bankruptcy Code, any
proceeding to dissolve the Borrower or Pledgor, any proceeding to have a
receiver appointed, or should the Borrower or Pledgor make an assignment for the
benefit of creditors, or should there be an attachment, execution, or other
judicial seizure of all or any portion of the Borrower’s or any Pledgor’s
assets, including an action or proceeding to seize any funds on deposit with the
Bank, and such seizure is not discharged within 30 days and any of the foregoing
proceedings shall not be dismissed within 45 days of commencement.

 

8.07. Should final judgment for the payment of money be rendered against the
Borrower or Pledgor which is not covered by insurance and shall remain
undischarged for a period of 30 days unless such judgment or execution thereon
be effectively stayed.

 

8.08. Upon the death of, or termination of existence of, or dissolution of, any
Borrower or Pledgor.

 

8.09. Should any lien or security interest granted to Bank to secure payment of
the Note(s) terminate, fail for any reason to have the priority agreed to by
Bank on the date granted, or become unperfected or invalid for any reason.

 

Section 9 Remedies Upon Default

 

Upon the occurrence of any of the above listed Events of Default, the Bank may
at any time thereafter, at its option, take any or all of the following actions,
at the same or at different times:

 

9.01. Declare the balance of the Note to be immediately due and payable, both as
to principal and interest, without presentment, demand, protest, or notice of
any kind, all of which are hereby expressly waived by Borrower and each
Guarantor, and such balance shall accrue interest at the Default Rate as
provided herein until paid in full;

 

9.02. Require the Borrower or Guarantor to pledge additional collateral to the
Bank from the Borrower’s or any Guarantor’s assets and properties, the
acceptability and sufficiency of such collateral to be determined in the Bank’s
sole discretion;

 

9.03. Take immediate possession of and foreclose upon any or all collateral
which may be granted to the Bank as security for the indebtedness and
obligations of Borrower or any Guarantor under the Loan Documents;

 

9.04. Exercise any and all other rights and remedies available to the Bank under
the terms of the Loan Documents and applicable law, including the North Carolina
Uniform Commercial Code;

 

9.05. Any obligation of the Bank to advance funds to the Borrower or any other
Person under the terms of under the Note(s) and all other obligations, if any,
of the Bank under the Loan Documents shall immediately cease and terminate
unless and until Bank shall reinstate such obligation in writing.

 

Section 10 Miscellaneous Provisions

 

10.01. Definitions.

 

“Default Rate” shall mean a rate of interest equal to Bank’s Prime Rate plus
five percent (5%) per annum (not to exceed the legal maximum rate) from and
after the date of an Event of Default hereunder which shall apply, in the Bank’s
sole discretion, to all sums owing, including principal and interest, on such
date.

 

“Environmental Laws” shall mean all federal and state laws and regulations which
affect or may affect the Mortgaged Property, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
Sections 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Sections 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C.
Sections 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the
Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Sedimentation
Pollution Control Act (N.C.G.S. Sections 113A-5 et seq.), the Hazardous
Chemicals Right to Know Act (N.C.G.S. Sections 95-173 et. seq.), the Oil
Pollution and Hazardous Substances Control Act (N.C.G.S. Sections 143-215.75 et
seq.), the North Carolina Solid Waste Management Act (N.C.G.S. Sections 130A-290
et seq.), and the Coastal Area Management Act (N.C.G.S. Sections 113-a-119 et
seq.), as such laws or regulations have been amended or may be amended.

 

“Loan Documents” shall mean this Agreement including any schedule attached
hereto, the Note(s), the Deed(s) of Trust, the Mortgage(s), the Security
Agreement(s), the Assignment(s) of Leases and Rents, all UCC Financing
Statements, the Guaranty Agreement(s), and all other documents, certificates,
and instruments executed in connection therewith, and all renewals, extensions,
modifications, substitutions, and replacements thereto and therefore.

 

“Person” shall mean an individual, partnership, corporation, trust,
unincorporated organization, limited liability company, limited liability
partnership, association, joint venture, or a government agency or political
subdivision thereof.

 

“GAAP” shall mean generally accepted accounting principles as established by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants, as amended and supplemented from time to time.

 

“Prime Rate” shall mean the rate of interest per annum announced by the Bank
from time to time and adopted as its Prime Rate, which is one of several rate
indexes employed by the Bank when extending credit, and may not necessarily be
the Bank’s lowest lending rate.

 

10.02. Non-impairment. If any one or more provisions contained in the Loan
Documents shall be held invalid, illegal, or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions contained
therein shall not in any way be affected or impaired thereby and shall otherwise
remain in full force and effect.

 

10.03. Applicable Law. The Loan Documents shall be construed in accordance with
and governed by the laws of the State of North Carolina.

 

10.04. Waiver. Neither the failure or any delay on the part of the Bank in
exercising any right, power or privilege granted in the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise of any other right, power, or privilege
which may be provided by law.

 

10.05. Modification. No modification, amendment, or waiver of any provision of
any of the Loan Documents shall be effective unless in writing and signed by the
Borrower and Bank.

 

10.06. Payment Amount Adjustment. In the event that any Loan(s) referenced
herein has a variable (floating) interest rate and the interest rate increases,
Bank, at its sole discretion, may at any time adjust the Borrower’s payment
amount(s) to prevent the amount of interest accrued in a given period to exceed
the periodic payment amount or to cause the Loan(s) to be repaid within the same
period of time as originally agreed upon.

 

10.07. Stamps and Fees. The Borrower shall pay all federal or state stamps,
taxes, or other fees or charges, if any are payable or are determined to be
payable by reason of the execution, delivery, or issuance of the Loan Documents
or any security granted to the Bank; and the Borrower and Guarantor agree to
indemnify and hold harmless the Bank against any and all liability in respect
thereof.

 

10.08. Attorneys’ Fees. In the event the Borrower or any Pledgor or Guarantor
shall default in any of its obligations hereunder and the Bank believes it
necessary to employ an attorney to assist in the enforcement or collection of
the indebtedness of the Borrower to the Bank, to enforce the terms and
provisions of the Loan Documents, to modify the Loan Documents, or in the event
the Bank voluntarily or otherwise should become a party to any suit or legal
proceeding (including a proceeding conducted under the Bankruptcy Code), the
Borrower and Guarantors agree to pay the reasonable attorneys’ fees of the Bank
and all related costs of collection or enforcement that may be incurred by the
Bank. The Borrower and Guarantor shall be liable for such attorneys’ fees and
costs whether or not any suit or proceeding is actually commenced.

 

 

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BB&T

 

LOAN AGREEMENT

 

10.09. Bank Making Required Payments. In the event Borrower shall fail to
maintain insurance, pay taxes or assessments, costs and expenses which Borrower
is, under any of the terms hereof or of any Loan Documents, required to pay, or
fail to keep any of the properties and assets constituting collateral free from
new security interests, liens, or encumbrances, except as permitted herein, Bank
may at its election make expenditures for any or all such purposes and the
amounts expended together with interest thereon at the Default Rate, shall
become immediately due and payable to Bank, and shall have benefit of and be
secured by the collateral; provided, however, the Bank shall be under no duty or
obligation to make any such payments or expenditures.

 

10.10. Right of Offset. Any indebtedness owing from Bank to Borrower may be set
off and applied by Bank on any indebtedness or liability of Borrower to Bank, at
any time and from time to time after maturity, whether by acceleration or
otherwise, and without demand or notice to Borrower. Bank may sell
participations in or make assignments of any Loan made under this Agreement, and
Borrower agrees that any such participant or assignee shall have the same right
of setoff as is granted to the Bank herein.

 

10.11. UCC Authorization. Borrower authorizes Bank to file such UCC Financing
Statements describing the collateral in any location deemed necessary and
appropriate by Bank.

 

10.12. Modification and Renewal Fees. Bank may, at its option, charge any fees
for modification, renewal, extension, or amendment of any terms of the Note(s)
permitted by N.C.G.S.§ 24.1.1 in North Carolina, and as otherwise permitted by
law if Borrower is located in another state.

 

10.13. Conflicting Provisions. If provisions of this Agreement shall conflict
with any terms or provisions of any of the Note(s) or Security Agreement(s), the
provisions of such Note(s) or Security Agreement(s), as appropriate, shall take
priority over any provisions in this Agreement.

 

10.14. Notices. Any notice permitted or required by the provisions of this
Agreement shall be deemed to have been given when delivered in writing to the
City Executive or any Vice President of the Bank at its offices in Durham, North
Carolina, and to the President of the Borrower at its offices in Durham, North
Carolina when sent by certified mail and return receipt requested.

 

10.15. Consent to Jurisdiction. Borrower hereby irrevocably agrees that any
legal action or proceeding arising out of or relating to this Agreement may be
instituted in the Superior Court in Forsyth County, North Carolina, or the
United States District Court for the Middle District of North Carolina, or in
such other appropriate court and venue as Bank may choose in its sole
discretion. Borrower consents to the jurisdiction of such courts and waives any
objection relating to the basis for personal or in rem jurisdiction or to venue
which Borrower may now or hereafter have in any such legal action or
proceedings.

 

10.16. Counterparts. This Agreement may be executed by one or more parties on
any number of separate counterparts and all of such counterparts taken together
shall be deemed to constitute one and the same instrument.

 

10.17. Entire Agreement. The Loan Documents embody the entire agreement between
Borrower and Bank with respect to the Loans, and there are no oral or parol
agreements existing between Bank and Borrower with respect to the Loans which
are not expressly set forth in the Loan Documents.

 

10.18. Tangible Personal Property. The Borrower and the Pledgor agree that all
equipment now or hereafter located on the Property and any other equipment
required in the Pledgor’s operations (specifically including, but not limited
to, equipment acquired with the proceeds of the Loan) shall be owned by the
Pledgor, rather than the Borrower.

 

10.19. Covenants Applicable to the Pledgor. The Pledgor agrees that certain
covenants applicable to the “Borrower” under the provisions of the Loan
Agreement shall also apply to the Pledgor, an entity that is owned by the
Borrower. Any covenant, representation or provision in this Loan Agreement that
relates to the real property and improvements owned by the Pledgor shall apply
to the Pledgor and the Borrower. In addition, the Pledgor and the Borrower agree
that the following sections of the Loan Agreement shall be applicable to the
Pledgor, as well as the Borrower.

 

  a. All of Section 2, with the following qualification as to Section 2.01: The
Pledgor’s operations shall be reflected in the consolidated and consolidating
financial statements of the Borrower.

 

  b. All of Section 3, with the above-stated qualifications as to Section 3.08.

 

  c. All of Section 6.01, 6.03 and 6.04.

 

  d. All of Section 7.

 

  e. All of Section 8.03, 8.04, 8.05, 8.06, 8.07 and 8.08. The occurrence of the
events described in the foregoing sections with respect to the Pledgor (subject
to cure provisions set out herein) shall constitute an event of default under
the Loan Agreement.

 

Although the construction documents (construction contract, etc.) have been
executed by the Borrower, those provisions of Schedule CC relating to the real
property and improvements shall also [be] deemed to be obligations of the
Pledgor.

 

[SIGNATURES ON FOLLOWING PAGES]

 

- 5 -

--------------------------------------------------------------------------------

BB&T

 

LOAN AGREEMENT

 

SIGNATURE PAGE

 

IN WITNESS WHEREOF, the Bank, Borrower and Guarantor(s) have caused this
Agreement to be duly executed under seal all as of the date first above written.

 

Borrower is a Corporation:

 

ATTEST:

     

 

--------------------------------------------------------------------------------

        Name of Corporation

 

--------------------------------------------------------------------------------

      By:  

See Attached Signature Page

--------------------------------------------------------------------------------

           

Title:

 

 

--------------------------------------------------------------------------------

(SEAL)

--------------------------------------------------------------------------------

      By:  

 

--------------------------------------------------------------------------------

           

Title:

 

 

--------------------------------------------------------------------------------

Borrower is a Partnership, Limited Liability Company, or Limited Liability
Partnership:

WITNESS:

         

 

--------------------------------------------------------------------------------

  (SEAL)                 Name of Partnership, LLC or LLP

 

--------------------------------------------------------------------------------

      By:  

See Attached Signature Page

--------------------------------------------------------------------------------

  (SEAL)                 General Partner or Manager    

 

--------------------------------------------------------------------------------

      By:  

 

--------------------------------------------------------------------------------

  (SEAL)                 General Partner or Manager

 

--------------------------------------------------------------------------------

           

 

--------------------------------------------------------------------------------

      By:  

 

--------------------------------------------------------------------------------

  (SEAL)                 General Partner or Manager    

WITNESS:

      BRANCH BANKING AND TRUST COMPANY

 

--------------------------------------------------------------------------------

      By:  

/s/ Margaret A. Brady

--------------------------------------------------------------------------------

                Margaret A. Brady            

Title:

  Vice President

 

- 6 -

--------------------------------------------------------------------------------

       

EMBREX, INC.,

a North Carolina corporation

Attest:

           

/s/ Don T. Seaquist

      By:  

/s/ Randall L. Marcuson

--------------------------------------------------------------------------------

       

--------------------------------------------------------------------------------

Don T. Seaquist, Secretary

         

Randall L. Marcuson

President & CEO

 

[CORPORATE SEAL]

 

STATE OF NORTH CAROLINA

 

COUNTY OF ORANGE

 

I, Hannah J. Chase, a Notary Public of Orange County, State of North Carolina,
do hereby certify that Don T. Seaquist personally came before me this day and
acknowledged that he is Secretary of Embrex, Inc., a North Carolina corporation,
and that, by authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its President, sealed with its
corporate seal, and attested by himself as its Secretary.

 

Witness my hand and official seal, this the 6th day of August, 2003.

 

/s/ Hannah J. Chase

--------------------------------------------------------------------------------

Notary Public

 

My Commission Expires: 12/25/2007

 

[OFFICIAL SEAL]

 

 

- 7 -

--------------------------------------------------------------------------------

   

EMBREX POULTRY HEALTH, LLC.,

a North Carolina limited liability

company (SEAL)

       

By:

 

EMBREX, INC.,

a North Carolina corporation,

its manager (SEAL)

                 

Attest:

           

/s/ Don T. Seaquist

     

By:

 

/s/ Randall L. Marcuson

--------------------------------------------------------------------------------

       

--------------------------------------------------------------------------------

Don T. Seaquist, Secretary

         

Randall L. Marcuson

President & CEO

[CORPORATE SEAL]

           

 

STATE OF NORTH CAROLINA

 

COUNTY OF ORANGE

 

I, Hannah J. Chase, a Notary Public of Orange County, State of North Carolina,
do hereby certify that Don T. Seaquist personally came before me this day and
acknowledged that he is Secretary of Embrex, Inc., a North Carolina corporation
(the “Corporation”), Manger of Embrex Poultry Health, LLC, a North Carolina
limited liability company (the “Company”), and that, by authority duly given and
(a) as the act of the Corporation and (b) as the act of the Company, the
foregoing instrument was signed in the name of the Company and in the name of
the Corporation by the Corporation’s President, sealed with its corporate seal,
and attested by himself as its Secretary.

 

Witness my hand and official seal, this the 6th day of August, 2003.

 

/s/ Hannah J. Chase

--------------------------------------------------------------------------------

Notary Public

 

My Commission Expires: 12/25/2007

 

[OFFICIAL SEAL]

 

- 8 -

--------------------------------------------------------------------------------

RIDER TO LOAN AGREEMENT

 

THIS RIDER TO LOAN AGREEMENT is attached to and shall be a part of that Loan
Agreement dated August 6, 2003 with attached Schedule CC thereto (collectively
the “Loan Agreement”), between Embrex, Inc. (“Borrower”), Embrex Poultry Health,
LLC (“Pledgor”) and BRANCH BANKING AND TRUST COMPANY (“Bank”).

 

1. (a) NOTICE AND RIGHT TO CURE WITH RESPECT TO NON-MONETARY DEFAULTS.
Notwithstanding any provision in the Deed of Trust, the Loan Agreement, the
Assignment of Rents and Leases, or Note or other Documents to the contrary, in
the event of a non-monetary default, Bank’s right, power and privilege to
accelerate the maturity of the indebtedness secured hereby shall be stayed until
thirty (30) days from the first to occur of (i) the date that Borrower has
knowledge of the default, or (ii) Borrower’s receipt of written notice of such
non-monetary default from Bank; provided, however, that Borrower shall have
forty-five (45) days after the filing of any involuntary petition in bankruptcy
against it to have such petition dismissed.

 

(b) NOTICE AND RIGHT TO CURE WITH RESPECT TO MONETARY DEFAULTS. Notwithstanding
any provision in the Loan Agreement to the contrary, in the event of a monetary
default set forth in the Loan Agreement, the Note or other Documents, Bank’s
right, power and privilege to accelerate the maturity of the Debt secured hereby
shall be stayed until ten (10) days from notice by Bank to Borrower of said
monetary default.

 

(c) EXCEPTIONS TO MONETARY AND NON-MONETARY NOTICE AND RIGHT TO CURE.
Notwithstanding anything contained in paragraphs 2(a) and (b) of this Rider, or
the Loan Agreement, the Deed of Trust, the Assignment of Rents and Leases, Note
or other Documents, in no event shall notice and right to cure be granted for
the following specific events of default:

 

(i) any Event of Default arising from any report, certificate, financial
statement, or other document furnished prior to the execution of or pursuant to
the terms of this Agreement, if same shall prove to be false or misleading in
any material respect;

 

(ii) any Event of Default arising if a custodian shall be appointed for or take
possession of any or all of the assets of the Borrower, or should the Borrower
either voluntarily or involuntarily become subject to any insolvency proceeding,
any proceeding to dissolve the Borrower, any proceeding to have a receiver
appointed, or should the Borrower make an assignment for the benefit of
creditors, or should there be an attachment, execution, or other judicial
seizure of all or any portion of the Borrower’s assets, including an action or
proceeding to seize any funds on deposit with Bank;

 

(iii) any Event of Default arising if the Borrower voluntarily shall become a
debtor (as such term is defined in the U.S. Bankruptcy Code);

 

(iv) any Event of Default consisting of a failure to repay the Debt at maturity;

 

(v) any Event of Default arising from Borrower commencing the process of
liquidation or dissolution of its charter, articles, agreement or other
governing document, or if same is revoked; or if Borrower or any other obligor
commences the process of dissolution or partition; or if Borrower or any
guarantor (if a trust) commences the process of termination or expires;

 

(vi) any Event of Default arising from the institution of any proceeding seeking
the forfeiture of the Property or any portion thereof or any interest therein as
a result of any criminal or quasi-criminal activity by Borrower or any obligor,
or any other person or entity so related to Borrower, obligors or the Property
that the Property or any portion thereof or any interest therein might be
forfeited on account of the activity or such person or entity; or

 

(vii) any Event of Default arising from the sale, conveyance, transfer or
encumbrance of the Property or any part or interest therein, for real property
collateral, and a bulk sale transfer to the extent that the indebtedness is
secured by any personal or other tangible or intangible property, all without
the prior written consent of Bank, in its sole and absolute discretion.

 

2. ATTORNEYS’ FEES. Notwithstanding any other provision in the Note, the Deed of
Trust, the Loan Agreement, Assignment of Rents and Leases or other Document, all
legal fees shall be based on the actual amount of time expended at the usual and
customary hourly rates of attorneys and paralegals for time actually spent
without giving effect to any statutory presumptions that may then be in effect.

 

IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals to
this Rider as of the date first written above.

 

BORROWER:

See Attached Signature Page

PLEDGOR:

See Attached Signature Page

BANK

   

BRANCH BANKING AND TRUST COMPANY

By  

/s/ Margaret A. Brady

 

(SEAL)

 

--------------------------------------------------------------------------------

   

Title:

 

Margaret A. Brady, Vice President

   

 

- 9 -

--------------------------------------------------------------------------------

       

EMBREX, INC.,

a North Carolina corporation

Attest:

           

/s/ Don T. Seaquist

      By:  

/s/ Randall L. Marcuson

--------------------------------------------------------------------------------

       

--------------------------------------------------------------------------------

Don T. Seaquist, Secretary

         

Randall L. Marcuson

President & CEO

 

[CORPORATE SEAL]

 

STATE OF NORTH CAROLINA

 

COUNTY OF ORANGE

 

I, Hannah J. Chase, a Notary Public of Orange County, State of North Carolina,
do hereby certify that Don T. Seaquist personally came before me this day and
acknowledged that he is Secretary of Embrex, Inc., a North Carolina corporation,
and that, by authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its President, sealed with its
corporate seal, and attested by himself as its Secretary.

 

Witness my hand and official seal, this the 6th day of August, 2003.

 

/s/ Hannah J. Chase

--------------------------------------------------------------------------------

Notary Public

My Commission Expires: 12/25/2007

 

[OFFICIAL SEAL]

 

- 10 -

--------------------------------------------------------------------------------

       

EMBREX POULTRY HEALTH, LLC.,

a North Carolina limited liability

company (SEAL)

            By:  

EMBREX, INC.,

a North Carolina corporation,

its manager (SEAL)

                 

Attest:

           

/s/ Don T. Seaquist

     

By:

 

/s/ Randall L. Marcuson

--------------------------------------------------------------------------------

       

--------------------------------------------------------------------------------

Don T. Seaquist, Secretary

         

Randall L. Marcuson

President & CEO

 

[CORPORATE SEAL]

 

STATE OF NORTH CAROLINA

 

COUNTY OF ORANGE

 

I, Hannah J. Chase, a Notary Public of Orange County, State of North Carolina,
do hereby certify that Don T. Seaquist personally came before me this day and
acknowledged that he is Secretary of Embrex, Inc., a North Carolina corporation
(the “Corporation”), Manger of Embrex Poultry Health, LLC, a North Carolina
limited liability company (the “Company”), and that, by authority duly given and
(a) as the act of the Corporation and (b) as the act of the Company, the
foregoing instrument was signed in the name of the Company and in the name of
the Corporation by the Corporation’s President, sealed with its corporate seal,
and attested by himself as its Secretary.

 

Witness my hand and official seal, this the 6th day of August, 2003.

 

/s/ Hannah J. Chase

--------------------------------------------------------------------------------

Notary Public

 

My Commission Expires: 12/25/2007

 

[OFFICIAL SEAL]

 

- 11 -

--------------------------------------------------------------------------------

BB&T

SCHEDULE “CC” TO BB&T LOAN AGREEMENT

 

(Commercial/Residential Construction and/or Development Loan)

 

This Schedule “CC” is an attachment to and a part of the Loan Agreement (the
“Loan Agreement”) dated August 6, 2003, between Branch Banking and Trust Company
(“Bank”) and Embrex, Inc. (“Borrower”) and Embrex Poultry Health, LLC
(“Pledgor”).

 

CC.01. Definitions. In addition to the words and terms defined elsewhere in this
Loan Agreement, the following terms shall have the following specified meanings:

 

  (a) “Borrower’s Equity” shall mean the cost of the Mortgaged Property plus the
estimated cost of the Improvements, minus the amount of the Loan.

 

  (b) “Closing Date” shall mean the date as of which the Note is executed by the
Borrower and the Bank.

 

  (c) “Completion Date” shall mean the date upon which the Bank has received
evidence satisfactory to it that the Improvements have been completed in
accordance with the Construction Documents. Borrower hereby agrees that the
Completion Date will occur not later than June 30, 2004.

 

  (d) “Construction Documents” shall mean the final plans, specifications,
blueprints, and shop drawings for the construction of the Improvements prepared
by or used by the General Contractor and approved by the Bank, including such
amendments thereto as may from time to time be made by Borrower and approved by
the Bank.

 

  (e) “Deed of Trust” shall mean the deed of trust executed by the Borrower or
other owner for the benefit of the Bank granting as collateral the Mortgaged
Property.

 

  (f) “Event of Default” shall mean any of the events of default listed in the
Note or Deed of Trust, in Section 7 of the Loan Agreement, or in Section CC.07
of this Schedule “CC.”

 

  (g) “General Contractor” shall mean the contractor(s), if any, who contracts
with the Borrower to build or install the Improvements, and who shall be
approved by Bank prior to Borrower’s execution of any contract(s) therewith.

 

  (h) “Governmental Authorities” shall mean any governmental office, officer, or
official (including health and environmental) whose consent or approval is
required as a prerequisite to the commencement or continuation of the
construction of the Improvements or to the operation and occupancy of the
Project or to the performance of any act or obligation or the observance of any
agreement, provision, or condition of whatsoever nature contained in the Loan
Agreement.

 

  (i) “Improvements” shall mean all improvements now existing and to be
constructed on the Mortgaged Property, including without limitation roads,
utility lines, buildings, fixtures and structures of any type.

 

  (j) “Loan” shall mean outstanding principal balance advanced by Bank to
Borrower evidenced by the Note.

 

  (k) “Mortgaged Property” shall mean the real property and fixtures described
in the Deed of Trust.

 

  (l) “Note” shall mean the promissory note of the Borrower dated as of the
Closing Date payable to the order of the Bank in the principal amount of
$9,000,000, and all substitutions, replacements, extensions, modifications, or
renewals thereof.

 

  (m) “Project” shall mean the Improvements and the Mortgaged Property
collectively.

 

CC.02. Disbursements. Bank agrees that it will from time to time, so long as
Borrower has not committed an Event of Default, beyond any applicable grace or
cure period, advance Loan proceeds to Borrower in accordance with the conditions
of this Loan Agreement.

 

  (a) Disbursement Requests. Borrower will notify Bank of all Loan advance
requests at least ten (10) business days prior to the requested advance date.
Borrower will submit no more than one (1) Loan disbursement request per calendar
month unless otherwise approved by Bank.

 

  (b) Disbursement Amounts. Following a request by Borrower for a Loan advance,
Bank shall determine the maximum amount of the advance. If the construction
contract under which an advance is requested provides for a retainage, Bank
shall advance no more than the amount actually due to the General Contractor.
The value of each completed portion of the Improvements at any time shall be
determined by Bank in its sole discretion and shall be binding on Borrower. The
maximum amount which will be advanced shall be determined as follows:

 

  x Advances will be made on the basis of 100% of the value of the Land plus the
Improvements which have been completed, based on the Construction Budget, minus
the Borrower’s Equity and any contingency reserve and retainages provided for in
the Construction Budget, in the Bank’s discretion, upon satisfactory site
inspection of the Project by an officer or representative of Bank and/or receipt
by Bank of copies of the General Contractor’s Application and Certificate for
Payment, invoices representing costs incurred, and such other certificates as
may be required by Bank.

 

  (c) Deposit of Disbursements. Bank shall make all Loan advances by deposit to
Borrower’s demand deposit account with Bank, unless Bank deems it appropriate to
make advances by some other method.

 

  (d) Option to Pay Contractors. At its option, Bank may make advances directly
to the General Contractor or any unpaid subcontractor, laborer, or material
supplier which has provided labor, services, or materials in connection with the
construction of the Improvements, and the execution of this Loan Agreement shall
hereby constitute an irrevocable direction and authorization of Bank by Borrower
to so disburse Loan funds. No further authorization from Borrower shall be
necessary to warrant such direct advances, all of which shall be secured by the
Deed of Trust as though fully made to Borrower, regardless of the disposition
thereof by the General Contractor or any subcontractor, laborer, or material
supplier so paid.

 

CC.03. Conditions Precedent to Initial Disbursement. The Bank shall not be
obligated to make the initial advance under this Loan until all of the
conditions in Section 1 of the Loan Agreement have been satisfied and all of the
following conditions have been satisfied by proper evidence, execution, and/or
delivery to Bank of the following items, all in form and substance satisfactory
to Bank and Bank’s counsel, unless waived in writing by Bank:

 

  (a) Evidence of Zoning and Permits. Satisfactory evidence of the zoning
designation for the Project, the permitted uses of the Project under such zoning
designation, and compliance by the Project and its intended uses with such
zoning designation and with all other applicable regulations or rules of
Governmental Authorities including without limitation a copy of any building
permits and any other documents related to compliance with requirements for
density, land use, waste disposal, or continuation of construction.

 

  (b) Construction Documents. One set of the Construction Documents must be
submitted to Bank prior to the Closing Date.

 

  (c) Construction Contracts. Copies of the construction contracts and
architects contracts executed by the General Contractor and the architect, and
copies of all other executed contracts as may be required by Bank.

 

  (d) Construction Budget. A detailed breakdown of the cost of constructing the
Improvements, including an itemization of nonconstruction and land costs, and a
funding schedule for all items (“Construction Budget”).

 

  (e) Construction Time Schedule. A detailed schedule of the dates by which
construction of portions of the Improvements shall be completed.

 

  (f) Flood Insurance Policy. If Bank determines that the Mortgaged Property is
located in an area having special flood hazards, a flood insurance policy for
the insurable Improvements naming Bank as mortgagee (loss payee) must be
submitted to Bank.

 

  (g) Hazard/Liability/Builder’s Risk Insurance. An insurance policy covering
hazards (not less than Loan), liabilities, and builder’s risks for an amount and
from an insurance company satisfactory to Bank, which shall name Bank as loss
payee (Mortgagee’s long form).

 

  (h) Other Documents. Borrower will provide such other documents, certificates,
or opinions as may be required by Bank.

 

  (i) No Event of Default. In addition to the conditions listed above, Borrower
must not have committed nor suffered an Event of Default.

 

  (j) Evidence satisfactory to Bank of payment of Borrower’s Equity.

 

Page 1 of 5

--------------------------------------------------------------------------------

BB&T

SCHEDULE “CC” TO BB&T LOAN AGREEMENT

 

(Commercial/Residential Construction and/or Development Loan)

 

  (k) Consents from General Contractor and architect to assignment to Bank of
the construction contract and the architect’s contract.

 

CC.04. Conditions Precedent to Advances After Initial Disbursement. Bank shall
not be obligated to make any advances after the initial advance until all of the
following conditions have been satisfied:

 

  (a) Each and every one of the conditions stated in Section CC.03 of this
Schedule “CC.”

 

  (b) No lien, security interest, or other encumbrance shall have been permitted
to attach to the Mortgaged Property except taxes for the current year and others
specifically approved by Bank, and Bank shall have received all released and
waivers of liens from General Contractor or subcontractors as may be required by
Bank.

 

  (c) Construction of the Improvements shall have been in accordance with the
Construction Documents in a good and workmanlike manner, and the Improvements
shall not have been materially damaged, in Bank’s opinion, by fire, storm or
otherwise.

 

  (d) There has been no change in the status of the title to the Mortgaged
Property, and there are no survey exceptions not previously approved by Bank in
writing. Bank may require title insurance policy endorsement prior to any
advance.

 

  (e) There has been no material adverse change in the financial condition of
the Borrower.

 

  (f) A foundation survey, unless waived in writing by Bank, shall have been
furnished within ten (10) days after the laying of the foundation of the
Improvements, showing no encroachment on any boundary line, easement, building
setback line, or other restricted area.

 

  (g) All change orders or other material changes in the construction of the
Improvements which differ from the Construction Documents and which increase the
cost of any portion of the Improvements by one percent (1%) or more over the
cost estimated for that portion in the Construction Budget have been approved by
Bank.

 

  (h) Bank is satisfied with the progress of construction, and in the opinion of
Bank, the estimated remaining cost of the construction of the Improvements does
not exceed the remaining unadvanced principal balance of the Loan.

 

  (i) No Event of Default beyond any applicable grace or cure period has
occurred and remains unremedied.

 

CC.05. Conditions Precedent to Final Advance. Bank shall not be obligated to
make the final Loan advance until all of the following conditions have been
satisfied:

 

  (a) Each and every one of the conditions stated in Section CC.04 of this
Schedule “CC.”

 

  (b) The Improvements have been fully completed in a good and workmanlike
manner and in accordance with the Construction Documents, the Project has passed
inspection by the architect and the Construction Officer or another agent of
Bank, and certificates of completion and occupancy have been issued by all
appropriate Governmental Authorities.

 

  (c) If required by Bank, an “as built” survey of the Project.

 

  (d) The final Loan advance shall be made by Bank no more than twenty-one (21)
days after the Completion Date.

 

CC.06. Additional Covenants and Agreements. In addition to the representations,
warranties, covenants, and agreements contained in Sections 2, 3, 4, and 5 of
the Loan Agreement, the following covenants and agreements apply to the Loan:

 

  (a) Payment of Contractors. Borrower shall promptly advise Bank in writing if
Borrower receives any notice, written or oral, from the General Contractor, any
laborer, subcontractor, or material furnisher to the effect the General
Contractor or such laborer, subcontractor, or material furnisher has not been
paid for any labor or materials furnished to or contained in the Project.

 

  (b) Compliance with Construction Documents. Borrower shall, upon demand of
Bank, correct any defects in the Improvements or any departure from the
Construction Documents not approved by Bank. Except for changes which increases
the cost of any portion of the Improvements by one percent (1%) or less over the
cost estimated for that portion in the Construction Budget, Borrower shall not
change, alter, or amend either the Construction Documents or installation of the
Improvements without the prior written consent of Bank, and will not permit any
deviations by any contractor(s) from the Construction Documents.

 

  (c) Subcontractors. Borrower shall deliver to Bank, upon request, the names of
persons or companies with whom the General Contractor has contracted or intends
to contract for the construction of the Improvements or for the furnishing of
labor or materials therefor.

 

  (d) Inspection. Borrower shall permit Bank and its authorized agents to enter
upon the Project during normal working hours as often as the Bank desires, for
the purpose of inspecting the construction of the improvements, and its books
and records with respect to the Project. When requested, Borrower shall furnish
to Bank detailed plans, shop drawings, and specifications which relate to the
Improvements. Any failure by Bank or its authorized agents to discover or to
reject unsatisfactory or defective materials or workmanship shall not make Bank
liable to Borrower or to any other person, nor shall any prior failure
constitute a waiver of the Bank’s right to subsequently reject any such
workmanship or materials.

 

  (e) Fees and Expenses. Regardless of whether the Loan is made or all funds are
advanced hereunder, Borrower agrees to pay all expenses incurred by Bank or by
Borrower in order to meet the Bank’s requirements in connection with the Loan,
including without limitation commitment fees and renewal fees or deposits to
Bank, appraisal fees, survey fees, recording fees, title insurance premiums,
builder’s risk and other insurance premiums, property taxes, intangible taxes,
engineer’s or inspector’s fees (including agents of the Bank), and such
reasonable legal fees incurred by Bank in connection with the making of the Loan
and the enforcement of the Bank’s rights hereunder. Bank may pay any such
amounts and, if Borrower shall not reimburse Bank therefor, Bank may add same to
the unpaid principal balance of the Loan.

 

  (f) Use of Loan Funds. Borrower shall use all Loan proceeds solely in payment
of costs incurred in connection with acquiring, constructing the Improvements
on, and developing the Mortgaged Property, in accordance with the Construction
Documents and the Construction Budget furnished by the Borrower. Borrower shall
furnish, whenever requested, statements showing an itemization of all
expenditures and unpaid invoices.

 

  (g) Bonds. Bank shall have no obligation or liability in connection with any
bonds, including performance or completion bonds, that may be obtained in order
to develop the Mortgaged Property.

 

  (h) Additional Documentation. At the request of Bank, Borrower shall perform
any act or execute any additional documents required by Bank to secure the Loan,
to confirm the first priority lien of the Deed of Trust, to comply with this
Loan Agreement, or to correct any error or defect in any one of the Loan
Documents.

 

  (i) Deposits to Cover Deficiencies. If and whenever Bank shall determine and
notify Borrower that the amount of unadvanced Loan proceeds is less than the
amount required to fully complete and pay for the Improvements and Bank shall
demand that Borrower deposit with Bank an amount equal to such deficiency, as
determined by Bank, Borrower shall comply with such demand within ten (10) days
from the date thereof. The judgment and determination of Bank in this regard
shall be final and conclusive.

 

  (j) Termination of Contract with General Contractor. Borrower shall not,
without the prior written approval of Bank, terminate or cancel any contract
with the General Contractor in connection with the construction of the
Improvements. Borrower shall immediately notify Bank in writing of any
additional or substitute contractor(s) with whom Borrower deals, and Bank has
the right to require the submission of any additional documentation regarding
such contractor(s).

 

  (k)

Construction Officer. If checked here x, Bank will designate a construction
officer (which may include an independent architect in the Bank’s sole
discretion, “Construction Officer”) whose duties will include but are not
limited to the following: review of the Construction Documents and all proposed
changes thereto; inspection of the Improvements for basic conformity with the
Construction Documents; determination of the accuracy of Borrower’s draw
requests with regard to the percentage of the construction work completed; and

 

Page 2 of 5

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BB&T

SCHEDULE “CC” TO BB&T LOAN AGREEMENT

 

(Commercial/Residential Construction and/or Development Loan)

 

 

determination that the funds not yet disbursed under the Note are sufficient to
complete the Improvements in accordance with the Construction Documents.
Inspections by the Construction Officer shall not be building code compliance or
quality inspections.

 

CC.07. Additional Events of Default. In addition to the Events of Default listed
in Section 7 of the Loan Agreement and in the Note, each of the following shall
also constitute an Event of Default under the Loan Agreement after passage of
any applicable grace or cure period:

 

  (a) Any material deviation from the Construction Documents without the prior
written approval of the Bank.

 

  (b) The appearance of defective workmanship or unsatisfactory or unsuitable
materials in the Improvements.

 

  (c) The appearance on any survey required hereunder of easements or
encroachments which have occurred without the prior written approval of the Bank
and which are not removed or corrected within ten (10) business days after
written notice thereof to Borrower.

 

  (d) Cessation of the work of construction prior to the Completion Date for a
continuous period of ten (10) business days or more for causes other than those
beyond the control of Borrower (force majeure) and consented to in writing by
Bank; or the failure of Borrower to complete all Improvements as required
herein.

 

  (e) Borrower neglects, fails, or refuses to keep in full force and effect any
permit or approval with respect to the construction, occupation, or use of the
Project.

 

  (f) Borrower neglects, fails, or refuses to keep in full force and effect the
hazard, liability, or builder’s risk insurance required under this Loan
Agreement.

 

  (g) Any suit is filed against Borrower or Guarantor which, if adversely
determined, could substantially impair the ability of Borrower or Guarantor to
perform any of their obligations under the Loan Documents and such suit is not
dismissed within twenty (20) business days after the filing thereof.

 

  (h) Borrower fails to keep the Mortgaged Property free and clear of all
encumbrances, liens, deeds of trust, security interests, and any and all
secondary financing other than those appearing in Bank’s title policy insuring
the Deed of Trust, except as may be approved in writing by the Bank in advance.

 

  (i) The removal of any materials from the Mortgaged Property or the
Improvements if said materials were funded by the Borrower’s Equity or by a Loan
advance.

 

  (j) Any sale, transfer, or conveyance of the Mortgaged Property or any portion
thereof.

 

CC.08. Additional Rights and Remedies. In addition to the rights and remedies
specified in the Loan Agreement, Bank shall have the following rights and
remedies:

 

  (a) Assignment/Completion of Construction. As additional security for the
payment of the Loan, Borrower hereby assigns to Bank all of Borrower’s right,
title, and interest in contracts related to the construction of the
Improvements, including without limitation the construction contract with the
General Contractor, the architect’s contract, the Construction Documents, the
permanent loan commitment, if any, and any permits obtained, but this assignment
shall not, in the absence of affirmative ratification of such contracts by Bank,
be deemed to impose upon Bank any of the Borrower’s obligations under any such
contract. Borrower hereby empowers and appoints Bank its true and lawful
attorney-in-fact, with full power of substitution in the premises to complete
the Improvements in the name of Borrower. Borrower hereby empowers said attorney
as follows: (1) to use any funds of Borrower, including any funds which may
remain unadvanced under the Loan, for the purpose of completing the Improvements
in accordance with the Construction Documents; (2) to make such additions,
changes, and corrections in the Construction Documents as shall be necessary or
desirable to complete the Improvements; (3) to employ such contractors,
subcontractors, agents, architects, engineers, and inspectors as shall be
required for said purposes; (4) to pay, settle, or compromise all existing bills
and claims which may be liens against Improvements, or as may be necessary or
desirable in the sole discretion of the Bank for the completion of the
Improvements or for clearance of title; (5) to take over and use all or any part
of the labor, materials, supplies, and equipment contracted for, or owned by, or
under the control of Borrower; (6) to execute all applications and certificates
in the name of Borrower which may be required by any of the contract documents;
(7) to prosecute and defend all actions or proceedings in connection with the
Mortgaged Property or the construction of the Improvements and take such action
and require such performance as Bank shall deem necessary under any performance
or payment bond; and (8) to do any and every act with respect to construction or
completion of the Improvements or the closing of any permanent financing which
Borrower might do in its own behalf including, without limitation, execution,
acknowledgment, and delivery of all instruments, documents, and papers in the
name of Borrower as may be necessary or desirable in the sole discretion of
Bank. It is further agreed that this power of attorney, which shall be deemed to
be a power coupled with an interest, is irrevocable. All sums so expended by
Bank shall be deemed to have been advanced to Borrower pursuant to this Loan
Agreement and secured by the Deed of Trust and the other Loan Documents.
Borrower hereby assigns to Bank all sums unadvanced under the Loan, such
assignment to be effective only in case of acceleration of the Loan by Bank.

 

  (b) Disputes. Where disputes have arisen which, in the opinion of Bank, may
endanger timely completion of the Improvements or fulfillment of any condition
precedent or covenant herein, Bank may agree to advance Loan funds for the
account of Borrower without prejudice to Borrower’s rights, if any, to recover
said funds from the party to whom paid. Such agreement or agreements may take
the form which Bank in its discretion deems proper, including without limitation
agreements to indemnify (on behalf of Borrower and/or for Bank’s own account)
any title insurer against possible assertion of lien claims. All sums paid or
agreed to be paid pursuant to such undertaking shall be for the account of
Borrower, and Borrower agrees to reimburse Bank for any such payments made upon
demand therefor, with interest at the rate applicable under the Note from the
day of payment until the date of reimbursement. Such payments are secured by the
Deed of Trust and by the other applicable Loan Documents.

 

  (c) Remedies Cumulative/Nonwaiver. All remedies of Bank provided for herein or
in the other Loan Documents are cumulative and shall be in addition to any and
all other rights and remedies provided for or available under the other Loan
Documents, at law or in equity. The exercise of any right or remedy by Bank
hereunder shall not in any way constitute a cure or waiver of default hereunder
or under any of the applicable Loan Documents, or invalidate any act done
pursuant to any notice of default, or prejudice the Bank in the exercise of any
of its rights hereunder or under the Loan Documents unless, in the exercise of
said rights, Bank realized all amounts owed to it under the Loan Documents.

 

  (d) No Liability of the Bank. Whether or not Bank elects to employ any or all
remedies available to it upon an Event of Default, Bank shall not be liable for
the construction of or failure to construct, to complete, or to protect the
Improvements, for payment of any expense incurred in connection with the
exercise of any remedy available to Bank, or for the performance or
nonperformance of any other obligation of Borrower.

 

  (e) Security Interest. It is understood and agreed that Bank shall have and is
hereby granted a lien on and a security interest in any and all now or later
arising reserves, deferred payments, advanced Loan proceeds, insurance refunds,
insurance claims, deposit accounts held by Bank in Borrower’s name, impound
accounts, refunds for overpayment of any kind, and any surplus of withheld funds
resulting from the invalidity of “stop notice” claims or the failure of
claimants to prosecute their claims to judgment, to the extent the same arise
out of or occur in connection with the construction of the Improvements, and
such lien and security interest shall constitute additional security for the
Loan, and upon the occurrence of any Event or Default hereunder, Bank shall have
and possess any and all remedies of a secured party provided by law with respect
to enforcement of and recovery on its security interest on such items and
amounts.

 

  (f)

Assignment. It is expressly recognized and agreed that Bank may assign this Loan
Agreement, the Note, the Deed of Trust, and any other Loan Documents to any
other person, firm, or legal entity, that all of the provisions thereof shall
continue in full force and effect, and, in the event of such assignment, that
Bank shall thereafter be relieved of all liability hereunder and any Loan
advances made by any assignee

 

Page 3 of 5

--------------------------------------------------------------------------------

BB&T

SCHEDULE “CC” TO BB&T LOAN AGREEMENT

 

(Commercial/Residential Construction and/or Development Loan)

 

 

shall be deemed made in pursuance and not in modification hereof and shall be
evidenced by the Note and secured by the Deed of Trust and any other Loan
Documents.

 

  (g) Publicity. Bank shall have the right to place upon the Mortgaged Property
a sign or signs advertising the fact that financing is being provided by Bank.

 

  (h) No Third Party Beneficiaries. This Loan Agreement is made and entered into
for the sole protection and benefit of Bank and Borrower, their successors and
assigns, and no third person or persons shall have any right to action hereon or
rights to the Loan funds at any time, nor shall Bank owe any duty whatsoever to
any claimant for labor performed or material furnished in connection with the
construction of the Improvements, or to apply any undisbursed portion of the
Loan to the Improvements, or to apply any undisbursed portion of the Loan to the
payment of any such claim, or to exercise any right or power of Bank hereunder
or arising from any default by Borrower.

 

(SIGNATURES ON FOLLOWING PAGE)

 

Page 4 of 5

--------------------------------------------------------------------------------

BB&T

SCHEDULE “CC” TO BB&T LOAN AGREEMENT

 

(Commercial/Residential Construction and/or Development Loan)

 

SIGNATURE PAGE

 

IN WITNESS WHEREOF, the Bank, Borrower and Guarantor(s) have caused this
Agreement to be duly executed under seal all as of the date first above written.

 

Borrower is a Corporation:

 

ATTEST:

     

--------------------------------------------------------------------------------

        Name of Corporation

 

--------------------------------------------------------------------------------

      By:  

See Attached Signature Page

--------------------------------------------------------------------------------

           

Title:

 

 

--------------------------------------------------------------------------------

(SEAL)

--------------------------------------------------------------------------------

      By:  

 

--------------------------------------------------------------------------------

           

Title:

 

 

--------------------------------------------------------------------------------

 

Borrower is a Partnership, Limited Liability Company, or Limited Liability
Partnership:

 

WITNESS:

     

 

--------------------------------------------------------------------------------

 

(SEAL)

        Name of Partnership, LLC or LLP    

 

--------------------------------------------------------------------------------

      By:  

See Attached Signature Page

--------------------------------------------------------------------------------

 

(SEAL)

            General Partner or Manager          

--------------------------------------------------------------------------------

 

     

By:

 

 

 

--------------------------------------------------------------------------------

 

(SEAL)

            General Partner or Manager

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

     

By:

 

 

 

--------------------------------------------------------------------------------

 

(SEAL)

            General Partner or Manager          

 

WITNESS:

      BRANCH BANKING AND TRUST COMPANY

 

--------------------------------------------------------------------------------

      By:  

/s/ Margaret A. Brady

--------------------------------------------------------------------------------

                Margaret A. Brady            

Title:

  Vice President              

--------------------------------------------------------------------------------

 

Page 5 of 5

--------------------------------------------------------------------------------

       

EMBREX, INC.,

a North Carolina corporation

Attest:

       

/s/ Don T. Seaquist

--------------------------------------------------------------------------------

      By:  

/s/ Randall L. Marcuson

--------------------------------------------------------------------------------

Don T. Seaquist, Secretary

         

Randall L. Marcuson

President & CEO

 

[CORPORATE SEAL]

 

STATE OF NORTH CAROLINA

 

COUNTY OF ORANGE

 

I, Hannah J. Chase, a Notary Public of Orange County, State of North Carolina,
do hereby certify that Don T. Seaquist personally came before me this day and
acknowledged that he is Secretary of Embrex, Inc., a North Carolina corporation,
and that, by authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by its President, sealed with its
corporate seal, and attested by himself as its Secretary.

 

Witness my hand and official seal, this the 6th day of August, 2003.

 

/s/ Hannah J. Chase

--------------------------------------------------------------------------------

Notary Public

 

My Commission Expires: 12/25/2007

 

[OFFICIAL SEAL]

 

--------------------------------------------------------------------------------

       

EMBREX POULTRY HEALTH, LLC.,

a North Carolina limited liability

company (SEAL)

        By:  

EMBREX, INC.,

a North Carolina corporation,

its manager (SEAL)

Attest:

       

/s/ Don T. Seaquist

--------------------------------------------------------------------------------

      By:  

/s/ Randall L. Marcuson

--------------------------------------------------------------------------------

Don T. Seaquist, Secretary

         

Randall L. Marcuson

President & CEO

 

[CORPORATE SEAL]

 

STATE OF NORTH CAROLINA

 

COUNTY OF ORANGE

 

I, Hannah J. Chase, a Notary Public of Orange County, State of North Carolina,
do hereby certify that Don T. Seaquist personally came before me this day and
acknowledged that he is Secretary of Embrex, Inc., a North Carolina corporation
(the “Corporation”), Manger of Embrex Poultry Health, LLC, a North Carolina
limited liability company (the “Company”), and that, by authority duly given and
(a) as the act of the Corporation and (b) as the act of the Company, the
foregoing instrument was signed in the name of the Company and in the name of
the Corporation by the Corporation’s President, sealed with its corporate seal,
and attested by himself as its Secretary.

 

Witness my hand and official seal, this the 6th day of August, 2003.

 

/s/ Hannah J. Chase

--------------------------------------------------------------------------------

Notary Public

 

My Commission Expires: 12/25/2007

 

[OFFICIAL SEAL]