Exhibit 10.1

LOAN AGREEMENT
(Revolving Credit)

          THIS LOAN AGREEMENT (the “Agreement”) is made and entered into as of
December 17, 2004, by and between [i] Large Scale Biology Corporation, a
Delaware corporation (“LSBC”) and [ii] Large Scale Bioprocessing, Inc., formerly
known as Biosource Merger Corporation, a Delaware corporation (“LSBI”), (each
hereinafter referred to as “Borrower”), having a mailing address of 3700 Airpark
Drive, Owensboro, Kentucky 43301 and [iii] Kentucky Technology, Inc., a Kentucky
corporation (“Lender”) having a mailing address of 1501 Bull Lea Road,
Lexington, Fayette County, Kentucky 40511.

RECITALS

          LSBC and LSBI shall each be a Borrower under this Agreement and the
terms and conditions of this Agreement and the obligations hereunder shall be
binding on each jointly and severally.

          Borrower desires to borrow certain funds from Lender as hereinafter
set forth, and Lender has agreed to extend credit to Borrower upon the terms and
conditions hereinafter set forth.

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants and undertakings contained in this Agreement, Borrower and Lender
agree as follows:

ARTICLE 1. 

DEFINITIONS

          The terms listed in this Article 1 when used and capitalized in this
Agreement shall have the meanings set forth for each by this Section 1.  Certain
other capitalized terms when used in this Agreement shall have the meanings
ascribed to them elsewhere in this Agreement.  Each reference in this Agreement
to a Schedule or Exhibit shall mean a Schedule or Exhibit to this Agreement
unless expressly otherwise indicated and all such Schedules and Exhibits are
incorporated by reference herein.

          1.     “Advance” means a disbursement of funds by Lender to Borrower
pursuant to any Loan Document.

          2.     “Affiliate” means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
or by such Person.  In no event shall Lender be deemed or construed to be an
Affiliate of Borrower.  For purposes of this definition, “control” (including
“controlling,” “controlled by” and “under common control with”) shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or by contract or otherwise.

          3.     “Business Day” means any day other than a Saturday, Sunday or
other day on which state or nationally chartered commercial banking institutions
in Lexington, Kentucky are authorized or required by law to be closed for
business.

          4.     “Closing” means the satisfaction of the conditions and
execution and delivery of the Loan Documents required by this Agreement to be
satisfied and executed and delivered as a condition to Lender’s making any
Advance or otherwise extending any credit under this Agreement.

          5.     “Collateral” means the assets and property of Borrower
identified in the Collateral Schedules annexed hereto, whether tangible or
intangible, real, personal or mixed, which heretofore, now, at the Closing or at
any time thereafter are pledged or granted as security for all or any part of
the Loan, or for all or any part of any guaranty or other accommodation for all
or any part of the Loan.

          6.     “Default Condition” means an event, condition, or thing which,
with the lapse of any applicable permitted grace period or the giving of any
required notice, or both, would constitute an Event of Default.

          7.     “Due Date” shall mean the “Final Maturity Date” as defined in
the Note.

          8.     “Event of Default” means the occurrence or happening of any of
the matters, conditions and events set forth in the Article of this Agreement
entitled “Events of Default.”

          9.     “Loan” means the Revolving Credit Loan.

          10.   “Loan Documents” has the meaning set forth in Schedule 1.

          11.   “Owensboro Facilities” means the real property and facilities of
Borrower located at 3700 AirPark Drive, Owensboro, Kentucky.

          12.   “Note” means the Note described in Schedule 1.

          13.   “Obligations” has the meaning set forth in Schedule 1.

          14.   “Permitted Exceptions” means those exceptions to title to the
Collateral described in the Permitted Exceptions Schedule attached hereto as
Schedule 2.

          15.   “Person” means any natural person, sole proprietorship, private
or public corporation, partnership (general or limited), limited liability
company, trust, business trust, joint venture, unincorporated organization or
association, or any other entity of whatever nature.

          16.   “Prepayment Date” shall mean any date prior to the Due Date on
which all principal and interest due under the Note is paid in full.

          17.   “Registration Rights Agreement” means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Borrower  and
Lender, in the form of Exhibit B hereto.

          18.   “Revolving Credit Loan” means indebtedness from Borrower to
Lender in an aggregate principal amount at any one time outstanding not
exceeding $2,900,000.00 created pursuant to the revolving line of credit
extended by Lender to Borrower upon the terms and conditions of the Article of
this Agreement entitled “Revolving Credit Loan.”

          19.   “Subsidiary” means, with respect to any Person, any other
Person, five percent (5%) or more of the partnership, stock or other ownership
interest having voting power or other power to control such Person shall, at the
time as of which any determination is being made, be owned by the Person first
mentioned.

          20.   “Warrant” means the Common Stock Purchase Warrant, in the form
of Exhibit A.   

ARTICLE 2.

GENERAL UNDERTAKINGS

          The Lender has as one of its stated missions and goals, to enhance the
educational, research and economic development of the University of Kentucky and
the Commonwealth of Kentucky.  Borrower possesses certain technology, the
development and pursuit of which is expected to foster further research and
economic development within the Commonwealth of Kentucky.  Funds loaned to
Borrower pursuant to this Agreement are intended to further the Lender’s mission
by providing Borrower with funds critical to the further development and
commercialization of its technologies for plant made pharmaceuticals as
described in the Intellectual Property Schedule annexed hereto as Schedule 4
(“Intellectual Property”) and innovative programs relating thereto utilized at
its Owensboro Facilities. To enhance the benefits to Borrower of the
relationship created by this Agreement, Borrower and Lender shall explore the
establishment of such cooperative and collaborative programs among them and with
the University of Kentucky, and its professors, researchers and other employees
and agents (collectively “UKY”), as the parties hereto may deem reasonable and
appropriate to foster Borrower’s further development of its technologies and
innovations utilized at the Owensboro Facility.  To enhance the benefits to
Lender and its affiliate, the University of Kentucky, of the relationship
created by this Agreement, Borrower agrees that, for a period of five (5) years
following execution of this Agreement, UKY may utilize the Intellectual Property
for educational and non-commercial internal research purposes on a
non-exclusive, royalty free basis and, during the term of the Loan Agreement,
may on reasonable terms and at reasonable times have access to Borrower’s
Owensboro Facilities in connection therewith. Further, for a period of five (5)
years following the execution of this Agreement, Borrower and Lender shall work
to establish programs pursuant to which Borrower would permit third parties to
have access to Borrower’s Owensboro Facilities and the Intellectual Property on
commercially reasonable terms, to be negotiated, in conjunction with UKY’s
incubator or related commercial projects. 

ARTICLE 3.

REVOLVING CREDIT LOAN; ISSUANCE OF WARRANTS

          1.     Revolving Credit Loan Commitment.  Lender agrees to disburse to
Borrower from time to time after the date of Closing, subject to and in
accordance with the terms and conditions of this Agreement, an aggregate
principal amount not to exceed at any one time outstanding the lesser of
$2,900,000.00 or the amount which is prescribed by the Section of this Agreement
entitled “Limitation of Commitment.”  Within such limits, Borrower may borrow,
repay and reborrow.  All Advances by Lender to Borrower of the Revolving Credit
Loan shall be evidenced by the “Revolving Credit Note” delivered in conjunction
with the Closing. Anything to the contrary contained in this Article or this
Agreement or the other Loan Documents to the contrary notwithstanding, Borrower
shall not be entitled to obtain and Lender shall not be required to make any
Advance of the Revolving Credit Loan at any time at which there exists a Default
Condition or Event of Default under this Agreement.

          2.     Advances.  The initial Advance under this Agreement shall be in
the amount of $1,000,000.00 and shall be made upon Lender’s receipt of a final
mortgage policy of title insurance (or a marked version of the commitment
delivered pursuant to Section 2(J) hereof) insuring the lien of the mortgage in
the amount of $2,900,000.00.  Subject to Borrower’s continued compliance with
the terms and conditions of this Agreement, a second Advance in the amount of
$1,900,000.00 shall be made on January 14, 2005.

          3      Limitation of Commitment.  Notwithstanding any other provision
of this or any other Loan Document, the aggregate unpaid principal amount of
Advances of the Revolving Credit Loan shall not at any time exceed an amount
(the “Commitment Limit”) equal to $2,900,000.00 (the “Dollar Limitation”).

          4.     Termination of Commitment.  Lender’s obligation to make
Advances under the Revolving Credit Loan (the “Commitment”) shall continue until
the earlier of June 17, 2006, or any later date or dates, if applicable, as to
which Borrower and Lender (each in their sole and absolute discretion, which may
be exercised arbitrarily) may agree in writing (June 17, 2006 or such later date
is referred to herein as the “Revolving Credit Expiration Date”), and the amount
of all Advances not earlier repaid, together with interest thereon, shall be due
and payable in full as of the Revolving Credit Expiration Date.

          5.     Purpose; Security for Revolving Credit Loan.  Borrower shall
use Advances made under the Revolving Credit Loan for i) the repayment in full
of an existing loan from the Kentucky Economic Development and Finance Authority
(“KEDFA Loan”), ii) for working capital of Borrower and iii) acquisition of
machinery and equipment to be installed at the Owensboro Facilities and for no
other purpose.

          6.     Source of Funds.  Lender and Borrower acknowledge that the
source of funds for the Loan is a grant from the University of Kentucky Research
Foundation to the Lender and that the source of funds for that grant is itself a
grant from the Commonwealth of Kentucky.  Lender shall use reasonable efforts to
cause such funding and grant to be made and shall promptly notify Borrower with
respect to all material developments relating thereto. To the extent the Lender
fails to receive the grant, or any portion thereof, from the University of
Kentucky Research Foundation, then Lender’s obligation to make Advances under
this Agreement shall be reduced by an amount equal to the reduction in the grant
from the University of Kentucky Research Foundation to Lender.  If, as a result
of a lack of funding under the grant, Lender is unable to fund the additional
$1,900,000.00 to be advanced pursuant to Article 3, paragraph 2 of this
Agreement (or, if at any time the outstanding principal balance of the loan and
Lender’s commitment to lend to Borrower, is reduced to an amount not in excess
of $1,500,000.00), Lender agrees to release any security interest granted to the
Lender in the Intellectual Property. 

          7.     Issuance of Warrants.  Subject to the terms of this Loan
Agreement, LSBC agrees to issue to Lender, or Lender’s designee, at the Closing
a Common Stock Purchase Warrant in substantially the form annexed hereto as
Exhibit A.

ARTICLE 4.

SECURITY AND OTHER ASSURANCES FOR LOAN

          1.     Security for Loan.  The indebtedness evidenced by the Note and
all of the other Obligations shall be secured by the following:

                         A.     A continuing first priority mortgage lien
(subject only to the applicable Permitted Exceptions) on the interests of
Borrower in and to the land, buildings, improvements and other real property
(collectively, the “Real Property Collateral”) located in Daviess County,
Kentucky, and described in the Real Property Collateral Schedule; and

                         B.     A continuing first priority security interest
(subject only to the applicable Permitted Exceptions), in all fixtures,
machinery and equipment of Borrower located at or within the Real Property
described on the Real Property Collateral Schedule, and all patented
intellectual property and related know-how used at the Real Property to conduct
Borrower’s business as described in the attached Intellectual Property
Collateral Schedule (the “Intellectual Property”) and all of the foregoing
whether now or hereafter owned or existing, created, arising or acquired, and
all proceeds thereof in each case (collectively, the “Personal Property
Collateral”).

ARTICLE 5.

LOAN CLOSING AND CONDITIONS

          1.     Date and Place of Closing.  The Closing shall take place on
December 17, 2004, at the offices of Dinsmore & Shohl LLP, Lexington Financial
Center, Suite 1400, Lexington, Kentucky 40507 at 10:00 a.m., Lexington, Kentucky
time, or at such other time or place as shall be agreed upon by Lender and
Borrower.

          2.     Conditions to Closing.  At or prior to the Closing, Borrower
shall deliver or cause to be delivered to Lender each of the following Loan
Documents, duly authorized, executed and in form and substance satisfactory to
Lender, and shall satisfy or cause to be satisfied in a manner acceptable to
Lender each condition set forth in this Section:

                         A.     This Agreement;

                         B.     The Note;

                         C.     A security agreement (the “Security Agreement”)
granting to Lender a security interest in the Personal Property Collateral as
security for the Obligations;

                         D.     A mortgage (the “Mortgage”) encumbering the Real
Property Collateral as security for the Obligations;

                         E.     UCC-1 and other Financing Statements (the
“Financing Statements”) necessary to perfect the security interests granted
pursuant to the Security Agreement and the Mortgages;

                         F.     A Warrant Agreement in the form attached hereto
as Exhibit A, and a Registration Rights Agreement in the form attached hereto as
Exhibit B;

                         G.     Certificates of “existence” or “good standing”
for Borrower issued by the Office of Secretary of State (or comparable office)
of Borrower’s incorporation and dated as of a date not earlier than 30 days
prior to the date of Closing, together with certificates executed by the
Secretary or Assistant Secretary of Borrower (the “Secretary’s Certificates”),
certifying, as of the date of the Closing [i] as to the incumbency and the true
signatures of the officers of Borrower executing the Loan Documents, and
[ii] that the copy, which shall be attached to or incorporated in the
Secretary’s Certificates, of resolutions authorizing the execution and delivery
of this Agreement, the Notes and all other Loan Documents to be executed by
Borrower have been adopted by the Boards of Directors of Borrower and remain
unmodified and in full force and effect as of the Closing, and [iii] that
attached thereto are complete and accurate copies as of the date thereof of the
Articles of Incorporation and Bylaws of the Borrower.

                         H.     An ACORD 27 or other evidence satisfactory to
Lender of fire and, extended coverage insurance of the Real Property Collateral
subject to the Mortgage, containing standard mortgagee and lender loss payee
clauses in favor of Lender, and evidence that the property of Borrower which is
Collateral for the Loan is insured under standard lender loss payee clauses in
favor of  Lender , all in amounts and coverages acceptable to Lender;

                         I.     An ACORD 25 or other evidence satisfactory to
Lender that Lender has been named as an additional insured under policies of
comprehensive general liability insurance maintained by Borrower applicable to
the Real Property Collateral;

                         J.     A commitment for a standard ALTA form mortgage
policy of title insurance issued by an insurer acceptable to Lender insuring the
lien of the Mortgage in an amount not less than $2,900,000.00 with such
endorsements, including a revolving credit endorsement, and with the Permitted
Exceptions as the only exceptions to coverage.

                         K.     Evidence satisfactory to Lender that a complete
chattel search for liens or encumbrances against the Collateral has been
conducted and that there are no liens, claims or encumbrances against the
Collateral except any which are Permitted Exceptions;

                         L.     A favorable opinion of counsel for Borrower as
to certain of the matters set forth in the Article of this Agreement which is
entitled “Representations and Warranties” in form and substance acceptable to
Lender;

                         M.     Such other documents and instruments as Lender
may reasonably request to insure the binding effect in accordance with the terms
thereof of any Loan Document, or to effect the intent of this Agreement and to
establish the security for the benefit of Lender contemplated by it.

          3.     Further Assurances of Borrower.

                         A.     Regardless of whether the Closing shall occur or
the transactions contemplated by this Agreement shall be consummated, Borrower
shall reimburse Lender, at the Closing or at such earlier time as it may be
determined that no Closing shall occur, for Lender’s expenses, including
reasonable counsel and other fees, incurred in connection with the negotiation,
preparation and execution of the Loan Documents; examinations of title, records
and properties; and all other reasonable expenses of whatsoever nature incurred
in connection with the Closing (“Lender’s Loan Transaction Expenses”).

                         B.     Borrower, as a condition to Closing, shall have
complied with all of the terms and conditions of this Agreement to be performed
or complied with by Borrower prior to or at the Closing; the Representations and
Warranties contained in the Article of this Agreement entitled “Representations
and Warranties” shall be true and correct; and no condition or event shall have
occurred which would at the time of the Closing constitute a Default Condition
or an Event of Default.

ARTICLE 6.

REPRESENTATIONS AND WARRANTIES

          To induce Lender to enter into this Agreement, Borrower makes the
following representations and warranties, which shall be deemed to be continuing
in nature until all of the Obligations have been paid in full and restated any
time any Advance of a Loan is requested or made:

          1.     Existence of Entity.  Borrower is a corporation, validly
existing and in good standing under the laws of Delaware, has the corporate
power to own its properties and assets, to carry on the businesses in which it
is engaged, and to execute and perform this Agreement and all Loan Documents to
be executed by it, and is duly qualified to do business in Kentucky and in all
jurisdictions where such qualification is necessary or advisable. 

          2.     Authorization.  The execution, delivery and performance by
Borrower of this Agreement and all other Loan Documents to which Borrower is a
party have been duly authorized by all requisite action of Borrower and will not
violate any provisions of law or of the articles of incorporation, charter or
bylaws of Borrower, or any amendments thereto; will not be in conflict with,
result in a breach of, or constitute a default under, any agreement to which
Borrower is a party or any order, writ, injunction or decree of any court or
governmental instrumentality; and will not result in the creation or imposition
of any lien, charge or encumbrance upon any property of Borrower other than as
created by the Loan Documents.

          3.     Right to Act; Enforceability.  No registration with, notice to,
consent or approval of any third party, including any governmental agency of any
kind, is required for the due execution and delivery of, or for the
enforceability of, this Agreement or any other Loan Document.  The Persons
executing and delivering this Agreement and the other Loan Documents on behalf
of Borrower have been duly authorized to do so, and this Agreement and the
applicable Loan Documents are legally binding upon the Borrower and are
enforceable in accordance with their terms, except to the extent the validity or
enforceability of any Loan Document may be affected by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
relating to or affecting the rights of creditors generally, and excepting the
availability of any equitable or specific remedy as may be provided therein.

          4.     Litigation and Taxes.  Except as set forth in Schedule 5
annexed hereto, no litigation or proceeding involving Borrower, material to the
business operations or financial condition of Borrower, is pending or threatened
in any court or before any administrative agency, federal, state or local. 
Borrower is not in default in the payment of any tax, nor is any assessment
threatened in respect thereof, and Borrower has timely filed all federal, state
and local tax returns and paid all taxes required to be paid therewith.

          5.     Financial Statements.  The Borrower’s financial statements
contained in Form 10-Q filed with the Securities and Exchange Commission for the
period ending September 30, 2004, heretofore furnished to Lender, are true and
complete, have been prepared in accordance with the internal accounting
principles and procedures consistently utilized by the Borrower and were
prepared from the books and records of the Borrower.  Such books and records are
complete and correct in all material respects and accurately reflect all of the
transactions of the Borrower.

          6.     Title to Properties; Liens.  Borrower has good and marketable
title to all properties owned by it, and none of the Collateral is subject to
any liens, charges, encumbrances or pledges except the Permitted Exceptions.

          7.     Licenses; Compliance with Laws.  Borrower has obtained all
governmental, administrative and other licenses, permits and other
authorizations required by law to be obtained or made in order to permit the
operation of the Borrower’s operations, and as are necessary to the carrying on
of its businesses, except for any such authorizations or filings which are not
currently so required and which, in the reasonable judgment of the Borrower, can
be obtained or made without difficulty prior to the time so required.  The
Borrower is in material compliance with all laws and regulations, including
without limitation all environmental, occupational safety and health, and
workers’ compensation laws and regulations, applicable to those businesses where
failure to comply would have a material adverse effect on the business or
financial condition of Borrower.  Borrower has not received and has no knowledge
of any notice, not heretofore complied with, from any federal, state or local
authority or any insurance or inspection body to the effect that any of its
properties, facilities, equipment or business procedures or practices of
Borrower fail to comply in any material respect with any applicable law,
ordinance, regulation, building or zoning law, or any other requirements of any
such authority or body.

          8.     Trademarks, Patents, Licenses.  To the best of Borrower’s
knowledge, information and belief, Borrower possesses all trademarks, trademark
rights, patents, patent rights, licenses, permits, trade names, trade name
rights, copyrights and approvals which are required to conduct its business as
now conducted without conflicting with the rights of others.

          9.     Contracts and Agreements.  Borrower is not a party to or bound
by any agreement, contract, instrument or understanding or commitment of any
kind or subject to any corporate or other restriction, the performance or
observance of which by Borrower now has or, as far as Borrower can reasonably
foresee, may have a material adverse effect, financial or otherwise, upon the
assets or business of Borrower taken as a whole.  Neither Borrower, nor any
other Person party to a contract or agreement material to the financial
condition or operations of Borrower taken as a whole, is in default under any
such contract or agreement, and to the knowledge of Borrower no event has
occurred which, but for the giving of notice or the passage of time, or both,
would constitute a default thereunder.

          10.   Regulations U and X.  Borrower does not own and no part of the
proceeds of the Loan will be used to purchase or carry any margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System) or to extend credit to others for the purpose of purchasing or carrying
any margin stock.  Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any margin stock.  If requested by Lender, Borrower will
furnish to Lender a statement in conformity with the requirements of Federal
Reserve Form U-1 referred to in said Regulation.  No part of the proceeds of the
Loan to Borrower will be used for any purpose which violates or is inconsistent
with the provisions of Regulation X of said Board of Governors.

          11.   ERISA.  Except as specifically disclosed to Lender in writing
prior to the date of this Agreement:  [1] there is no accumulated funding
deficiency with respect to any employee pension benefit plan as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) of Borrower, [2] no reportable event has occurred with respect to any
such plan, [3] Borrower has not incurred withdrawal liability with respect to
any multiemployer plan (as defined in Section 3(37) of ERISA) that has not been
satisfied in full, and [4] to the best of Borrower’s knowledge, no such
multiemployer plan is in reorganization.  No liability (whether or not such
liability is being litigated) has been asserted against Borrower in connection
with any such employee pension plan or any such multiemployer plan by the
Pension Benefit Guaranty Corporation (“PBGC”), by a trustee appointed pursuant
to Section 4042(b) or (c) of ERISA, or by a sponsor or an agent of a sponsor of
such multiemployer plan, and no lien has been attached and no Person has
threatened to attach a lien on any of Borrower’s property as a result of failure
to comply with ERISA, or as a result of the termination of any such employee
pension benefit plan.  Any actuarial report for any such employee pension plan
heretofore or hereafter furnished to Lender by Borrower, is or will be accurate
in all material respects.  Borrower has no unfulfilled obligation to contribute
to any such multiemployer plan.  Borrower has not engaged in any “prohibited
transaction” (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) or any other breach of fiduciary responsibility under Part 4, Subtitle
B, Title I or ERISA that could subject Borrower or any officer of the Borrower
to the tax or penalty on prohibited transactions imposed by such Section 4975 or
to any liability under Section 502(i) or (1) or ERISA.

          12.   Environmental Matters.   Based on all appropriate inquiries by
it, Borrower does not know or have reason to know of any activity on the Real
Property Collateral which has been conducted, or is being conducted, except in
compliance with all federal, state and local statutes (including but not limited
to the Comprehensive Environmental Response, Compensation and Liability Act 42
U.S.C. 9601, et seq., as amended, and the Resource Conversation and Recovery
Act, 42 U.S.C. 6901, et seq., as amended), ordinances, regulations, orders and
requirements of common law concerning [i] those activities, [ii] repairs or
construction of any improvements, [iii] handling of any materials,
[iv] discharges to the air, soil, surface water, or ground water, [v] storage,
treatment or disposal of any waste at or connected with any activity at the Real
Property Collateral, and [vi] health, safety and the environment (“Environmental
Laws”), and no “hazardous substance” as defined in 42 U.S.C. 9601(14) or toxic,
dangerous or other substance regulated under Environmental Laws (collectively,
“Hazardous Substances”) has been transported from or discharged or released onto
any of the Real Property Collateral by Borrower or, to the best knowledge and
belief of Borrower, any other Person, which has not been disposed of in a manner
permitted by law and as to which Borrower is subject to no additional liability
(contingent or otherwise) for clean-up, disposal or consequential damages
resulting from such discharge.

          13.   Default.  No Default Condition or Event of Default exists under
any Loan Document, nor will any such default begin to exist immediately after
the execution and delivery of any Loan Document.

          14.   Disclosure.  Neither this Agreement, nor any of the other Loan
Documents, nor any certificate or other document furnished to Lender by or on
behalf of Borrower pursuant to any Loan Document contains, or will contain, as
of its date, any untrue statement of a material fact or omits to state or will
omit to state, as of its date, a material fact necessary in order to make the
statements contained herein and therein not misleading.  There are no facts
known to Borrower which, individually or in the aggregate, materially adversely
affect or involve any substantial possibility of materially adversely affecting
the condition, business or affairs of Borrower or its properties and assets
considered as an entirety which have not been disclosed herein.

ARTICLE 7.

COVENANTS

          Borrower covenants that as long as this Agreement is in effect and
outstanding and until all Obligations are paid and satisfied in full:

          1.     Insurance.  Without limitation of more specific requirements
concerning insurance contained in any other Loan Document, Borrower will
maintain or cause to be maintained, with financially sound and reputable
insurers, such insurance with respect to its properties, assets and business,
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
under similar circumstances by such other corporations.  Borrower shall furnish
Lender from time to time, promptly upon request of Lender, with evidence
satisfactory to Lender that such insurance is in effect and that such insurance,
to the extent it covers Collateral, names Lender as an insured-loss payee
pursuant to a standard lender’s endorsement in form and substance acceptable to
Lender.

          2.     Obligations.  Borrower shall pay in full:

                         A.     prior in each case to the respective dates when
penalties would attach, all taxes, assessments and governmental charges and
levies (except only those which shall be contested in good faith by appropriate
and timely legal proceedings and as to which adequate reserves or other
provision shall be established on the books of Borrower in accordance with
generally accepted accounting principles, consistently applied) assessed or
asserted against Borrower, or any of its property;

                         B.     except with respect to obligations for borrowed
funds, on or prior to their respective due dates or performance dates, all
debts, obligations and liabilities for which Borrower may be or become liable or
to which any or all of its properties may be or become subject, which if not so
paid could have a material adverse effect upon the condition, business or
affairs of Borrower; and

                         C.     on or prior to their respective due dates, or
within any grace period or period of cure, all obligations due on account of any
borrowed funds.

          3.     Financial Statements; Compliance Certificates. 

          4.          A.     The Borrower covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
quarterly and annual financial statements and other reports required to be filed
by LSBC after the date hereof pursuant to the Securities Exchange Act of 1934,
as amended. (“Exchange Act”). Borrower shall provide to Lender courtesy copies
of all such reports containing financial statements promptly after the filing
thereof; and the filing or providing to Lender of such financial statements
shall be deemed a representation by Borrower to Lender as to the accuracy of the
matters set forth therein.

                       B.     Borrower shall furnish or cause to be furnished to
Lender within forty-five (45) days after the end of each calendar quarter a
certificate (“Compliance Certificate”) in the form of the Compliance Certificate
Schedule confirming whether or not as of such date Borrower is in compliance
with certain of the financial and other covenants contained in this Agreement a
certificate signed by an officer of Borrower, certifying that such officer has
reviewed the relevant terms of this Agreement and the other Loan Documents, has
made, or caused to be made under his supervision, an adequate review of the
transactions and condition of Borrower during such period and as at the date of
such signing, and that such review has not disclosed the existence, during such
period or as at the date of such signing, of any Event of Default or Default
Condition, or if so, specifying the nature and period of existence thereof and
what action Borrower has taken or is taking or proposes to take with respect
thereto together with a certification that Borrower as at the end of such month
was, or was not, in compliance with the financial covenants set forth in the
Section of this Agreement entitled “Financial Statements,” and a schedule
disclosing the calculations forming the basis for such certification.

                       C.     At least once each calendar year, at the sole
election of Lender, Lender may conduct or cause to be conducted, upon adequate
advance notice and at Lender’s expense, a field audit of Borrower’s Collateral,
and Borrower shall cooperate as requested by Lender in any such audit.  Such
audit shall be conducted so as not to unnecessarily interfere with the
operations of Borrower.

                       D.     Borrower shall furnish or cause to be furnished to
Lender with reasonable promptness, such other financial data and information
with respect to the Borrower as from time to time may reasonably be requested,
including without limitation, any such data or information which may be
requested of Lender by any governmental or public body or agency having
jurisdiction over Lender.

          5.     Financial Records and Assets.  Borrower shall:

                       A.     At all times keep true and complete financial
records in accordance with accounting principles and procedures consistently
utilized by the Borrower;

                       B.     At all reasonable times during the customary
business hours of Borrower maintain or make readily available to Lender the
books and records of Borrower at the principal office of Borrower.

                       C.     Permit any authorized representative of Lender to
visit and inspect the Owensboro Facilities and any of Borrower’s properties
therein, including the financial books and records of Borrower (and to make
copies thereof and take extracts therefrom), upon reasonable advance notice and
under conditions of confidentiality, and to discuss the affairs, finances and
accounts of Borrower with the officers and directors of Borrower at all
reasonable times.

          6.     Properties and Operations.  Borrower shall continuously operate
its Owensboro Facility and actively pursue use and development of the
Intellectual Property and shall also maintain its material plants, equipment,
warehouses including, without limitation, the Real Property Collateral, and
other fixed and operating assets in good condition and repair, subject only to
normal wear and use; and Lender shall have the right to inspect the same from
time to time, and the assets  of Borrower maintained therein.  Borrower shall
not substantially change the basic nature of its business as presently conducted
at the Owensboro Facility without the prior written consent of Lender, provided
such consent is not unreasonably withheld or delayed.  Borrower shall disclose
to Lender any substantial change anticipated in the manner in which its
businesses are now operated, prior to such changes becoming effective.

          7.     Intentionally omitted.

          8.     Franchise.  Borrower shall preserve and maintain its existence
and will be and remain qualified to do business in good standing in all
jurisdictions in which required to be so qualified, and will maintain all
permits, licenses and other similar authorizations necessary or appropriate for
the operation of its businesses.  Borrower shall not amend its certificate of
incorporation to change the capitalization of the Borrower without the prior
written consent of Lender, provided such consent is not unreasonably withheld.

          9.     Notice.  Borrower shall notify Lender in writing
[i] immediately in each case should any default, Event of Default or Default
Condition occur under any Loan Document or should any representation or warranty
made herein, or hereafter, or in any related instrument or writing, for any
reason not be at the time made, or cease in any material respect thereafter to
be true, complete, and not misleading, [ii] immediately upon becoming aware
thereof, complete information as to the pendency of any material litigation or
other action before any court, agency, quasi-judicial or quasi-governmental body
or any pending arbitration in which Borrower is involved in any capacity
(“material” shall mean, for purposes of this subsection only, any single
uninsured claim in the amount of $100,000.00 or more and any claim after all
uninsured claims in any one calendar year shall aggregate $200,000.00 or more),
and [iii] immediately upon becoming aware thereof, of the occurrence of any
“reportable event,” as such term is defined in Section 4043 of ERISA, or any
“prohibited transaction,” as such term is defined in Section 4975 of the
Internal Revenue Code, in connection with any plan or any trust created
thereunder, together with written notice specifying the nature thereof, what
action Borrower has taken or proposes to take with respect thereto, and, when
known, any action taken by the Internal Revenue Service or the Pension Benefit
Guaranty Corporation with respect thereto.

          10.   Agreements.  Unless disputed in good faith (and as long as such
dispute does not give rise to any default thereunder or materially affect the
obligation of any party thereto), Borrower shall timely comply with and fully
perform all of its respective agreements and valid obligations to and with all
Persons and shall not commit or permit to be committed any default thereunder,
the noncompliance with which, or default under which, could [i] have a material
and adverse effect upon the assets or businesses of Borrower conducted at the
Owensboro Facilities or [ii] impair the ability of Borrower to perform hereunder
or [iii] result in a lien or charge upon any Collateral of Borrower.

          11.   Laws.  Borrower shall comply with all applicable laws, rules,
regulations, orders and ordinances, and not fail to obtain a license, permit,
franchise or other governmental authorization necessary to the ownership of
Borrower’s properties or to the conduct of its businesses, the noncompliance
with which might have a material and adverse effect on the business of Borrower;
provided, however, that nothing in this Section shall require compliance with
any law, statute or governmental rule, regulation or order if the validity of
such law, statute, rule, regulation or order, as applied to Borrower, is being
contested by Borrower in good faith by appropriate proceedings promptly
initiated and diligently conducted by Borrower, as long as Lender is given
prompt notice of such contest and the business, operations, affairs or
conditions of Borrower and the ability of Borrower to perform its Obligations
under this Agreement and the other Loan Documents is not materially adversely
affected thereby.

          12.   Intentionally omitted.

          13.   Leases; Licenses.  Borrower shall take all steps and actions
necessary to maintain all leases to which Borrower is a party, the continued
effectiveness of which are material to the Borrower’s ability to perform the
Obligations hereunder, in full force and effect and shall perform thereunder
either in a manner consistent with the terms thereof, or in a manner which, in
the reasonable judgment of Lender, is not likely to cause a termination or
cancellation thereof.  Borrower shall give Lender immediate notice of any
default, repudiation or termination of any such lease, or upon Borrower becoming
aware of any circumstance, event or condition which is likely, with notice
and/or passage of time, to result in a default thereunder by any party thereto. 
Borrower shall maintain, at all times, continuously and without interruption,
all federal, state and local licenses, certifications and registrations
necessary for the continued operation of Borrower’s businesses in their ordinary
course and in compliance with all laws and regulations.

          14.   Liens.  Borrower shall not, directly or indirectly, subordinate
to any Person the payment of any indebtedness owed by any Person to Borrower,
whether said indebtedness be evidenced by an instrument or in whatsoever manner,
or incur, create, assume or suffer to exist any pledge, lien or encumbrance of
any assets or property of Borrower (including but not limited to liens securing
obligations or alleged obligations for environmental contamination or
environmental response costs pursuant to 42 U.S.C. 9601 et seq., or other
similar federal or state statutes pertaining to hazardous substances) except for
the security interests of Lender created by the Loan Documents and the Permitted
Exceptions, but, as long as no other provision of any Loan Document is violated,
Borrower shall be entitled to incur, create, assume or suffer to exist:

                         A.     Purchase money security interests for amounts
not exceeding the lesser of [i] the actual consideration paid (or to be paid)
for the property so acquired; [ii] the fair market value thereof at the time of
acquisition; or [iii] if the property is not purchased for installation in the
Owensboro Facilities, $150,000.00 for any one item of property or $250,000.00 in
the aggregate outstanding at any one time.

                         B.     Liens for taxes, assessments or governmental
charges or levies [i] which are not yet delinquent or [ii] which are being
contested in good faith by appropriate proceedings timely initiated (but in any
event within three (3) months of the date of delinquency) and diligently
conducted (notice of which shall be furnished to Lender promptly upon
delinquency), and if the portion thereof that is properly accruable in
accordance with internal accounting principles consistently utilized by the
Borrower, has been charged to income or operations..

                         C.     Undetermined or inchoate liens and charges
incidental to construction and development and liens of carriers, mechanics and
materialmen incurred in the ordinary course of business for work or services
performed or materials furnished for sums not yet due or being contested in good
faith by appropriate proceedings promptly initiated and diligently conducted,
and if such reserve or other appropriate provision, if any, as shall be required
by generally accepted accounting principles shall have been made therefor.

                         D.     Liens incurred or deposits made in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other social security benefits (excluding pension and profit
sharing plans and other optional employee benefits) or bonds to secure statutory
obligations such as land reclamation, surety and appeal bonds, performance and
return of money bonds and other similar obligations not incurred in connection
with the borrowing of money or the obtaining of advances of credit.

                         E.     Undetermined or inchoate liens (but not
consensual liens) of lessors of any real or personal property.

                         F.     Any judgment lien, unless the judgment it
secures shall not within thirty (30) days after the entry thereof have been
discharged or execution thereof stayed pending appeal, or shall not have been
discharged within thirty (30) days after the expiration of any such stay.

                         G.     Easements, rights-of-way, use restrictions and
other similar matters granted in the ordinary course of business of Borrower or
the operation of its properties.

                         H.     Title defects or irregularities which are in the
aggregate of a minor nature and not of such a nature as to prevent or materially
affect the business operations of Borrower.

          15.     Sale of Assets; Subsidiaries; Merger; Dissolution.  Borrower
shall not [i] dispose of all or substantially all of its assets, or [ii] sell,
lease, assign, transfer or otherwise dispose of any of its assets which are
material to the business operations conducted  at the Owensboro Facilities or
which would have a material  adverse effect on the financial condition of
Borrower.

          16.     Use of Proceeds; Securities Exchange Act, Federal Reserve
Board, Etc.  Borrower shall not, directly or indirectly, use any part of the
Loans for any purpose other than as expressly permitted by this Agreement. 
Borrower shall not, directly or indirectly, use any part of the Loans, and has
not incurred any indebtedness to be reduced, retired or purchased out of the
Loans except for the KEDFA Loan, for the purpose of purchasing or carrying any
“margin security” within the meaning of Regulation G (12 C.F.R. Part 207, as
amended), and will not otherwise take or permit any action which would involve a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulation issued thereunder, including, without limitation, Regulation U
(12 C.F.R. Part 221, as amended) or Regulation X (12 C.F.R. Part 224), in
connection with the transactions contemplated hereby.  Borrower does not now own
and has no present intention of acquiring any such margin security.

          17.     Loans and Advances and Guaranties.  Other than with the
express prior written consent of Lender, which may be granted or withheld in the
sole and absolute discretion of Lender, Borrower shall not: make loans, advances
or investments to, or in, any Person, or guarantee the same or permit any of the
same to remain outstanding, except for in the ordinary course of business to the
extent of not more than $50,000 in the aggregate at any one time outstanding.

          18.     Intentionally omitted.

          19.     Hazardous Waste.  Borrower shall comply with all Environmental
Laws.  Borrower will not store or permit to be stored at the Qwensboro
Facilities (except as a necessary incident to the ordinary course of business of
Borrower and then only in compliance with all Environmental Laws), or released
or discharged upon, any premises owned or leased by Borrower or any Affiliate of
Borrower, any Hazardous Substances.  Borrower hereby indemnifies Lender and
holds Lender harmless from and against any and all losses, costs, expenses
(including but not limited to reasonable attorneys’ fees), injuries, damages,
liabilities and claims of any kind whatsoever paid, incurred or suffered by or
asserted against Lender by any Person, including but not limited to any
governmental entity, whatsoever with respect to or as a direct or indirect
result of the presence of any Hazardous Substance on or under any real property
now and at any time hereafter owned, leased, operated or controlled by Borrower
or any Subsidiary or Affiliate of Borrower, or the violation or alleged
violation by Borrower or any such Subsidiary or Affiliate of any Environmental
Law or, without limitation of the foregoing, any inaccuracy of any
representation or warranty by Borrower contained in this Agreement concerning
Environmental Laws or Hazardous Substances or any breach by Borrower or other
default in the covenants contained in this Section.  The indemnification
established under the preceding sentence shall survive the maturity as well as
the repayment or other discharge of the Obligations and any termination of this
Agreement whether pursuant to repayment of the Obligations, repossession and/or
sale of the Collateral or otherwise, to the maximum extent permitted by law.

          20.     Indebtedness.  Borrower shall not hereafter, except for
Obligations incurred by Borrower pursuant to the Loan Documents, without
Lender’s prior written approval, which shall not be unreasonably withheld or
delayed, enter into any transaction pursuant to which Borrower incurs
indebtedness for Borrowed Money (the term “Borrowed Money”, for purposes of this
Agreement, includes any and all liabilities of Borrower of whatever nature,
whether secured or unsecured, including by purchase money security interests,
and whether direct or contingent, including but not limited to any guaranty, and
any letter of credit issued for the account of or otherwise with recourse to
Borrower, and obligations under leases that are or would be capitalized under
generally accepted accounting principles, but shall not include trade payables
and accrued salaries, wages and other similar operating accruals incurred by
Borrower in the ordinary course of business) in excess of $175,000.00 as to any
single indebtedness or resulting in an aggregate indebtedness outstanding in
excess of $250,000.00.

          21.     Equipment and Other Leases.  Without Lender’s prior approval,
which approval shall not be unreasonably withheld or delayed, Borrower shall not
hereafter enter into, as a lessee or vendee, except for in the ordinary course
of business any operating leases or rental agreements, title retention or
conditional sales agreements, involving real or personal property any one of
which require Borrower to make lease payments exceeding $250,000.00 in the
aggregate in any one fiscal year of the Borrower.

          22.     Transactions with Affiliates.  Borrower shall not enter any
contract or agreement material to the business of such Borrower (“material”
shall mean, for purposes of this subsection, any contract or agreement involving
$60,000 or more) with any Affiliate of Borrower other than upon the same or
similar terms and conditions with which such Borrower would deal with an
unrelated third party.

          23.     Fiscal Year.  Borrower shall not change its fiscal year
(January 1 - December 31) without so advising Lender in writing at least thirty
(30) days prior thereto and obtaining the written consent of Lender, provided
such consent is not unreasonably withheld.

          24.     Securities Laws Disclosure; Publicity. The Company shall, by
8:30 a.m. Eastern time on the Trading Day following the date hereof, issue a
press release or file a Current Report on Form 8-K, in each case reasonably
acceptable to Lender disclosing the material terms of the transactions
contemplated hereby. The Company and Lender shall consult with each other in
issuing any other press releases with respect to the transactions contemplated
hereby, and neither party shall issue any such press release or otherwise make
any such public statement without the prior consent of the other party hereto,
which consent shall not unreasonably be withheld, except if such disclosure is
required by law, in which case the disclosing party shall promptly thereafter
provide the other party with notice of such public statement or communication.

ARTICLE 8.

EVENTS OF DEFAULT

          Each of the following shall constitute an Event of Default under this
Agreement:

          1.     Payments.  If any installment of principal or interest on the
Note, or any other payment required under this Agreement or under any Loan
Document, or pursuant to any of the other Obligations shall not be paid in full
within ten (10) calendar days after the date upon which it is due and payable
and the continuation of such failure to pay for five (5) business days after
written notice is provided to Borrower by Lender.

          2.     Covenants and Agreements.  If Borrower shall fail or omit to
perform or observe any covenant, agreement, condition or other provision
contained or referred to in this Agreement (other than in this Article) or any
other Loan Document, not requiring the payment of money in each case, and such
failure or omission shall not have been corrected to the satisfaction of Lender
on or before the earlier of (a) thirty (30) calendar days after the date that an
executive officer or director, of Borrower first has actual knowledge of such
breach, or (b) forty-five (45) calendar days after the occurrence of such breach
(unless this Agreement or the other applicable Loan Document in connection with
which such non-compliance has occurred affirmatively provides that no notice
and/or period of cure, or that an explicit alternative period of cure, whether
longer or shorter than the foregoing period, shall be applicable to such failure
by Borrower, in which case such alternative provision rather than the foregoing
periods).

          3.     Accuracy of Statements.  If any representation or warranty or
other statement of fact contained herein or in any writing, certificate, report
or statement at any time furnished to Lender pursuant to or in connection with
this Agreement or any Loan Document or any of the other Obligations, shall be
false or misleading in any material respect or shall omit a material fact
necessary to make such representation, warranty or statement not misleading and
such false or misleading statement has not been corrected to the satisfaction of
Lender on or before the earlier of (a) thirty (30) calendar days after the date
that an officer, director, shareholder, partner or member of Borrower first has
actual knowledge of such false and misleading statement or (b) forty-five (45)
calendar days after the occurrence of such false of misleading statement.

          4.     Judgments and Liens.  If a final judgment or judgments for the
payment of money in excess of the sum of One Hundred Fifty Thousand Dollars
($150,000) in the aggregate shall be rendered against Borrower and such judgment
or judgments shall remain unsatisfied and in effect and shall not have been
discharged by the last to occur of:  [i] the expiration of thirty (30)
consecutive days after the entry thereof, if execution thereon shall not have
been stayed pending appeal, or [ii] if so stayed, thirty (30) days after the
expiration of such stay.

          5.     Solvency.  If Borrower shall [a] discontinue business or
[b] make a general assignment for the benefit of creditors or [c] apply for or
consent to the appointment of a receiver, trustee or liquidator of all or a
substantial part of its respective assets, [d] be adjudicated a bankrupt or
insolvent, or [e] file a voluntary petition in bankruptcy or file a petition or
an answer seeking reorganization or an arrangement with creditors or seek to
take advantage of any other law (whether federal or state) relating to relief
for debtors, or admit (by answer, default or otherwise) the material allegations
of any involuntary petition filed against it in any bankruptcy, reorganization,
insolvency or other proceeding (whether federal or state) relating to relief for
debtors, or [f] suffer the filing of any involuntary petition in any bankruptcy,
reorganization, insolvency or other proceeding (whether federal or state), if
the same is not dismissed within thirty (30) days after the date of such filing,
or [g] suffer or permit to continue unstayed and in effect for thirty (30)
consecutive days any judgment, decree or order entered by a court or
governmental agency of competent jurisdiction which assumes control of Borrower
or approves a petition seeking reorganization, composition or arrangement of
Borrower or any other judicial modification of the rights of any of their
respective creditors, or appoints a receiver, trustee or liquidator for Borrower
or for all or a substantial part of any of the businesses or assets of Borrower,
or [h] if Borrower shall be enjoined or restrained from conducting all or a
material part of any of its or their businesses as then conducted at the
Owensboro Facility and the same is not dismissed and dissolved within thirty
(30) days after the entry thereof.

          6.     Loss of Material Leases or Contracts.  If any material lease,
license or contract of Borrower, shall be revoked or terminated which loss of
lease, license or contract shall have a material adverse  effect on the
financial condition of the Borrower or of the business conducted at the
Owensboro Facilities.

ARTICLE 9.

REMEDIES UPON DEFAULT

          Notwithstanding any contrary provision or inference herein or
elsewhere:

          1.     Lender’s Right to Declare Default in its Sole Discretion.  If
any Event of Default referred to in the Article of this Agreement entitled
Events of Default (except the Events of Default described in the Section thereof
entitled “Solvency”) shall occur or begin to exist, Lender may, as to the
entirety of the Obligations, without further notice, declare the Note and all
other Obligations to be, whereupon the same shall be, immediately due and
payable in full, all without any presentment, demand or notice of any kind, all
of which are hereby expressly waived by Borrower.

          2.     Automatic Default.  If any Event of Default referred to in the
Section of this Agreement entitled “Solvency” shall occur, or begin to exist,
all of the Obligations under the Loan Documents shall thereupon become
immediately due and payable in full, all without presentment, demand or notice
of any kind, all of which are hereby expressly waived by Borrower.

          3.     Enforcement of Security Agreement.  Immediately upon a
declaration of a default pursuant to the first Section of this Article, or the
occurrence of an automatic Event of Default under the immediately preceding
Section of this Article, any requirement for Lender to make any Advance
hereunder or under any Loan Document shall immediately and automatically
terminate, and Lender may exercise any and all rights at law or in equity to
realize upon the security afforded herein or under any other Loan Document,
including, without limitation, the right to seize any assets of Borrower, or any
other Person securing the Loan and the right to commence proceedings for the
foreclosure upon and sale of any or all of the Collateral and to pursue all
remedies afforded under the terms of any Loan Document. Lender further agrees
that in the event it becomes necessary for the Lender to seize or foreclose upon
any Collateral, Lender shall (i) first seek to recover any amounts due to Lender
by liquidation of any real property or personal property, and then (only if
there remains a deficiency in the balance owed to Lender) will Lender seek to
recover that deficiency through sale or license of the Intellectual Property,
and (ii) assign or grant to LSBC or permit LSBC to retain the co-exclusive
rights, interests, and royalty-free  license (with each of LSBC and Lender
having the right or license to use, to license the use of, and to assign its
interest therein) in and to the Intellectual Property.

          4.     Right of Set-Off.  Upon the occurrence and during the
continuance of any Event of Default, Lender is hereby authorized at any time and
from time to time, without further notice to Borrower (any such notice being
expressly waived by Borrower) to set off and apply any and all sums of money at
any time held, and other indebtedness at any time owing, by Lender to or for the
credit or the account of Borrower against any and all of the Obligations of
Borrower, including, without limitation, court costs and reasonable attorneys’
fees to the extent permitted by law.

          5.     Protection of Assets.  Upon notice by Lender to Borrower of an
Event of Default and during the continuance of such default , Borrower grants to
Lender or its designee an non-exclusive royalty free right to use the
Intellectual Property  in any way reasonably necessary for the running of the
Owensboro Facilities, and agrees to cooperate with Lender in any way necessary
to assure the Owensboro facility remains open and operational, including but not
limited to granting Lender or its designee free access to the Owensboro
Facilities, and attempting to assure that key personnel remain available to
assist in the operation of such facilities.

          6.     Rights Cumulative.  All of the rights and remedies upon
occurrence of an Event of Default or Default Condition under this Agreement and
the other Loan Documents shall be cumulative to the greatest extent permitted by
law and shall be in addition to all those rights and remedies afforded at law or
in equity or bankruptcy.

ARTICLE 10.

MISCELLANEOUS

          1.     Course of Dealing.  No course of dealing in respect of, nor any
omission or delay in the exercise of, any right, power, remedy or privilege by
Lender shall operate as a waiver thereof, nor shall any right, power, remedy or
privilege of Lender be exclusive of any other right, power, remedy or privilege
referred to herein or in any related document, or now or hereafter available at
law, in equity, in bankruptcy, by statute or otherwise.  Each such right, power,
remedy or privilege may be exercised by Lender either independently or
concurrently with others, and as often and in such order as may deem expedient.

          2.     No Oral Amendment.  No amendment or modification by Lender of
any provision of any Loan Document or related writings, nor consent by Lender to
any departure by Borrower or any other party therefrom, shall be binding and
effective unless the same shall be in writing and signed by a duly authorized
representative of Lender, which writing shall be strictly construed.

          3.     Time of Essence.  Time shall be of the essence in the
performance of all the Obligations under the Loan Documents and any other
instruments related thereto.

          4.     Successors.  The provisions of this Loan Agreement shall bind
and benefit Borrower and Lender and the respective successors, heirs, legal
representatives and assigns of each of them, including each subsequent holder,
if any, of the Note; provided, however, that Borrower may not assign its rights
under this Agreement or the other Loan Documents to any other party, any such
purported assignment being void and of no effect.  Only following the occurrence
of an Event of Default, Lender may endorse or transfer all or any part of its
interest in the Loan Documents, including, without limitation, the Note.  Upon
any bona-fide transfer by Lender of all of the legal and beneficial interest of
Lender in the Note and all of the other Loan Documents, to a commercial bank or
financial institution not an Affiliate of Lender, Lender automatically shall be
released from all obligations, liabilities and claims resulting from, or
connected with the Loan Documents that arise out of actions, omissions or other
circumstance occurring after the time of the transfer.

          5.     Captions.  The substantive provisions of this Agreement,
exclusive of the captions for the various Articles and Sections of this
Agreement, shall control in the event of any inference created by any caption
that is inconsistent with the substantive provisions.

          6.     Kentucky Law to Govern.  This Agreement shall be construed in
accordance with and governed in all respects by the laws of the Commonwealth of
Kentucky.

          7.     Entirety of Agreement.  This Agreement and the Loan Documents
contain the final, complete and exclusive agreement of the parties pertaining to
its subject matter and supersede all prior written and oral agreements
pertaining thereto.

          8.     Notices.  All notices, requests and demands made by the parties
to this Agreement shall be in writing (at the addresses set forth below) by any
of the following means: (a) personal service (including service by overnight
courier service); (b) electronic communication, whether by telex, telegram or
telecopying (if confirmed in writing sent by personal service or registered or
certified, first class mail, postage prepaid, return receipt requested); or (c)
registered or certified, first class mail, postage prepaid, return receipt
requested.  Any notice, demand or request sent pursuant to either subsection (a)
or (b) hereof shall not be effective until actually received at the address (or
facsimile number) specified (and prior to 5:00 p.m. on a Business Day in the
case of notices given in accordance with (b) above or if not, then on the next
Business Day), but notices given under (c) above shall be deemed given two (2)
days following deposit in the United States mails.  Any party to this Agreement
may change its address for notices by manner specified by this Section.

 

If to Borrower:

Large Scale Biology Corporation

 

 

3333 Vaca Valley Parkway, Suite 1000

 

 

Vacaville, California  95688

 

 

(707) 446-5501 - Phone

 

 

(707) 446-3917 - Fax

 

 

 

 

cc:

Large Scale Bioprocessing, Inc.

 

 

3700 Airpark Drive

 

 

Owensboro, Kentucky  43301

 

 

(270) 926-2405- Phone

 

 

(270) 926-2385 -Fax

 

 

 

 

 

Gerald B. Sweeney

 

 

Sweeney Lev

 

 

460 Bloomfield Ave, Suite 200.

 

 

Montclair, NJ  07042

 

 

(973) 509-1800 - Phone

 

 

(973) 509-1074-  Fax

 

 

 

 

If to Lender:

Kentucky Technology, Inc.

 

 

1501 Bull Lea Road

 

 

Lexington, Kentucky 40511

 

 

(859) 254-5454 - Phone

 

 

(859) 253-1112 - Fax

 

 

 

 

cc:

Clifton B. Clark

 

 

Dinsmore & Shohl LLP

 

 

Lexington Financial Center

 

 

250 West Main Street, Suite 1400

 

 

Lexington, Kentucky 40507

 

 

(859) 425-1000 - Phone

 

 

(859) 425-1099 - Fax

          9.     No Third Party Beneficiaries.  The provisions of this Agreement
shall inure to the benefit and responsibility of the parties hereto, their
successors and assigns (but only to the extent such assignment is permitted
herein) and shall not benefit or affect any third party.

          10.   Gender; Number; Accounting Principles.  As used herein, any
gender includes all other genders, the singular includes the plural, and the
plural includes the singular.  Except as otherwise provided herein, all
accounting terms used herein shall be defined in accordance with generally
accepted accounting principles.

          11.   Exhibits.  Any schedules, exhibits and riders attached hereto,
and all terms and provisions thereof, are deemed to be a part hereof as if fully
set forth herein and are deemed to be incorporated by reference herein.

          12.   Construction of Provisions; Additional Deliveries.  Each
covenant by the Borrower contained in this Agreement and the other Loan
Documents shall be construed without reference to any other such covenant, and
any determination of whether Borrower is in compliance with any such covenant
shall be made without reference to whether any Borrower is in compliance with
any other such covenant.  In the event of any conflict between or among the
provisions as contained in one Loan Document and other provisions contained in
the same or one or more other Loan Documents, Lender shall be entitled to
resolve the conflict by selecting which provision shall be applicable.  Borrower
shall deliver or cause to be delivered to Lender from time to time hereafter,
promptly upon request of Lender, such additional documents, instruments and
information as Lender may request in order to insure the binding effect in
accordance with the terms thereof of any Loan Document, or to effect the intent
of this Agreement or to establish the security for the benefit of Lender
contemplated by this Agreement and the other Loan Documents, and Borrower hereby
appoints Lender as Borrower’s attorney-in-fact, which is coupled with an
interest and irrevocable until all of the Obligations are paid and discharged to
the satisfaction of Lender, to do all acts and things that Lender may deem
necessary or appropriate in furtherance of any of such purposes.

          13.   Severability.  Upon any determination that any provision of this
Loan Agreement or any other Loan Document is invalid or unenforceable, the
balance of this Loan Agreement and the other Loan Documents shall be construed,
to the maximum extent possible, to give effect to each of the remaining
provisions thereof.

          14.   Existence of Facts Underlying Conditions.  Any condition of this
Agreement which requires the submission of evidence of the existence or
non-existence of a specified fact or facts implies as a condition the existence
or non-existence, as the case may be, of such fact or facts and the Lender
shall, at all times, be free independently to establish to its reasonable
satisfaction and in its reasonable discretion such existence or nonexistence.

          15.   Counterparts.  To facilitate execution, this Agreement may be
executed in two or more counterparts, and it shall not be necessary that the
signature of, or on behalf of, each party, or that the signatures of all Persons
required to bind any party, be affixed to each counterpart.  All counterparts
shall collectively constitute a single Agreement.  The signature pages of the
counterparts may be detached from them and be reattached to any other
counterpart identical in form hereto, but having attached to it one or more
additional signature pages, and it shall not be necessary in making proof of
this Agreement to produce or account for any particular number of counterparts
so long as one or more counterparts collectively contain the respective
signatures of, or on behalf of, all of the parties hereto.

          16.   Payments on Days Other than Business Days.  If the day on which
any payment required to be made to Lender or any Lender under any Loan Document
should be a day other than a Business Day, such payment shall be deemed to be
required to be made on the next succeeding Business Day, and such extension of
time shall be included in computing any interest with respect to such payment.

          17.   Claims and Damages.  In no event shall Lender ever be liable to
the Borrower for consequential damages resulting from, arising out of or in
connection with the Loan or any of the Loan Documents, whatever the nature of a
breach by the Lender in the obligations of the Lender hereunder.  No action
shall be commenced by the Borrower for any claim against the Lender under the
terms of this Agreement unless a notice specifically setting forth the claim of
the Borrower shall have been given to the Lender within  one hundred twenty
(120) days after the occurrence of the event which the Borrower alleges gave
rise to such claim, and failure to give such notice shall constitute a waiver of
any such claim.  Upon full payment and satisfaction of the Obligations, Lender
thereupon automatically shall be fully, finally and forever released and
discharged from any further claim, liability or obligation in connection with
the Loan and with this Agreement, except any obligation to release Collateral of
record from any lien or claim by Lender.

          18.   Indemnity.  Borrower hereby jointly and severally indemnifies
and holds Lender harmless from and against any and all costs, claims, losses,
damages or expenses, including reasonable attorneys’ fees, incurred by Lender as
a result, in whole or in part, of Lender’s entering into this Agreement and the
other Loan Documents, or otherwise incurred by Lender in connection with or
arising out of this Agreement and the other Loan Documents unless resulting from
the gross negligence or willful misconduct of Lender.

          19.   Consent to Jurisdiction and Venue.  Borrower hereby consents to
the jurisdiction of any state or federal court located within the County of
Fayette, Commonwealth of Kentucky and irrevocably agrees that, subject to the
Lender’s sole and absolute election, any case or proceeding relating to Title XI
of the United States Code and any actions relating to the Obligations shall be
litigated in such courts, and Borrower waives any objection which Borrower may
have based on improper venue or forum non conveniens to the conduct of any
proceeding in any such court.  Nothing contained in this paragraph shall affect
the right of the Lender to bring any action or proceeding against Borrower or
the property of Borrower in the courts of any other jurisdiction.

<the balance of this page intentionally has been left blank>

 

“Borrower”

 

 

 

 

LARGE SCALE BIOLOGY CORPORATION

 

 

 

By:

/s/  RONALD J ARTALE

 

 

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

 

 

(signature)

 

 

 

 

Name:

Ronald J Artale

 

 

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

 

 

(type or print)

 

 

 

 

Title:

Senior Vice President, COO, CFO

 

 

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

 

 

(type or print)

 

 

 

 

 

 

 

LARGE SCALE BIOPROCESSING, INC.

 

 

 

 

By:

/s/  RONALD J ARTALE

 

 

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

 

 

(signature)

 

 

 

 

Name:

Ronald J Artale

 

 

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

 

 

(type or print)

 

 

 

 

Title:

Senior Vice President, COO, CFO

 

 

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

 

 

(type or print)

 

 

 

 

 

 

 

“Lender”

 

 

 

 

KENTUCKY TECHNOLOGY, INC.

 

 

 

 

By:

/s/  JOHN B. PARKS

 

 

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

 

 

(signature)

 

 

 

 

Name:

John B. Parks

 

 

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

 

 

(type or print)

 

 

 

 

Title:

President

 

 

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

 

 

(type or print)

STATE OF CALIFORNIA

COUNTY OF  SOLANO

          The foregoing instrument was acknowledged before me this 17th day of
December, 2004, by Ronald J. Artale, as Senior Vice President, COO, CEO of Large
Scale Biology Corporation, a Delaware corporation on behalf of the corporation.

          My commission expires: 8/21/2006

[Notary Seal]

/s/ Sharon J. Thomson

 

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

 

NOTARY PUBLIC

STATE OF CALIFORNIA

COUNTY OF  SOLANO

          The foregoing instrument was acknowledged before me this 17th day of
December, 2004, by Ronald J. Artale, as Senior Vice President, COO, CEO of Large
Scale Bioprocessing, Inc., a Delaware corporation on behalf of the corporation.

          My commission expires: 8/21/2006

[Notary Seal]

/s/ Sharon J. Thomson

 

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

 

NOTARY PUBLIC

COMMONWEALTH OF KENTUCKY

COUNTY OF FAYETTE

          The foregoing instrument was acknowledged before me this 17th day of
December, 2004, by John B Parks, as President of Kentucky Technology, Inc., a
Kentucky corporation, on behalf of the corporation.

          My commission expires: January 6, 2007

[Notary Seal]

/s/ Linda H. Haulk

 

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

 

NOTARY PUBLIC

Lists of Schedules and Exhibits
--          Schedule 1 - Description of Obligations
--          Schedule 2 - Permitted Exceptions Schedule
--          Schedule 3 - Real Property Collateral Schedule
--          Schedule 4 - Intellectual Property Schedule
--          Schedule 5 -Litigation Schedule
--          Schedule 6 - Compliance Certificate Schedule
--          Exhibit A - Warrant Agreement
--          Exhibit B - Registration Rights Agreement

Schedule 1
to Loan Agreement

          “Loan Documents” shall mean all documents or instruments executed in
connection with and/or delivered at the Closing.

          “Obligations” shall mean each and every obligation, whether payment or
otherwise, of the Borrower under any or all of the Loan Documents.

          “Note” shall mean the Revolving Credit Note dated December 17, 2004 in
the original principal amount of $2,900,000.00.

Schedule 2

Permitted Exceptions Schedule
to Loan Agreement

          1.     The liens and security interests created by or expressly
permitted by the Loan Documents.

          2.     The lien of ad valorem taxes assessed against the Collateral,
provided the same are paid prior to becoming delinquent.

Schedule 3

Real Property Collateral Schedule
to Loan Agreement

 

PARCEL 1

 

 

 

Lot 2-A, Unit 2, Phase I, Mid-America AirPark, a plat of which is recorded in
Plat Book 28, page 194, Office of the Daviess County Court Clerk, and to which
plat reference is made for a more particular description.

 

 

 

AND BEING the same property conveyed to Biosource Merger Corporation (now Large
Scale Bioprocessing, Inc.) a Delaware corporation, by deed from Biosource
Technologies, Inc., a California corporation, dated April 23, 1999, and of
record in Deed Book 702, at page 201, Office of the Daviess County Court Clerk. 
See also deed of correction dated November 11, 1999, and of record in Deed Book
711, at page 283, Office of the Daviess County Court Clerk.

 

 

 

PARCEL 2

 

 

 

Lot 2, Unit 2, Phase I, Mid-America AirPark, a plat of which is recorded in Plat
Book 28, page 194, Office of the Daviess County Court Clerk, and to which plat
reference is made for a more particular description.

 

 

 

AND BEING the same property conveyed to Biosource Merger Corporation (now Large
Scale Bioprocessing, Inc.) a Delaware corporation, by deed from Economic
Development Properties, Inc., et al., dated June 8, 1999, and of record in Deed
Book 702, at page 214, Office of the Daviess County Court Clerk.

Schedule 4

Intellectual Property Schedule
to Loan Agreement

Issued Patents.

U.S. Patent No. 6,284,875

U.S. Patent No. 6,441,147

U.S. Patent No. 6,617,435

U.S. Patent No. 6,037,456

U.S. Patent No. 6,033,895

U.S. Patent No. 6,303,779

U.S. Patent No. 6,740,740

U.S. Patent No. 6,817,970

U.S. Patent Applications, not yet issued, as follows:

Application Date October 3, 2001

Publication No. 20020138207

Flexible Processing

 

 

 

Application Date August 1, 2003

Publication No. 20040047923

Method of Recovering

 

 

 

Application Date February 18, 2004

Publication No. 20040166026

Flexible Processing

 

 

 

Application Date April 20, 2004

Publication No. 20040171813

Process for Isolating

 

 

 

Application Date October 29, 2004

Not Published

Method of Recovering

Schedule 5

Litigation Schedule
to Loan Agreement

The following litigation is disclosed because it relates to a product that has
been or could be produced at the Owensboro Facilities and its disclosure is not
intended as recognition of its materiality.

LSBC filed a law suit against Prodigene, Inc. seeking a Declaratory Judgment of
non-infringement of a patent owned by Prodigene directed to making recombinant
aprotinin in a transgenic plan; and Prodigene has counterclaimed.

Schedule 6

Compliance Certificate Schedule
to Loan Agreement

Kentucky Technology, Inc.
1501 Bull Lea Road
Lexington, KY 40511

               Re:     Loan Agreement Compliance

Dear _________:

          Please be advised that Large Scale Biology Corporation and Large Scale
Bioprocessing, Inc. are each in compliance with all of the covenants, terms and
conditions of that certain loan agreement between each as borrower and Kentucky
Technology, Inc. as Lender.

 

LARGE SCALE BIOLOGY CORPORATION

 

 

 

By:

 

 

 

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

 

Its:

 

 

 

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

 

 

 

 

LARGE SCALE BIOPROCESSING, INC.

 

 

 

By:

 

 

 

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

 

Its:

 

 

 

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

Commonwealth of California                    )
                                                                                )
SS:
County of  Solano                                      )

          ___________________________, the ___________________ of Large Scale
Biology Corporation appeared before me and acknowledged the foregoing to be a
true and accurate statement as of this _____ day of ________________, 20__.

          My commission expires:_______________________

 

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

 

Notary Public

 

 

[Notary Seal]

 

Commonwealth of California                    )
                                                                                )
SS:
County of  Solano                                      )

          ___________________________, the ___________________ of Large Scale
Bioprocessing, Inc. appeared before me and acknowledged the foregoing to be a
true and accurate statement as of this _____ day of ______________, 20__.

          My commission expires:_______________________

 

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

 

Notary Public

 

 

[Notary Seal]

 

Exhibit A
to Loan Agreement

Warrant Agreement

Exhibit B
to Loan Agreement

Registration Rights Agreement

PROMISSORY NOTE

$2,900,000.00

Lexington, Kentucky
December 17, 2004

          FOR VALUE RECEIVED, each of the undersigned, Large Scale Biology
Corporation, a Delaware corporation (“LSBC”), having an address of 3333 Vaca
Valley Parkway, Vacaville, California, 95688 and Large Scale Bioprocessing,
Inc., a Delaware corporation (“LSBI”), having an address of 3700 Airpark Drive,
Owensboro, Kentucky, 43301 (LSBC and LSBI shall each be referred to herein as
“Borrower”), hereby promises and agrees to pay to Kentucky Technology, Inc.
(“Lender”), a Kentucky corporation, having an address of 1501 Bull Lea Road,
Lexington, KY 40511, the aggregate principal sum of $2,900,000.00, or so much
thereof as may be advanced hereunder, together with interest thereon as
hereinafter provided, in lawful money of the United States of America, in the
manner set forth herein, on or before the 17th day of June, 2006 (the “Final
Maturity Date”).

           This note (the “Note”) is the Revolving Credit Note issued pursuant
to, and is subject to all the terms and conditions of, the Loan Agreement dated
as of the date hereof (the “Loan Agreement”) to which Lender and Borrower are
parties, and is secured by a certain Mortgage (the “Mortgage”) and certain other
collateral (the “Collateral”) as more particularly described in the Loan
Agreement (all documents, instruments and agreements heretofore, now, or
hereafter made or given by the Borrower or any other person or entity to
guarantee or secure the indebtedness evidenced by this Note, including but not
limited to the Mortgage, together with the Loan Agreement and each other
document establishing terms and conditions applicable to, or required to be
delivered in connection with, the indebtedness evidenced by this Note are
referred to collectively hereinafter as the “Loan Documents”).

          The principal of this Note prior to any Default, as defined hereunder,
shall bear interest on the unpaid balance thereof at a fixed rate per annum of
8.0%.  All interest on this Note shall be computed daily on the basis of the
actual number of days elapsed over a year assumed to consist of three hundred
sixty (360) days (having 12 months of 30 days each).

          Principal of this Note shall be paid in a single payment on the 17th
day of June, 2006.  All accrued and unpaid interest shall be paid quarterly
commencing on the 17th day of March, 2005, and on June 17, 2005, September 17,
2005, December 17, 2005 and March 17, 2006 thereafter, and on the Final Maturity
Date and any and each other date that the principal balance of this Note is paid
in full.

          Principal of this Note may be repaid in whole or in part without
penalty or premium at any time prior to maturity and, subject to the terms and
conditions of the Loan Agreement and the other Loan Documents, Borrower shall be
entitled to reborrow, repay and reborrow hereunder in incremental advances of
not less than $100,000.00 each. The actual amount of principal due hereunder
shall be the sum of all advances less the aggregate repayments thereof. 
Lender’s records with respect to advances and repayments shall be presumed
correct unless manifest error is shown.

          All payments of principal and interest and any other sums due under
this Note shall be made to Lender at the address first set forth above for the
Lender in this Note or to such other person or at such other address as may be
designated in writing by the Lender.  All payments on this Note shall be applied
first to the payment of any expenses or charges payable hereunder, and next to
accrued interest, and then to the principal balance hereof, or in such other
order as Lender may elect in its sole discretion.

          Any payment on this Note that is overdue for more than ten (10) days
from its due date shall, if requested by and at the sole option of the Lender,
in order to compensate the Lender for inconvenience and administrative expense
incident to such delinquency and not as a penalty, be increased by an amount
equal to five percent (5%) of the overdue payment, unless such increase would
exceed the maximum increase permitted by law, in which event the overdue payment
shall be increased by such lesser increment, if any, as is the maximum permitted
by law.  The charging or collection of a late charge shall not be deemed a
waiver of any of the Lender’s other rights and remedies hereunder, including, if
applicable, the right to exercise the remedies of the Lender upon a Default
under this Note as hereinafter provided. 

          A “Default” hereunder shall mean the occurrence of any “Event of
Default” under the Loan Agreement, and Lender may, at its option, and without
notice, declare the entire unpaid principal balance of, and all accrued interest
on, this Note to be immediately due and payable and proceed to enforce and
realize upon any or all security for this Note provided under the Loan
Documents. 

          Whenever there a Default under this Note, the entire principal balance
of and all accrued interest on this Note, and all other existing or hereafter
created or arising liabilities, indebtedness and obligations of Borrower to
Lender (however acquired or evidenced) shall, at the option of Lender, become
forthwith due and payable, without presentment, notice, protest or demand of any
kind (all of which are expressly waived by Borrower). 

          This Note, the other Loan Documents, and all other agreements between
the Borrower and the Lender, whether now existing or whether hereafter arising
and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration of the
maturity hereof, or otherwise, shall the amount paid or agreed to be paid to the
Lender for the use, forbearance or retention of money loaned hereunder, or
advanced for the performance or payment of any covenant or obligation contained
herein, in any other Loan Document, or in any other document evidencing,
securing or pertaining to the indebtedness evidenced hereby, exceed the maximum
amount permissible under applicable law.  If from any circumstances whatsoever,
fulfillment of any provision of this Note, the other Loan Documents, or of any
such other document, at the time performance of such provisions shall be due,
shall involve transcending the limit of validity prescribed by law, then ipso
facto the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from such circumstance the Lender shall ever receive anything
of value deemed by applicable law to be interest in any amount that would exceed
the highest lawful rate payable hereunder, an amount equal to any excessive
interest shall be applied to the reduction of the principal amount owing
hereunder and not to the payment of the interest, and if the amount that would
be excessive interest exceeds the principal balance then owing, such excess
shall be refunded to the party paying the same.

          Failure of the Lender to exercise any of its rights and remedies shall
not constitute a waiver of the right to exercise the same at that or any other
time.  All rights and remedies of the Lender for Default under this Note shall
be cumulative to the greatest extent permitted by law.  Time shall be of the
essence in the payment of all installments of interest and principal on this
Note and the performance of Borrower’s other obligations under this Note.

          If there is any Default under this Note, and this Note is placed in
the hands of an attorney for collection or is collected through any court,
including any bankruptcy court, Borrower promises to pay to the Lender hereof
its reasonable attorneys’ fees and court costs incurred in collecting or
attempting to collect or securing or attempting to secure this Note or enforcing
the Lender’s rights in any collateral securing this Note, provided the same is
legally allowed by the laws of the Commonwealth of Kentucky or any state where
the collateral or part thereof is situated.

          Without restricting any of the rights or remedies available to Lender,
Lender shall have the right to set off, at any time after a Default by Borrower
under this Note, without notice to Borrower or any guarantor of, or person or
entity that has granted security for this Note, any and all deposits or other
sums at any time or times credited by or due from Lender to Borrower, whether or
not held by Lender in a special account or other account or represented by a
certificate of deposit (whether or not matured), which deposits and other sums
shall at all times constitute additional security for the obligations of the
Borrower arising under this Note and under any of the other Loan Documents. 
Borrower hereby grants to Lender a lien on and a continuing security interest in
all instruments, documents, securities, cash, chattel paper, general
intangibles, deposits, certificates of deposit, other property, and the cash and
noncash proceeds of any of the foregoing, owned by Borrower or in which Borrower
has an interest, which now or hereafter are at any time in possession or control
of Lender, or in transit by mail or carrier to or from Lender or in the
possession of any third party on behalf of Lender, without regard to whether
Lender received the same in pledge, for safekeeping, as an agent for collection
or transmission or otherwise, or whether Lender had conditionally released the
same, all of which shall at all times constitute additional security for the
obligations of Borrower hereunder and under the Loan  Documents, and all of
which may be applied at any time after Default by Borrower with respect to any
of said obligations, without notice to Borrower or any guarantor of, or person
or entity that has granted security for this Note, in such order as Lender may
determine.

          If any provision, or portion thereof, of this Note, or the application
thereof to any persons or circumstances shall to any extent be invalid or
unenforceable, the remainder of this Note, or the application of such provision,
or portion thereof, to any other person or circumstances shall not be affected
thereby, and each provision of this Note shall be valid and enforceable to the
fullest extent permitted by law.

          This Note was negotiated in the Commonwealth of Kentucky and delivered
to and accepted by Lender in the Commonwealth of Kentucky, and the proceeds of
this Note have been and/or will be disbursed from the Commonwealth of Kentucky,
which state Borrower and Lender agree has a substantial relationship to Borrower
and Lender and to the underlying transaction in connection with which this Note
is issued.  This Note, including matters of construction, validity and
performance, and the obligations arising hereunder, shall be construed in
accordance with and otherwise governed in all respects by the laws of the
Commonwealth of Kentucky applicable to contracts made and performed in such
state and any applicable law of the United States of America.

          Borrower and any other party who may become primarily or secondarily
liable for any of the obligations of Borrower hereunder hereby jointly and
severally waive presentment, demand, notice of dishonor, protest, notice of
protest, and diligence in collection, and further waive all exemptions to which
they may now or hereafter be entitled under the laws of this or any other state
or of the United States, and further agree that the Lender shall have the right
without notice, to deal in any way, at any time, with Borrower, or any guarantor
of this Note or with any other party who may become primarily or secondarily
liable for, or pledge any collateral as security for, any of the obligations of
Borrower under this Note and to grant any extension of time for payment of this
Note or any other indulgence or forbearance whatsoever, and may release any
security for the payment of this Note and/or modify the terms of the Loan
Agreement and the other Loan Documents securing or pertaining to this Note,
without in any way affecting the liability of Borrower, or such other party who
may pledge any collateral as security for, or become primarily or secondarily 
liable for, the obligations of Borrower hereunder and without waiving any rights
the Lender may have hereunder or by virtue of the laws of this state or any
other state of the United States.

          The terms and conditions of this Note and the obligations hereunder
shall be binding upon each Borrower jointly and severally.

          Borrower hereby consents to the jurisdiction of any state or federal
court located within the County of Fayette, Commonwealth of Kentucky and
irrevocably agrees that, subject to the Lender’s sole and absolute election, any
case or proceeding relating to Title XI of the United States Code and any
actions relating to the indebtedness evidenced hereby shall be litigated in such
courts, and Borrower waives any objection which it may have based on improper
venue or forum non conveniens to the conduct of any proceeding in any such
court.  Nothing contained in this paragraph shall affect the right of the Lender
to bring any action or proceeding against Borrower or its property in the courts
of any other jurisdiction.

<the balance of this page intentionally has been left blank>

 

“Borrower”

 

 

 

 

LARGE SCALE BIOLOGY CORPORATION

 

 

 

 

By:

/s/  RONALD J ARTALE

 

 

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

 

 

(signature)

 

 

 

 

Name:

Ronald J Artale

 

 

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

 

 

(type or print)

 

 

 

 

Title:

Senior Vice President, COO, CFO

 

 

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

 

 

(type or print)

 

 

 

 

LARGE SCALE BIOPROCESSING, INC.

 

 

 

 

By:

/s/  RONALD J ARTALE

 

 

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

 

 

(signature)

 

 

 

 

Name:

Ronald J Artale

 

 

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

 

 

(type or print)

 

 

 

 

Title:

Senior Vice President, COO, CFO

 

 

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

 

 

(type or print)

STATE OF CALIFORNIA

COUNTY OF SOLANO

          The foregoing instrument was acknowledged before me this 17th day of
December, 2004, by Ronald J. Artale, as Senior Vice President, COO, CEO of Large
Scale Biology Corporation, a Delaware corporation, on behalf of the corporation.

          My commission expires: 8/21/2006

[Notary Seal]

/s/ Sharon J. Thomson

 

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

 

NOTARY PUBLIC

STATE OF CALIFORNIA

COUNTY OF SOLANO

          The foregoing instrument was acknowledged before me this 17th day of
December, 2004, by Ronald J. Artale, as Senior Vice President, COO, CEO of Large
Scale Bioprocessing, Inc., a Delaware corporation, on behalf of the corporation.

          My commission expires: 8/21/2006

[Notary Seal]

/s/ Sharon J. Thomson

 

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NOTARY PUBLIC

SECURITY AGREEMENT

          THIS SECURITY AGREEMENT (the “Agreement”) is made and entered into as
of December 17, 2004, by and between each of the following: [i] Large Scale
Biology Corporation., a Delaware corporation (“LSBC”); and [ii] Large Scale
Bioprocessing, Inc., a Delaware corporation (“LSBI”) (LSBC and LSBI are each
hereinafter referred to as “Borrower”), each having a mailing address of 3700
Air Park Drive, Owensboro, Kentucky 43301; and [iii] Kentucky Technology, Inc.,
a Kentucky corporation (hereinafter referred to as “Lender”), having a mailing
address of 1501 Bull Lea Road, Lexington, Kentucky 40511.

          IT IS AGREED BY THE PARTIES AS FOLLOWS:

          1.     Grant of Security.  For valuable consideration, the receipt of
which is hereby acknowledged by the Borrower, and to secure the indebtedness and
undertakings and other Obligations of the Borrower referred to in Section 2
hereof, including but not limited to those evidenced by or established pursuant
to the “Loan Documents” defined in Schedule 1 to this Agreement, Borrower hereby
pledges, assigns, transfers, and grants to Lender a continuing security interest
in the property and rights of Borrower, whether now owned or hereafter acquired,
proceeds and products thereof, as  described in Exhibit A attached to and made a
part of this Agreement (such property is hereinafter referred to as the
“Collateral”), together with all instruments, documents, securities, cash,
property, and the proceeds of any of the foregoing, owned by Borrower or in
which Borrower has an interest or which are in transit by mail or carrier to or
in the possession of any third party acting on behalf of Lender, without regard
to whether Lender received the same in pledge, for safekeeping, as agent for
collection or transmission or otherwise or whether Lender had conditionally
released the same; and all cash or non-cash proceeds of any of the foregoing.

          2.     Obligations Secured.  This Agreement is made as collateral
security for, and the security interest granted in the Collateral secures the
following obligations (hereinafter sometimes referred to collectively as the
“Obligations”):  [i] all indebtedness and liabilities (including but not limited
to loan fees and late charges) arising under or evidenced by, and the
performance of all covenants, conditions and agreements undertaken by Borrower
in connection with [a] that certain Promissory Note dated the date of this
Agreement made by Borrower to the order of Lender in face principal amount of
$2,900,000.00, and any and all renewals, extensions and amendments thereof and
substitutions and replacements therefor (the “Note”), and [b] that certain “Loan
Agreement” dated the date hereof entered into between Borrower and Lender
pursuant to which the Note was issued, and [c] this Agreement and each of the
other “Loan Documents” referenced in the Loan Agreement, and [ii] all other
indebtedness, liabilities and obligations of Borrower to Lender of whatever
nature, whether now in existence or hereafter created, arising or acquired,
whether created directly or acquired by Lender by assignment or otherwise,
whether joint or several, whether of the same or different class or type as the
indebtedness evidenced by the note, instrument or other agreement executed and
delivered by Borrower to Lender in connection with the execution and delivery of
this Agreement, it being the intent of Borrower and Lender that all of the same
be part of the Obligations for all purposes of this Agreement, and [iii] all
expenses, costs and changes of any nature whatsoever paid or incurred by Lender
to enforce its rights and remedies under any Loan Document, to obtain, preserve,
perfect and enforce the security interest established by this Agreement, to
collect the Obligations enumerated in this Section 2, and to maintain and
preserve the Collateral, including without limitation taxes, assessments,
insurance premiums, repairs, reasonable attorneys’ fees and legal expenses,
rent, storage costs and expenses of collection and sale.

          3.     Representations and Warranties.  Borrower represents and
warrants to Lender that:

                  A.     Borrower is a validly existing corporation organized
under the laws of the State of Delaware and is duly qualified to do business in
Kentucky and in all other jurisdictions in which qualification is necessary in
order to conduct the business and affairs of Borrower.

                  B.     The execution, delivery and performance by Borrower of
this Agreement [i] are authorized by all documents (organizational and
otherwise), agreements and stipulations limiting the activities of Borrower,
[ii] do not require approval of any governmental authority, [iii] will not
violate any provision of law, any order of any court or any governmental
authority, or any indenture, agreement or other instrument to which Borrower is
a party or by which Borrower or any of the property of Borrower is bound.

                  C.     There is no action, suit or proceeding pending, or to
the knowledge of Borrower threatened, against or affecting Borrower or involving
the validity of enforceability of this Agreement, including before or by any
governmental authority, and Borrower is not in default with respect to any
order, writ, judgment, decree or demand of any court or other governmental
authority except as previously disclosed in writing by Borrower to Lender.

                  D.     If applicable, the financial statements of Borrower are
most recently delivered to Lender [i] are complete and correct in all material
respects, [ii] accurately represent the financial condition of Borrower as of
their date and [iii] disclose all of Borrower’s material liabilities, direct or
contingent, as of such date.

                  E.     Borrower is the owner of the Collateral free from all
liens and security interests as of the date hereof except for the liens and
security interests permitted by the express terms of the Loan Documents.

                  F.     Borrower has the right to enter into this Agreement,
the execution and performance of which will not, either immediately, or with
notice and/or passage of time, result in the creation or imposition of any
encumbrance upon any of the Collateral except as granted hereby.

                  G.     The Collateral is used for business purposes, and all
of the Collateral is physically located at the location of the real property
described on Schedule A-2. The address of the registered office of Borrower in
Kentucky as set forth in the most recent corporate filing with the Secretary of
State of Kentucky which officially designates the current registered office of
Borrower in Kentucky is CT Corporation System, Kentucky Home Life Building,
Louisville, Jefferson County, Kentucky 40202.

                  H.     At no time during the previous five (5) years has the
Collateral been physically located, or the Borrower maintained a principal
office, or a registered office in the Commonwealth of Kentucky, other than at
the locations disclosed in the immediately preceding paragraph of this
Agreement.

                  I.     At no time within the past two (2) years has Borrower
operated under any assumed name or other name than the name of Borrower first
set forth in this Agreement.

          4.     Covenants.  Borrower agrees with Lender that until the
Obligations have been paid in full and discharged to the satisfaction of Lender,
Borrower:

                  A.     Will execute and deliver to Lender all information,
legal descriptions, UCC-1 and other Financing Statements, and such other
documents and instruments pertaining to the Collateral as are necessary in the
sole opinion of Lender to create, perfect, maintain, preserve and enforce the
security interest of Lender in the Collateral.

                  B.     Will defend the Collateral against the claims and
demands of all persons; comply in all material respects with all applicable
federal, state and local statutes, laws, rules and regulations, the
noncompliance with which could have a material adverse effect on the value of
the Collateral or the security intended to be afforded Lender hereby; and pay
all ad valorem property taxes which constitute or may constitute a lien against
any of the Collateral, prior to the date when penalties or interest would attach
to such taxes.

                  C.     Will maintain or cause to be maintained, with
financially sound and reputable insurers, such insurance with respect to its
properties, assets and business, against loss or damage of the kinds customarily
insured against by enterprises of established reputation engaged in the same or
a similar business and similarly situated, of such types and in amounts as are
customarily carried under similar circumstances by such other enterprises.

          Borrower shall insure the Collateral at Borrower’s expense in
accordance with the terms of the Loan Agreement.

          Borrower hereby assigns to Lender all rights to receive proceeds of
all insurance which is or may be required pursuant to this Section 4.C., not
exceeding the unpaid balance of the Obligations to Lender, and authorizes Lender
as the agent of Borrower and its attorney-in-fact to obtain such proceeds and to
endorse and negotiate any draft for such proceeds in Borrower’s name or
otherwise.  In the event of damage or destruction of any of the Collateral
covered by such insurance, any proceeds from such insurance shall upon request
of Lender, be paid to Lender and, at the option of Lender, be applied either to
reduce the Obligations, or endorsed to Borrower and disbursed from time to time
by Lender at Borrower’s written request but only for the repair and/or
replacement of such damaged or destroyed Collateral.  While such insurance
proceeds are in the possession of Lender, Lender shall have and hereby is
granted by Borrower a first and prior security interest in such proceeds and
cash and in all the repaired and replaced Collateral, and Borrower shall execute
all such instruments in connection therewith as Lender shall require.

                  D.     Borrower shall furnish or cause to be furnished to
Lender all financial reports as are required by the Loan Agreement.

                  E.     Will keep the Collateral in good condition and repair,
reasonable wear and tear excepted..

                  F.     Will maintain accurate records of the Collateral, and
will permit Lender, upon request by Lender from time to time, to inspect the
Collateral and all evidence of ownership of the Collateral and all other books
and records relating to the Collateral at any reasonable time and from time to
time.

                  G.     Will advise Lender in writing, at least thirty (30)
days prior thereto, of any change in the Borrower’s principal place(s) of
business, or chief executive office or registered office in Kentucky, or any
change in the locations where any of the Collateral is kept; or of any change in
Borrower’s name or the adoption, whether formal or informal, by Borrower of any
“trade name” or “assumed name.”

                  H.     Will preserve and maintain its corporate existence in
good standing and will be and remain qualified to do business in good standing
in all jurisdictions in which required to be so qualified, and will maintain all
permits, licenses and other similar authorization necessary or appropriate for
the operation of its business.

                  I.      Unless disputed in good faith (and as long as such
dispute does not give rise to any default thereunder or materially affect the
obligation of any party thereto), Borrower will timely comply with and fully
perform all of its agreements and valid obligations to and with all parties and
shall not commit or permit to be committed any default thereunder, the
noncompliance with which, or default under which, could [i] have a material and
adverse effect upon the assets or businesses of Borrower or [ii] impair the
ability of Borrower to perform hereunder or [iii] result in a lien or charge
upon any asset of Borrower.

                  J.     Other than in the ordinary course of business, will not
permit any part of the Collateral, or any of the records concerning same, to be
removed from the present locations thereof without the prior written consent of
Lender, provided such consent is not unreasonably withheld.

                  K.     Other than liens granted to suppliers of office
equipment used by Borrower in its day-to-day operations, i.e., copiers, fax
machines, phone equipment, etc., will not permit any liens or security interests
to attach to any of the Collateral except the security interests created by this
Agreement.

                  L.     Will not permit any material part of the Collateral to
be levied upon under any legal process.

                  M.    Will not sell, assign, lease or otherwise dispose of any
of the Collateral except in the ordinary course of business prior to an Event of
Default and when such disposal of Collateral shall not have a material adverse
effect on the business of Borrower.

                  N.     Will not permit anything to be done that may impair the
value of any of the Collateral or the security intended to be afforded (material
to the assets or the businesses of the Borrower or the value of the security
hereunder) by this Agreement.

                  O.     Will not permit any of the Collateral to become an
accession or improvement to, or affixed to, other property in which Lender does
not hold a security interest.

                  P.      Will not permit any accounts or other sums owed to
Borrower to be evidenced by a note or other instrument without the prior written
consent of Lender, which consent may be conditioned upon delivery by Borrower to
Lender of the note or other instrument, endorsed by Borrower to the order of
Lender.

          5.     Hazardous Substances.  Borrower represents and warrants that,
except as previously disclosed in writing by Borrower or its agent to Lender: no
hazardous or toxic substance or material or other waste (“Hazardous Substance”)
as defined in or regulated under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. §9601 et. seq.),
the Resource Conservation and Recovery Act (42 U.S.C. §6901, et. seq.) or any
other federal, state or local law, order or regulation pertaining to health,
safety or the environment (“Environmental Law”) has, to the knowledge of
Borrower ever been disposed, released, discharged or spilled on or under any
real property now or heretofore ever owned, leased, operated or controlled by
Borrower or any past, present or anticipated future subsidiary or affiliate of
Borrower, that no such real property has ever been used as a dump or landfill,
and that, to Borrower’s knowledge, no litigation or administrative action or
proceeding has been commenced or threatened against Borrower or any subsidiary
or affiliate of the Borrower alleging a violation of any Environmental Law. 
Borrower warrants and covenants that all real property now and at any time
hereafter owned, leased, operated or controlled by Borrower and each subsidiary
and affiliate of Borrower is and shall remain free from any contamination by any
Hazardous Substance and that Borrower and each such subsidiary and affiliate has
complied and will comply with all Environmental Laws affecting each of them,
respectively, and affecting all property, whether real, personal or mixed,
heretofore, now or hereafter owned, leased, operated or controlled by any of
them.  Borrower hereby indemnifies Lender and holds Lender harmless from and
against any and all losses, costs, expenses (including but not limited to
reasonable attorneys’ fees), injuries, damages, liabilities and claims of any
kind whatsoever paid, incurred or suffered by or asserted against Lender by any
person or entity, including but not limited to any governmental entity,
whatsoever with respect to or as a direct or indirect result of the presence of
any Hazardous Substance on or under any real property now and at any time
hereafter owned, leased, operated or controlled by Borrower or any subsidiary or
affiliate of Borrower, or the violation or alleged violation by Borrower or any
such subsidiary or affiliate of any Environmental Law or, without limitation of
the foregoing, any inaccuracy of any representation or warranty by Borrower
contained in this Section or any breach by Borrower or other default in the
covenants

contained in this Section.  The indemnification established under the preceding
sentence shall survive the maturity as well as the repayment or other discharge
of the Obligations and any termination of this Agreement whether pursuant to
repayment of the Obligations, repossession and/or sale of the Collateral or
otherwise, to the maximum extent permitted by law.  Borrower expressly
acknowledges that any misrepresentation by Borrower under this Section, or any
failure of condition or breach of covenant by Borrower or other default in any
of the obligations of Borrower under this Section shall be and constitute an
Event of Default under this Agreement.

          6.     Authorization to File UCC-1 Statements.  The Borrower hereby
irrevocably appoints and authorizes Lender as Borrower’s attorney-in-fact to do
all acts and things which Lender may deem necessary or appropriate to perfect
and continue perfected the security interest in the Collateral granted pursuant
to this Agreement and to protect the Collateral, including, but not in any way
limited to, the execution and filing of UCC-l and other Financing Statements,
notices of liens to be filed with the United States Patent and Trademark Office,
or amendments thereto, covering the Collateral in Borrower’s name, as Borrower’s
attorney-in-fact, wherever and whenever Lender deems appropriate.  All fees and
taxes required for or in connection with filing such Financing Statements shall
be paid for by the Borrower on demand of Lender and if paid by Lender, the
Borrower shall provide reimbursement therefor, with interest thereon at the
Applicable Rate, immediately upon request of Lender.

          7.     Events of Default.  Each of the following shall be deemed an
“Event of Default” hereunder:

                  A.     If Borrower shall fail to comply fully with any
provision of this Agreement and said noncompliance has not been corrected to the
satisfaction of Lender on or before the earlier of (i) thirty (30) calendar days
after the date that an officer or director of Borrower first has actual
knowledge of such breach  or (ii) forty-five (45) calendar days after the
occurrence of such breach (unless this Agreement or the other applicable Loan
Document in connection with which such non-compliance has occurred affirmatively
provides that no notice and/or period of cure, or that an explicit alternative
period of cure, whether longer or shorter than the foregoing period, shall be
applicable to such failure by Borrower, in which case such alternative provision
rather than the foregoing periods).

                  B.     If any Events of Default occur in the payment or
performance of the Note, the Loan Agreement, this Agreement, any of the other
Loan Documents (including after any required notice and/or period of cure
provided in the Loan Document governing such default),  strictly in accordance
with their respective terms.

                  C.     If any of the warranties or representations made herein
by Borrower or in any certificate, instrument, agreement  or other writing now
or hereafter delivered by Borrower to Lender shall prove untrue or materially
misleading, and such false or misleading warranty or representation has not been
corrected to the satisfaction of Lender within (i) thirty (30) calendar days
after the date that an officer or director, of Borrower first has actual
knowledge of such false and misleading statement or (ii) forty-five (45)
calendar days after the occurrence of such false of misleading statement.

                  D.     If Borrower or any guarantor of any of the Obligations
shall [a] discontinue business, [b] make a general assignment for the benefit of
creditors, [c] apply for or consent to the appointment of a receiver, trustee or
liquidator of all or a substantial part of its respective assets, [d] be
adjudicated a bankrupt or insolvent, [e] file a voluntary petition in bankruptcy
or file a petition or an answer seeking reorganization or an arrangement with
creditors or seek to take advantage of any other law (whether federal or state)
relating to relief for debtors, or admit (by answer, default or otherwise) the
material allegations of any involuntary petition filed against Borrower in any
bankruptcy, reorganization, insolvency or other proceeding (whether federal or
state) relating to relief for debtors, [f] suffer the filing of any involuntary
petition in any bankruptcy, reorganization, insolvency or other proceeding
(whether federal or state), if the same is not dismissed within thirty (30) days
after the date of such filing, [g] suffer or permit to continue unstayed and in
effect for thirty (30) consecutive days any judgment, decree or order entered by
a court or governmental agency of competent jurisdiction which assumes control
of Borrower or such guarantor or approves a petition seeking reorganization,
composition or arrangement of Borrower or such guarantor or any other judicial
modification of the rights of any of Borrower’s or their creditors, or appoints
a receiver, trustee or liquidator for Borrower or such guarantor or for all or a
substantial part of any of the businesses or assets of Borrower or such
guarantor or [h] if Borrower or such guarantor shall be enjoined or restrained
from conducting all or a material part of any of its or their businesses as then
conducted and the same is not dismissed and dissolved within thirty (30) days
after the entry thereof.

                  E.     If any material part of the Collateral is destroyed or
so damaged as to be unusable in the ordinary course of business and the same is
not covered by insurance adequate to repair or replace same.

          8.     Remedies.  Upon the occurrence of any Event of Default under
this Agreement, Lender may declare all of the Obligations to be automatically
and immediately due and payable in full, without demand or notice of any kind,
and Lender, subject to the remedies restrictions regarding Intellectual Property
set forth in Section 9 (3) of the Loan Agreement, shall have all rights and
remedies in and against the Collateral and otherwise of a secured party under
the Uniform Commercial Code of Kentucky (or such other state where any part of
the Collateral may be located, if applicable) and all other applicable laws, and
shall also have all rights and remedies provided herein, and in any other
agreements between the Borrower and Lender, all of which rights and remedies
shall, to the fullest extent permitted by law, be cumulative.  Lender shall have
the right to sell the Collateral at public or private sale(s) in one or more
lots.  Lender shall have the right to have the Collateral and all of the records
pertaining to the Collateral delivered to Lender by Borrower at a place
reasonably convenient to Lender and Borrower, subject to the remedies
restrictions regarding Intellectual Property set forth in Section 9 (3) of the
Loan Agreement.  If the Collateral consists in whole or in part of accounts,
general intangibles and/or contract rights, Lender shall have the right to
notify all obligors of any of the same that the same have been assigned to
Lender and that all payments thereon are to be made directly to Lender, and to
settle, compromise, or release, on terms acceptable to Lender, in whole or in
part, any amounts owing on such accounts, general intangibles and contract
rights, and to enforce payment and prosecute any action or proceeding with
respect to same, and to extend the time of payment, make allowances and
adjustments to and issue credits in the name of Lender or Borrower. Borrower
will pay, as part of the Obligations secured hereby, all amounts, including but
not limited to Lender’s reasonable attorneys’ fees, where permitted by
applicable law, and all sums paid by Lender [i] for taxes, levies and insurance
on, repair to, or maintenance of, the Collateral, and [ii] in taking possession
of, disposing of, or preserving the Collateral, with interest on all of same at
the Applicable Rate.  Lender may bid upon and purchase any or all of the
Collateral at any public sale thereof.  Subject to the remedies restrictions
regarding Intellectual Property set forth in Section 9 (3) of the Loan
Agreement, Lender may dispose of all or any part of the Collateral in one or
more lots and at one or more times and from time to time, and upon such terms
and conditions, including a credit sale, as Lender determines in Lender’s sole
discretion.  Lender may apply the net proceeds of any such disposition of the
Collateral or any part thereof, after deducting all costs incurred in connection
therewith, including Lender’s reasonable attorneys’ fees, and costs and expenses
incidental to the holding, or preparing for sale, in whole or in part, of the
Collateral, and with interest thereon at the Applicable Rate, in such order as
Lender may elect, to the Obligations and any remaining proceeds shall be paid to
Borrower or other party entitled thereto.

          9.     Termination.  This Agreement and the security interest and the
rights of Lender hereunder shall terminate on the date that all of the
Obligations have been paid in full or otherwise discharged to the complete
satisfaction of Lender.  Within thirty (30) days of such termination, Lender
shall, at the cost and expense of Borrower, execute and deliver for filing in
each office where any financing statement relative to this Agreement shall have
been filed, termination statements under the Uniform Commercial Code terminating
Lender’s interests in the Collateral.

          10.     Notices.  Except for any notice required under applicable law
to be given in another manner, any notice given under this Agreement shall be
given in the manner stipulated by the Loan Agreement dated the date hereof to
which Borrower and Lender are parties and which is one of the Loan Documents
referred to in Schedule 1 to this Agreement, unless the recipient prior to the
giving of such notice shall have advised the sender of the notice in accordance
with this Section of a different address, in which case the notice shall be
addressed to such different address.

          11.     Acknowledgments and Waivers.  Borrower agrees that the whole
or any part of the Collateral and any other security now or hereafter held for
any of the Obligations secured hereby may be exchanged, compromised or
surrendered by the Lender from time to time; that any guarantor, now or
hereafter, of any of the Obligations, and any pledgors of collateral now or
hereafter for any of the Obligations may be released in whole or in part from
time to time; that any of the Obligations may be renewed or extended or
accelerated, in whole or in part from time to time; that any of the provisions
of any of the Loan Documents or of any other instrument or agreement securing,
guaranteeing or otherwise pertaining to the Obligations may be modified or
waived on one or more occasions; and that Borrower and the Collateral pledged
hereunder shall remain bound hereunder notwithstanding any such exchanges,
compromises, surrenders, extensions, renewals, accelerations, indulgences or
releases, all of which may be effective without notice to or further consent by
Borrower and none of which shall affect the right of the Lender to pursue the
remedies available to the Lender under this Agreement or otherwise.  The ability
of Lender to pursue its remedies hereunder with respect to the Collateral shall
be direct and immediate and not conditional or contingent upon the pursuit of
any remedies against Borrower or any other person or entity or against any or
all of the other security or liens available to the Lender for the payment of
the Obligations secured hereby.  Borrower hereby waives any claim to marshalling
of assets, any right to require that any action be brought against Borrower or
any other person or entity prior to the exercise by Lender of its remedies with
respect to the Collateral, and waives any right to require that resort be had to
any security apart from the Collateral, or to any balance of any deposit account
or credit on the books of Lender in favor of Borrower or any other person or
entity prior to action by Lender hereunder to realize upon the Collateral.

          12.     Other Provisions and Conditions.

                    A.     Without limiting the generality of Section 1 hereof,
the security interest created by this Agreement attaches to all types of
property described therein and hereafter acquired by Borrower, whether as
replacement for any of the Collateral or otherwise.

                    B.     This Agreement shall bind Borrower and its successors
and assigns and shall inure to the benefit of Lender and its successors and
assigns.

                    C.     Time shall be of the essence in the performance by
the Borrower of all the covenants, obligations and agreements of Borrower
hereunder.

                    D.     The invalidity or unenforceability of any provision
hereof shall not affect or impair the validity or enforceability of any other
provisions of this Agreement.

                    E.     As used herein, as appropriate, the singular use
includes the plural, and the plural includes the singular.

                    F.     All exhibits and schedules attached to this Agreement
are an integral part hereof and are incorporated herein as though fully set
forth at this point.

                    G.    No course of dealing in respect of, nor any omission
or delay in the exercise of, any right, power, remedy or privilege vested in
Lender by this Agreement shall operate as a waiver thereof, and any waiver by
Lender shall only be effective if in writing and signed by an officer of Lender.

                    H.    No amendment or modification of any provision of this
Agreement, nor consent to any departure by any party therefrom, shall be binding
and effective unless the same shall be in writing and signed by a duly
authorized representative of Lender, which writing shall be strictly construed.

                    I.     The several captions and section headings of this
Agreement are inserted for convenience only and shall be ignored in interpreting
the provisions of this Agreement.

                    J.     This Agreement contains the final, complete and
exclusive agreement of the parties pertaining to its subject matter and
supersedes all prior written and oral agreements pertaining thereto.

                    K.    This Agreement may be executed in any number of
counterparts and by any combination of the parties to this Agreement in separate
counterparts, each of which counterparts shall be an original and all of which
taken together shall constitute one and the same Agreement, and it shall not be
necessary in order to prove the execution and delivery of this Agreement by all
of the parties to it to produce or account for any particular number of
counterparts so long as the signature of each of the parties is affixed to at
least one of those counterparts which are produced.

                    L.     The descriptions of the Collateral set forth in
Exhibit A to this Agreement (and elsewhere in this Agreement unless the context
requires otherwise), each shall have the meaning set forth for them in the
Uniform Commercial Code as in effect in the Commonwealth of Kentucky on the date
of this Agreement (the “UCC”).

          13.     Governing Law.  This Agreement was negotiated in the
Commonwealth of Kentucky, the promissory note or notes secured by this Agreement
were delivered by Borrower and accepted by Lender in the Commonwealth of
Kentucky, and the proceeds of the promissory note or notes secured hereby were
disbursed from the Commonwealth of Kentucky, which state Borrower and Lender
agree has a substantial relationship to Borrower and Lender and to the
underlying transactions in connection with which this Agreement was granted. 
This Agreement, including matters of construction, validity and performance, and
the obligations arising hereunder, shall be construed in accordance with and
otherwise governed in all respects by the laws of the Commonwealth of Kentucky
applicable to contracts made and performed in such state and any applicable law
of the United States of America, except to the extent the UCC provides that
matters of perfection and priority of the liens and security interests created
by this Agreement shall be governed by the law of another state and except to
the extent that enforcement of such liens and security interests in tangible
Collateral is governed by the laws of the state in which such Collateral is
located at the time enforcement is sought.

          14.          Consent to Jurisdiction and Venue.  Borrower hereby
consents to the jurisdiction of any state or federal court located within the
County of Fayette, Commonwealth of Kentucky, and irrevocably agrees that,
subject to the Lender’s sole and absolute election, any case or proceeding
relating to Title XI of the United States Code and any actions relating to the
Obligations secured hereby shall be litigated in such courts, and the Borrower
waives any objection Borrower may have based on improper venue or forum non
conveniens to the conduct of any proceeding in any such court.  Nothing
contained in this Section shall affect the right of the Lender to bring any
action or proceeding against the Borrower or the property of Borrower in the
courts of any other jurisdiction.

<the balance of this page intentionally has been left blank>

                              IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the date first above written.

 

LARGE SCALE BIOLOGY CORPORATION

 

 

 

By:

/s/  RONALD J ARTALE

 

 

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(signature)

 

 

 

 

Name:

Ronald J Artale

 

 

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(type or print)

 

 

 

 

Title:

Senior Vice President, COO, CFO

 

 

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LARGE SCALE BIOPROCESSING, INC.

 

 

 

By:

/s/  RONALD J ARTALE

 

 

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(signature)

 

 

 

 

Name:

Ronald J Artale

 

 

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(type or print)

 

 

 

 

Title:

Senior Vice President, COO, CFO

 

 

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KENTUCKY TECHNOLOGY, INC.

 

 

 

By:

/s/  JOHN B. PARKS

 

 

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(signature)

 

 

 

 

Name:

John B. Parks

 

 

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(type or print)

 

 

 

 

Title:

President

 

 

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STATE OF CALIFORNIA

COUNTY OF SOLANO

          The foregoing instrument was acknowledged before me this 17th day of
December, 2004, by Ronald J. Artale, as Senior Vice President, COO, CEO of Large
Scale Biology Corporation, a Delaware corporation on behalf of the corporation.

          My commission expires: 8/21/2006

[Notary Seal]

/s/ Sharon J. Thomson

 

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NOTARY PUBLIC

STATE OF CALIFORNIA

COUNTY OF  SOLANO

          The foregoing instrument was acknowledged before me this 17th day of
December, 2004, by Ronald J. Artale, as Senior Vice President, COO, CEO of Large
Scale Bioprocessing, Inc., a Delaware corporation on behalf of the corporation.

          My commission expires: 8/21/2006

[Notary Seal]

/s/ Sharon J. Thomson

 

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NOTARY PUBLIC

COMMONWEALTH OF KENTUCKY

COUNTY OF FAYETTE

          The foregoing instrument was acknowledged before me this 17th day of
December, 2004, by John B Parks, as President of Kentucky Technology, Inc., a
Kentucky corporation, on behalf of the corporation.

          My commission expires: January 6, 2007

[Notary Seal]

/s/ Linda H. Haulk

 

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NOTARY PUBLIC

SOME OF THE COLLATERAL DESCRIBED HEREIN IS OR WILL BE AFFIXED TO THE REAL ESTATE
DESCRIBED IN EXHIBIT A AND THE SCHEDULES ATTACHED THERETO AND THIS DOCUMENT IS
THEREFORE ALSO TO BE FILED AS A FIXTURE FILING IN THE OFFICE IN WHICH THE REAL
ESTATE RECORDS ARE KEPT.

KENTUCKY MORTGAGE, LEASEHOLD MORTGAGE,
SECURITY AGREEMENT. ASSIGNMENT AND FIXTURE FILING

          THIS MORTGAGE, LEASEHOLD MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT and
FIXTURE FILING (hereinafter referred to as this “Mortgage”) made and entered as
of the 17th day of December, 2004 by and between Large Scale Bioprocessing,
Inc., formerly known as Biosource Merger Corporation (“Mortgagor”), a Delaware
corporation, with its principal office and place of business at 3700 Airpark
Drive, Owensboro, Kentucky, 43301 and Kentucky Technology, Inc., a Kentucky
corporation (the “Mortgagee”), with an office at 1501 Bull Lea Road, Lexington,
Fayette County, Kentucky 40511.

W I T N E S S E T H:

          WHEREAS, pursuant to that certain Loan Agreement by and between
Mortgagor and Mortgagee dated the date of this Mortgage (the “Loan Agreement”),
Mortgagee has agreed to make a revolving credit loan to Mortgagor (the
“Revolving Credit Loan”) evidenced by a revolving credit note in the principal
amount of $2,900,000.00 from Mortgagor in favor of Mortgagee dated the date of
this Mortgage (the “Note”).

          WHEREAS, to induce Mortgagee to extend credit to Mortgagor, Mortgagor
desires to execute and deliver this Mortgage to Mortgagee pursuant to the Loan
Agreement.

          NOW, THEREFORE, in order further to secure the payment of the
aggregate principal amount of $2,900,000.00 and all sums due or to become due
under the Loan Agreement, the Note and the other Loan Documents (as defined in
the Agreement) including without limitation, any extensions or modifications
thereof, as well as to secure the performance of all Mortgagor’s covenants and
agreements contained in this Mortgage or any amendments thereof, and in
consideration of the premises and the further sum of Ten Dollars ($10.00) to
Mortgagor in hand well and truly paid by Mortgagee at and before the delivery
hereof, the receipt and sufficiency of which is hereby acknowledged, Mortgagor
has granted, bargained and sold, mortgaged, conveyed, aliened, released,
confirmed, assigned, transferred, set over, and granted a security interest in
and by these presents does grant, bargain and sell, mortgage, convey, alien,
release, confirm, assign, transfer, set over and granted a security interest
unto Mortgagee, its successors and assigns, Mortgagor’s interest in that certain
tract of land in Daviess County, Kentucky more particularly described in Exhibit
A attached hereto and made a part hereof (the “Land”) and in any leases or
leasehold estates related to the Land (the “Leases”).

          TOGETHER with all the right, title and interest of Mortgagor, now
owned or hereafter acquired, in and to all tenements, hereditaments,
appurtenances and all the estates and rights of Mortgagor in and to the Land.

          TOGETHER with all the right, title and interest of Mortgagor, now
owned or hereafter acquired, in and to all roads, public or private, and public
places, opened or proposed, adjoining the Land, and all easements and
rights-of-way, public or private, now or hereafter used in connection with the
Land.

          TOGETHER with all the right, title and interest of Mortgagor, now
owned or hereafter acquired, in and to all surface rights and easements, in or
pertaining to the Land.

          TOGETHER with all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to any land lying in the bed of any street, road or
avenue, opened or proposed, in front of or adjoining the Land to the extent of
the interest of Mortgagor therein, now or hereafter acquired.

          TOGETHER with all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to any and all sidewalks and alleys, and all strips
and gores of land, adjacent to or used in connection with the Land.

          TOGETHER with all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to all buildings, structures and improvements (the
“Improvements”) of every kind and description now or hereafter erected or placed
on the Land.

          TOGETHER with all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to [i] all fixtures (“Fixtures”) heretofore or
hereafter placed on the Land and [ii] to the extent owned or possessed by
Mortgagor, all machinery and equipment (“Equipment”), located on the Land or
within the Improvements, and all attachments, accessories, and parts used or
intended to be used with any of such Equipment or Fixtures whether now or
hereinafter installed therein or thereon or affixed thereto as well as all
substitutes and replacements thereof in whole or in part, and [iii]  all cash
and noncash proceeds (including insurance policies and proceeds) and all
guaranties, claims, rights, remedies and privileges relating to any or all of
the items listed in [i] and [ii] above.

          TOGETHER with all right, title and interest of Mortgagor, now owned or
hereafter acquired, in all reversions, remainders, easements, rents, issues and
profits arising or issuing from the Land and from the Improvements thereon,
including, but not limited to, the rents, royalties, issues and profits arising
or issuing from all leases and subleases now or hereafter entered into covering
all or any part of the Land and for the Improvements, including, without
limitation, all royalties, accounts receivable, maintenance, tax and insurance
contributions, percentage rents, minimum rents, any damages or awards following
suit or arbitration damages following default, capital reserve funds, any sums
to which Mortgagor may become entitled in any court proceedings involving the
bankruptcy, insolvency or reorganization of any tenants or operators of the
Land; any guaranties of any rents, royalties, income and profits due or to
become due under any lease, and any proceeds payable under any policy of
insurance covering loss of rents under any lease for any cause, all of which
leases, subleases, rents, issues and profits are hereby assigned (collectively,
the “Rents”) and, if requested by Mortgagee, shall be caused to be further
assigned to Mortgagee by Mortgagor. The foregoing assignment shall include
without limitation, cash or securities deposited under leases to secure
performance by tenants or operators of their obligations thereunder, whether
such cash or securities are to be held until the expiration of the terms of such
leases or applied to one or more installments of rent coming due prior to the
expiration of such terms. The foregoing assignment is intended by Mortgagor and
Mortgagee to create and shall be construed to create an absolute, unconditional
and presently effective assignment to Mortgagee of all of Mortgagor’s right,
title and interest in the Rents and shall not be deemed to create merely a
security interest therein for the payment of any indebtedness or the performance
of any obligations of Mortgagor evidenced by the Loan Agreement, the Note and
the other Loan Documents. Mortgagee is hereby irrevocably appointed
attorney-in-fact for Mortgagor to collect such rents, issues and profits after
default by Mortgagor, such power being coupled with an interest. Mortgagor will
execute and deliver to Mortgagee on demand such assignments and instruments as
Mortgagee may require to implement, confirm, maintain and continue the
assignment hereunder.

          TOGETHER with all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to any and all awards, damages, payments and other
compensation and any and all claims therefor and rights thereto that may result
from taking or injury by virtue of the exercise of the power of eminent domain
of or to, or any damage, injury or destruction in any manner caused to, the
Land, the Improvements, or any part thereof, or from any change of grade or
vacation of any roadway abutting thereon, all of which awards, damages,
payments, compensation, claims and rights are hereby assigned, transferred and
set over to Mortgagee on behalf of Mortgagee to the fullest extent that
Mortgagor may under the law so do. Mortgagee is hereby irrevocably appointed
attorney-in-fact for Mortgagor to settle for, collect and receive any such
awards, damages, payments and compensation from the authorities making the same,
to appear in and prosecute any proceeding therefor, and to give receipts and
acquittance therefor.

          TOGETHER with all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to rights and claims arising under and by virtue of
the covenants of warranty contained in those deeds conveying the Land to
Mortgagor.

          ALL of which property and rights therein hereinabove described or
mentioned and all of which collateral is now existing or hereafter arising, now
owned or hereafter acquired, due or to become due, including proceeds, products,
and insurance proceeds to secure payment of all indebtedness of Mortgagor to
Mortgagee now existing or hereafter arising, being hereinafter collectively
called, the “Property”.

          BUT THIS CONVEYANCE is to secure the payment of the Debt (as
hereinafter defined) and performance of the other obligations of Mortgagor
referred to herein.

          And without limiting any of the other provisions of this Mortgage,
Mortgagor, as debtor, and to the extent it has rights therein, expressly grants
unto Mortgagee, a security interest in all those portions of the Property that
may be subject to the Uniform Commercial Code (the “Code”) provisions applicable
to secured transactions under the laws of any state and this Mortgage shall
constitute a Security Agreement under the Code.

          TO HAVE AND TO HOLD the same unto Mortgagee, its successors and
assigns, forever.

          PROVIDED, HOWEVER, that if Mortgagor shall pay to Mortgagee the Debt
(as hereinafter defined), and shall keep and perform each of its other
covenants, conditions and agreements set forth herein and in the Loan Agreement,
the Note, and the other Loan Documents, upon the termination of all obligations,
duties and commitments of Mortgagor under the Loan Agreement, the Note, and the
other Loan Documents, this Mortgage and the estate hereby granted and conveyed
shall become null and void.

          This conveyance is intended as a Mortgage and is given for the purpose
of securing payment of the Debt and performance of the other obligations of
Mortgagor referred to above.

          This Mortgage is executed and delivered subject to the following
covenants, conditions and agreements.

          1.     Definitions. Words and terms defined in the Loan Agreement
shall, unless the context hereof clearly requires otherwise, have the same
meanings herein as therein provided.

          2.     Debt Secured. “Debt” means, collectively, [i] all indebtedness,
whether for principal, interest, fees, expenses or otherwise, of Mortgagor to
Mortgagee incurred in connection with the Loan Agreement, the Note, and the
other Loan Documents, as the same may from time to time be amended, together
with any and all extensions, renewals, refinancings or refundings thereof in
whole or in part, and [ii] all costs and expenses, including without limitation,
to the extent permitted by law, reasonable attorneys’ fees and legal expenses,
incurred by Mortgagee in the collection of any of the indebtedness referred to
in clause [i] above, and [iii] any advances made by Mortgagee for the
maintenance, preservation, protection or enforcement of, or realization upon,
any property or assets now or hereafter made subject to a mortgage, pledge, lien
or security interest granted pursuant to this Mortgage or pursuant to any
agreement, instrument or note relating to any of the Debt, including without
limitation advances for taxes, insurance, repairs and the like; without limiting
any of the foregoing, THIS INSTRUMENT SECURES THE LOAN AGREEMENT, THE NOTE, AND
THE OTHER LOAN DOCUMENTS together with interest on the principal sums hereby
secured, and taxes, insurance premiums and other obligations, including interest
thereon undertaken by Mortgagee herein or in any other agreement securing or
otherwise pertaining to all indebtedness evidenced or guaranteed by the Loan
Agreement, the Note, and the other Loan Documents.

          3.     Impositions and Other Charges.

                  A.     Duty to Pay. Until payment in full of the Debt and
termination of all obligations, duties and commitments of Mortgagor under the
Loan Agreement, the Note, and the other Loan Documents, Mortgagor will, except
as otherwise provided in the Loan Agreement, [i] at least five (5) days prior to
the date on which any interest or penalties shall commence to accrue thereon,
pay, discharge and, upon the request of Mortgagee furnish to Mortgagee copies of
(unless originals are requested by Mortgagee) proper receipts for all taxes,
general and special, water and sewer rent charges, excise levies, vault and
other license or permit fees, city taxes, transit taxes, levies and assessments
of every kind and all charges for utilities and utility services, and that may
have been or may hereafter be charged, assessed, levied, confirmed, imposed
upon, or accrue or become due and payable out of, or in respect to, or against,
the Property, or any part thereof, or any appurtenances thereto (collectively,
the “Impositions”), by any lawful authority or public utility, or that may
become a lien thereon, unless the same shall have been fully paid to Mortgagee
as provided in Subparagraph 3.B hereof, [ii] pay all ground rents reserved from
the Property and pay and discharge all mechanics’ liens that may be filed
against the Property, [iii] pay and discharge any documentary, stamp or other
tax, including interest and penalties thereon, if any, now or hereafter becoming
payable hereon, [iv] provide, renew and keep in force by paying the. necessary
premiums and charges thereon such policies of hazard and liability insurance
upon the Property as are required by Mortgagee.

                  B.     Proof of Payment. Unless the same shall have been fully
paid to Mortgagee as provided in Subparagraph 3.B hereof, Mortgagor, upon the
written request of Mortgagee, will furnish or will cause to be furnished to
Mortgagee within thirty (30) days after the date when any Impositions would
become delinquent, official receipts of the appropriate taxing authority or
other authority to which the charge is payable, or other evidences reasonably
satisfactory to Mortgagee evidencing the payment thereof.

                  C.     Evidence of Payment. The certificate, advice or bill of
the appropriate official designated by law to make or issue the same or to
receive payment of any Imposition, of nonpayment of such Imposition shall be
prima facie evidence that such Imposition is due and unpaid at the time of the
making or issuance of such certificate, advice or bill.

          4.     Risk of Loss: Insurance. Risk of loss or, damage to or
destruction of the Property is and shall remain upon Mortgagor. If Mortgagor
fails to effect and keep in force insurance covering the Property as required by
Mortgagee, or fails to pay the premiums thereon when due, Mortgagee may do so
for the account of Mortgagor. Mortgagor hereby assigns and sets over to
Mortgagee all monies that may become payable on account of all insurance
covering the Property including without limitation any return of unearned
premiums that may be due upon cancellation of any such insurance, and directs
the insurers to pay directly to Mortgagee any amount so due. Mortgagee is hereby
irrevocably appointed the attorney-in-fact of Mortgagor to endorse any draft or
check that may be payable to Mortgagor in order to collect the proceeds of such
insurance or any return of unearned premiums that Mortgagee is entitled to
collect under this paragraph. Mortgagee shall apply such proceeds of all
casualty insurance in accordance with the provisions of Paragraph 17 of this
Mortgage. Mortgagee may deduct from such proceeds any expense incurred by
Mortgagee in collecting the same (including counsel fees).

          5.     Property Maintenance. Alterations, Improvements. Mortgagor
shall maintain the Property and all buildings and improvements subject to this
Mortgage in good working order and condition, ordinary wear and tear excepted,
and shall not commit or suffer waste. Mortgagor shall not remove or destroy any
Improvement on the Property that has a cost or fair market value in excess of
$50,000.00 without the prior written consent of Mortgagee. In no event shall
Mortgagor undertake any alteration or addition to the Property that reduces the
economic value of the Property. Mortgagee shall have the right to enter upon the
Property at any reasonable hour on twenty-four (24) hours prior written notice
for the purpose of inspecting the order, condition and repair thereof.

           6.     Location of Personal Property. The personal property covered
by this Mortgage is located in the counties in the State of Kentucky more
particularly described on Exhibit A to this Mortgage or in another county in
which Mortgagee has a prior perfected security interest in such personal
property has been granted to Mortgagee. Except as otherwise permitted under the
Loan Agreement, Mortgagor will not move (except to any county in which Mortgagee
has a perfected security interest in such items of personal property), remove,
transfer, sell, convey or otherwise assign any of the items of personal property
included in the Property until the Debt secured hereby is paid in full.

          7.     Compliance with Laws. Mortgagor has complied with, is complying
with, and shall continue to comply with, in all material respects, all
applicable statutes, ordinances, regulations and orders of each governmental
authority having jurisdiction over it, the Property or its operations thereon.

          8.     Further Assurances. Mortgagor will, from time to time, make,
do, execute and acknowledge, as the situation may require from time to time,
such further acts, deeds, conveyances, mortgages, security agreements, financing
statements, continuation statements and other assurances in law as may be
required for the purpose of effectuating the intent hereof and for better
assuring and confirming to Mortgagee, its successors and assigns, the lien and
security interest created by this Mortgage.

          9.     Failure to Pay Impositions and Other Charges: Protection of
Property. Except as otherwise permitted in the Loan Agreement, in the event
Mortgagor neglects or refuses to pay or cause to be paid the charges mentioned
in Paragraph 3 of this Mortgage, or fails to maintain the buildings and
Improvements as aforesaid, Mortgagee may do so, add to the Debt the cost
thereof, and collect the same as part of said Debt. Mortgagee shall have the
power and authority to institute and maintain any suits and proceedings as
Mortgagee may deem advisable [i] to prevent any impairment of the Property by
any acts that may be unlawful or any violation of this Mortgage, [ii] to
preserve or protect its interest in the Property, and [iii] to restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid, if
the enforcement of or compliance with such enactment, rule or order might impair
the security hereunder or be prejudicial to Mortgagee’s interests.

          10.   Prohibition of Liens: Debt. Mortgagor will pay, or bond, from
time to time when the same shall become due, all claims and demands of
mechanics, materialmen, laborers, and others that, if unpaid, might result in,
or permit the creation of, a lien on the Property or any part thereof, or on the
revenues, rents, issues, income and profits arising therefrom. Mortgagor will do
everything necessary so that the lien and priority hereof shall be fully
preserved, at the cost of Mortgagor, without expense to Mortgagee.

          Mortgagor will not, without the written consent of Mortgagee, create
or suffer to be created any security interest under the Code, together with any
amendments or supplements thereto, or other encumbrances in favor of any party
other than Mortgagee, or create or suffer any reservation of title by any such
other party, with respect to any fixtures or property, nor shall any such
fixtures or property be the subject matter of any lease or other transaction
whereby the ownership or any beneficial interest in any of such property is held
by any person or entity other than Mortgagor (or Mortgagee as provided herein).
All such fixtures and property shall be purchased for cash or in such manner
that no lien shall be created thereon except the lien of this Mortgage, unless
Mortgagee shall agree in writing to the contrary before a contract to purchase
any such fixtures and property is executed.

          11.   Subrogation to Prior Lienholder. In the event Mortgagor pays any
prior lien from the proceeds of the Loan, Mortgagee shall be subrogated to the
rights of the holder of such prior lien as fully as if such lien had been
assigned to Mortgagee.

          12.   Prohibition of Assumption. Transfer. Mortgagor hereby warrants
and covenants that it is the lawful owner of the Property, that Mortgagor has
good right and lawful authority to convey and encumber the same, that the
Property is free and clear from all liens and encumbrances except for liens in
favor of Mortgagee and liens permitted under the Loan Agreement, and that it
will warrant and defend such title to the Property against the claims of all
persons whomsoever. Except as disclosed in the Loan Agreement or otherwise
permitted under the Loan Agreement, Mortgagor shall not create, incur, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing), any
conditional sale or other title retention agreement, any lease intended as
security, or any agreement to give any financing statement under the Code) on
the Property or any other part of the collateral mentioned above. Except as
disclosed in the Loan Agreement or otherwise permitted under the Loan Agreement,
Mortgagor shall not, without the prior written consent of Mortgagee, sell,
lease, transfer or otherwise dispose of any of the Property or all or a
substantial portion of its assets, or liquidate or consolidate with or merge
with or into any entity.

          13.   Priority of Lien. This Mortgage shall be prior and superior in
right and lien to any and all leases of a part or the whole of the Property
except for liens or encumbrances disclosed in the Loan Agreement or otherwise
permitted under the Loan Agreement. Except as otherwise provided herein or in
the Loan Agreement, Mortgagor shall not create or permit to accrue upon all or
any part of the Property any debt, lien or charge except the lien of this
Mortgage and shall promptly pay and discharge any lien or charge whatsoever that
by any present or future law may be or become superior to, or on a parity with,
this Mortgage, either in lien or in distribution out of the proceeds of any
judicial sale of the Property, or any part thereof, and any lien or charge not
permitted by Paragraph 11.

          14.   Default.

                  A.     Default and Remedies. If an Event of Default (as
defined in the Loan Agreement) shall occur and be continuing or shall exist, the
entire unpaid balance of the principal, the accrued interest, and all other sums
evidenced by the Loan Agreement, the Note, and the other Loan Documents or
evidenced or secured by this Mortgage shall, at the option of Mortgagee, become
immediately due and payable without notice or demand, and in the event of any
such Event of Default, Mortgagee may forthwith, and without further delay,
undertake any one or more of the following:

 

          [1]   Foreclosure. Institute an action of mortgage foreclosure, or
take such other action as the law may allow, at law or in equity, for the
enforcement thereof and realization on the mortgage security or any other
security that is herein or elsewhere provided for, and proceed thereon to final
judgment and execution thereon for the entire unpaid balance of the principal
indebtedness, with interest, at the rates and pursuant to the methods of
calculation specified in the Loan Agreement, the Note, and the other Loan
Documents and this Mortgage to the date of default and thereafter at the rate
provided in the Loan Agreement, the Note and the other Loan Documents, together
with all other sums secured by this Mortgage, all costs of suit, interest at the
rates and pursuant to the methods of calculation specified in the Loan
Agreement, the Note, and the other Loan Documents and this Mortgage on any
judgment obtained by Mortgagee from and after the date of sale of the Property
(which may be sold in one parcel or in such parcels, manner or order as
Mortgagee shall elect) until actual payment is made of the full amount due
Mortgagee, and reasonable attorneys’ fees, without further stay, any law, usage
or custom to the contrary notwithstanding;

 

 

 

          [2]   Entry. Without application to any court with the irrevocable
consent of Mortgagor, which consent is evidenced by Mortgagor’s execution of
this Mortgage, Mortgagee personally, or by its agents or attorneys, may enter
into and upon all or any part of the Property, and each and every part thereof,
and may exclude Mortgagor, its agents and servants wholly therefrom without
liability for trespass, damages or otherwise and Mortgagor agrees to surrender
possession to Mortgagee on demand after the happening of any Event of Default;
and having and holding the same, may use, operate, manage and control the
Property and conduct the business  located at the Land and Improvements, either
personally or by its superintendents, managers, agents, servants, attorneys or
receivers; and upon every such entry, Mortgagee, at the expense of Mortgagor or
the Property, from time to time, either by purchase, repairs or construction,
may maintain and restore the Property whereof it shall become possessed as
aforesaid, may complete the construction of the buildings, structures and
improvements and in the course of such completion may make such changes in the
contemplated or completed buildings, structures and improvements as it may deem
desirable and may insure the same; and likewise, from time to time, at the
expense of Mortgagor, Mortgagee may make all necessary or proper repairs,
renewals and replacements and such useful alterations, additions, betterments
and improvements thereto and thereon as to it may deem advisable; and in every
such case Mortgagee shall have the right to manage and operate the Property and
to carry on the business  related to the real property and

 

exercise all rights and powers of Mortgagor with respect thereto either in the
name of Mortgagor or otherwise as it shall deem best; and in addition to
Mortgagee’s right to collect all earnings, revenues, rents, royalties, issues,
profits and income prior to taking possession of the Property, Mortgagee shall
be entitled to collect and receive all earnings, revenues, rents, royalties,
issues, profits and income of the Property located at the Land and Improvements
and every part thereof, and after deducting the expenses of conducting  that
business  and of all maintenance, repairs, renewals, replacements, alterations,
additions, betterments and improvements and amounts necessary to pay for taxes,
assessments, insurance and prior or other proper charges upon the Property or
any part thereof, as well as just and reasonable compensation for the services
of Mortgagee and for all attorneys, counsel, agents, clerks, servants and other
employees by it properly engaged and employed, Mortgagee shall apply the moneys
arising as aforesaid to the payment of the Debt. Should Mortgagee collect all
earnings, revenues, rents, royalties, issues, profits and income from the
Property, the moneys so collected shall not be substituted for payment of the
Debt nor can they be used to cure the default, without prior written consent of
Mortgagee.

 

 

 

          [3]   Receivership. Have a receiver appointed to enter into possession
of the Property, collect the earnings, revenues, rents, issues, profits and
income therefrom and apply the same as the court may direct. Mortgagee shall be
entitled to the appointment of a receiver without the necessity of proving
either the inadequacy of the security or the insolvency of Mortgagor or any
other person who may be legally or equitably liable to pay moneys secured hereby
and Mortgagor and each such person shall be deemed to have waived such proof and
to have consented to the appointment of such receiver. Should Mortgagee or any
receiver collect earnings, revenues, rents, issues, profits or income from the
Property, the moneys so collected shall not be substituted for payment of the
Debt nor can they be used to cure the default, without the prior written consent
of Mortgagee. Mortgagee shall be liable to account only for earnings, revenues,
rents, issues, profits and income actually received by Mortgagee.

 

 

 

          [4]   Sale of Personal Property. Mortgagee shall have such rights and
remedies in respect of so much of the Property as may, under applicable law, be
personal property, or any part thereof, as are provided by the Code and such
other rights and remedies in respect thereof that it may have at law or in
equity or under this Mortgage, including without limitation the right to take
possession of the Property wherever located and to sell all or any portion
thereof at public or private sale, without prior notice to Mortgagor, except as
otherwise required by law (and if notice is required by law, after 10 days,
prior written notice), at such place or places and at such time or times and in
such manner and upon such terms, whether for cash or on credit, as Mortgagee in
its sole discretion may determine. Mortgagee shall apply the proceeds of any
such sale to the payment of the Debt. Upon the occurrence of any Event of
Default, Mortgagor, upon demand by Mortgagee, shall promptly assemble any
equipment and fixtures included in the Property and make them available to
Mortgagee at a place to be designated by Mortgagee that shall be reasonably
convenient to Mortgagee and Mortgagor.

 

 

 

          [5]   Sale of the Property. Mortgagee may sell any of the Property,
not specifically designated as personal property and subject to Subparagraph [4]
above, in such a manner as it deems appropriate and in accordance with any
applicable law. Mortgagee shall apply the proceeds of any such sale first to the
payment of the Debt.

 

 

 

          [6]   Additional Rights and Remedies: Not Exclusive. In addition to
all the foregoing, Mortgagee shall have such other rights as the law allows in
the pursuit of the foregoing specified remedies and shall have such other
remedies as the law allows for the realization of security interests herein
granted. The rights and remedies herein provided to Mortgagee shall be
cumulative and not alternative and are not exclusive of any other remedies that
may be available to Mortgagee, whether at law, in equity, or otherwise.

                    B.     Rights in Pursuit of Remedies. Upon the occurrence of
an Event of Default, Mortgagee in pursuance of the foregoing remedies, or in
addition thereto, [i] shall be entitled to resort to its security for the
payment of the sums secured hereby in such order and manner as Mortgagee may
think fit without impairing Mortgagee’s lien in, or rights to, any of such
security and without affecting the liability of any person, firm or corporation
for the sums secured hereby, except to the extent that the Debt shall have been
reduced by the actual monetary consideration, if any, received by Mortgagee from
the proceeds of such security; [ii] may, in Mortgagee’s sole discretion, release
for such consideration, or no consideration, as Mortgagee may require, any
portion of the Property without, as to the remainder of the security, in any way
impairing or affecting the lien of this Mortgage, or the priority thereof, or
improving the position of any subordinate lienholder with respect thereto,
except to the extent that the Debt shall have been reduced by the actual
monetary consideration, if any, received by Mortgagee for such release; and/or
[iii] may accept the assignment or pledge of any other property in place thereof
as Mortgagee may require without being accountable for so doing to any other
lienor.

                    C.     Waiver. Mortgagor hereby waives and releases [i] all
errors, defects and imperfections in any proceedings instituted by Mortgagee
under this Mortgage, [ii] all benefits that might accrue to Mortgagor by virtue
of any present or future laws exempting the Property, or any part of the
proceeds arising from any sale thereof, from attachment, levy or sale under
execution, or providing for any stay of execution, exemption from civil process,
or extension of time for payment, [iii] all benefits that might accrue to
Mortgagor from requiring valuation or appraisement of any party of the Property
levied or sold on execution of any judgment recovered for the Debt, and [iv] all
notices not herein elsewhere specifically required, of Mortgagor’s default or of
Mortgagee’s exercise of, or election to exercise, any option under this
Mortgage. Mortgagor further agrees to waive the issuance and service of process
and enter its voluntary appearance in any action, suit or proceeding brought in
connection with any Event of Default and, if required by Mortgagee, to consent
to the appointment of a receiver or receivers of the Property and of all the
earnings, revenues, rents, issues, profits and income thereof. Mortgagor will
not at any time insist upon, or plead, or in any manner whatever, claim or take
any benefit or advantage of any right under any statute heretofore or hereafter
enacted to redeem the property so sold, or any part thereof, and Mortgagor
hereby expressly waives all benefit or advantage of any such law or laws, and
covenants not to hinder, delay or impede the execution of any power herein
granted or delegated to Mortgagee, but to suffer and permit the execution of
every power as though no such law or laws had been made or enacted. Mortgagor,
for itself and all who may claim under it, waives, to the extent that it
lawfully may do so, all right to have the Property marshalled upon any
foreclosure hereof.

                    D.     Injunctive Relief. In the event of any breach or
threatened breach by Mortgagor of any of the covenants, agreements, terms or
conditions contained in the Loan Agreement, the Note, the other Loan Documents
or this Mortgage, Mortgagee shall be entitled to enjoin such breach or
threatened breach and shall have the right to invoke any right and remedy
allowed at law or in equity or by statute or otherwise as though other remedies
were not provided for in this Mortgage.

                    E.     Continued Lien of Mortgage. No recovery of any
judgment by Mortgagee and no levy of an execution under any judgment upon the
Property or upon any other property of Mortgagor shall affect in any manner or
to any extent, the lien of this Mortgage upon the Property or any part thereof,
or any liens, rights, powers or remedies of Mortgagee hereunder, but such liens,
rights, powers and remedies of Mortgagee shall continue unimpaired as before.

                    F.     Subordination of Tenants’ Rights Under Leases. In the
event that Mortgagee shall have the right to foreclose this Mortgage, Mortgagor
authorizes Mortgagee at its option to foreclose this Mortgage, subject to the
rights of any tenants of the Property if Mortgagee elects that this Mortgage
shall be subordinate to rights of tenants, and the failure to make any such
tenants parties defendant to any such foreclosure proceeding and to foreclose
their rights will not be asserted by Mortgagor as a defense to any proceeding
instituted by Mortgagee to collect the Debt or any deficiency remaining unpaid
after the foreclosure sale of the Property.

                    G.     Discontinuance of Proceedings: Position of Parties
Restored. If Mortgagee shall have proceeded to enforce any right or remedy under
this Mortgage by foreclosure, entry or otherwise, any such proceedings shall
have been discontinued or abandoned for any reason, or shall have been
determined adversely to Mortgagee, then in every such case Mortgagor and
Mortgagee, shall be restored to their former positions and rights hereunder, and
all rights, powers and remedies of Mortgagee shall continue as if no such
proceeding had occurred or had been taken.

          15.     Application of Proceeds of Foreclosure. Mortgagee shall apply
the proceeds of any foreclosure sale of or other disposition or realization
upon, or rents or profits from, the Property:

                    A.     First, to the payment or reimbursement of all
reasonable advances, expenses and disbursements of Mortgagee (including, without
limitation, the reasonable fees and costs of counsel and agents incurred in
connection with the administration and enforcement of, or the preservation of
any rights under, this Mortgage or in the collection of the obligations of
Mortgagor under the Loan Agreement, the Note, and the other Loan Documents;

                    B.     Second, in satisfaction of the Debt, whether for
principal, interest or expenses in such order as Mortgagee shall designate; and

                    C.     Third, the balance, if any, to be distributed as
required by law.

          If the proceeds from any such sale of or other disposition or
realization upon the Property are insufficient to pay the Debt, Mortgagor shall
remain liable for such deficiency.

          16.     Rents.

                    A.     All Rents shall constitute property of Mortgagee;
provided, however, that only such amounts as are applied to the Debt shall be
deemed as payments against the Debt. During the term of the loans, the Rents
shall not constitute property of Mortgagor (or any estate of Mortgagor) within
the meaning of section 541 of the United States Bankruptcy Code (11 U.S.C. §
541), as amended from time to time.

                    B.     Notwithstanding anything contained herein to the
contrary, provided no Event of Default exists, Mortgagor shall have the right
under a license granted hereby to collect, receive and retain the Rents, but no
Rents shall be collected in advance of the due date thereof.

          17.     Casualty Loss.

                    A.     Notice to Mortgagee. In case of casualty resulting in
damage or destruction to the Property, Mortgagor shall promptly give written
notice thereof to Mortgagee.

                    B.     Restoration of Property. Unless insurance proceeds
are applied to reduce the Debt, then, regardless of the amount of any such
damage or destruction, Mortgagor shall at its sole cost and expense, and whether
or not the insurance proceeds, if any, shall be sufficient for the purpose,
restore, repair, replace, rebuild or alter the same as nearly as possible to its
value, condition and character immediately prior to such damage or destruction
or with such changes or alterations as may be made at Mortgagor’s election in
conformity with and subject to the conditions of Paragraph 5 hereof. Such
restoration, repairs, replacements, rebuilding or alteration shall be commenced
promptly and prosecuted with reasonable diligence. If [i] estimates received,
and/or made, by Mortgagee disclose that the cost or restoration would be in
excess of the amount of the insurance proceeds available therefor, or [ii]
during the period of restoration by Mortgagor the amount of the insurance
proceeds shall not be sufficient to complete such restoration, then in either of
such events, Mortgagor shall deposit with Mortgagee the amount required to
complete such restoration or such other security as shall be satisfactory to
Mortgagee.

                    C.     Application of Proceeds. All proceeds of and payments
under insurance policies with respect to any casualty event shall be paid to
Mortgagee and applied by Mortgagee first to payment of the actual costs, fees
and expenses, if any, incurred by Mortgagee in connection with adjustment of the
loss and settlement with the insurance company. The remainder of such insurance
proceeds shall be applied by Mortgagee, either [i] in reduction of the
outstanding Debt, or [ii] to the payment of the cost of the aforesaid
restoration, repairs, replacement, rebuilding or alterations, including the cost
of temporary repairs and the cost of protection of property pending the
completion of permanent restoration, repairs, replacement, rebuilding or
alterations (all of which temporary and permanent repairs, restoration,
replacement, rebuilding, alterations and protection of property are hereinafter
collectively referred to as the “restoration’).

                    D.     Advancement of Proceeds. If under the provisions of
this Paragraph, insurance proceeds are to be applied to the cost of restoration,
Mortgagee shall hold such insurance proceeds, together with any amounts
deposited with Mortgagee pursuant to Subparagraph 17.B hereof, and advance the
same for application to the cost of the restoration from time to time as the
restoration progresses. Such funds will be advanced upon the written request of
Mortgagor and upon Mortgagor’s compliance with such reasonable requirements
therefor as Mortgagee shall impose. Upon completion of all of the restoration in
a good and workmanlike manner and substantially in accordance with any plans and
specifications therefor that Mortgagee may have required, and upon receipt by
Mortgagee of evidence satisfactory to Mortgagee that the restoration has been
completed and that the Property is not and will not become subject to any
mechanic’s or materialmen’s liens on account of the restoration or any part
thereof, any balance of the insurance proceeds or sums deposited with Mortgagee
pursuant to Subparagraph 17.B hereof and not applied to the cost of restoration
shall be applied to reduce the Debt, and any balance remaining after repayment
of the Debt shall be paid over to Mortgagor.

                    E.     Effect of Default. Notwithstanding any provision of
this Paragraph to the contrary, if at any time during any restoration of the
Property, an Event of Default shall exist, Mortgagee shall have no obligation to
continue to apply insurance proceeds to restoration and may apply such insurance
money to reduction of the Debt.

                    F.     No Postponement, Abatement of Scheduled Installments.
In no event shall the application to the obligation of Mortgagor, whether or not
then due or payable, of any insurance proceeds postpone, abate or reduce any of
the periodic installments of principal and interest thereafter to become due
under the Debt until the Debt is completely satisfied and paid in full. If
Mortgagee shall acquire title to the Property either by virtue of a deed in lieu
of foreclosure or a judicial sale thereof pursuant to proceedings under this
Mortgage, then all of Mortgagor’s estate, right, title and interest in and to
all such policies, including unearned premiums thereon and the proceeds thereof,
shall vest in Mortgagee.

          18.     Condemnation.

                    A.     Notice. Right to Participate. Mortgagor shall give
Mortgagee immediate notice of any actual or threatened commencement of
condemnation proceedings or the exercise of the right of eminent domain. In the
event that the Property, or any part thereof, shall be taken in condemnation
proceedings or by exercise of any right of eminent domain (hereinafter called
collectively, “condemnation proceedings”), Mortgagee may on behalf of Mortgagor
participate in any such condemnation proceedings and may on behalf of and with
the concurrence of Mortgagor adjust, contest, accept, reject or compromise any
proposed award and collect and, without the concurrence of Mortgagor, may
receive the proceeds thereof and endorse drafts, and Mortgagee is hereby
irrevocably appointed attorney-in-fact of Mortgagor for such purposes, such
power being coupled with an interest. The decision of Mortgagee with the
concurrence of Mortgagor with regard to the adjustment, contest, acceptance,
rejection or compromise of any proposed award issued in connection with any
condemnation proceedings shall be binding upon Mortgagor. The award that may be
made in any such proceeding or the proceeds thereof shall be deposited with
Mortgagee and distributed in the manner set forth in this Paragraph. The parties
agree to execute any and all further documents that may be required in order to
facilitate collection of any award or awards and the making of any such deposits
with Mortgagee.

                    B.     Condemnation of All or Material Part of Property. If
at any time during the term of this Mortgage title to the whole or a material
part of the Property shall be taken in condemnation proceedings or by agreement
between Mortgagor and Mortgagee and those authorized to exercise such right,
Mortgagee shall apply such award or proceeds that it receives pursuant to
Subparagraph 18.A hereof to payment of the Debt and any balance then remaining
shall be paid to Mortgagor. In the event that the amount of the award or
proceeds received by Mortgagee shall not be sufficient to pay the Debt,
Mortgagor shall, within  thirty(30) days after the application of the award or
proceeds as aforesaid, pay or cause to be paid such deficiency to Mortgagee. For
the purposes of this Subparagraph 18.B, “a material part” shall be deemed to
have been taken if the portion of the Property taken shall preclude, in
Mortgagee’s  reasonable judgment, the effective use of the Property as an
economically viable unit for the permitted purposes for which Mortgagor utilizes
such Property.

                    C.     Condemnation of Less than Material Part of Property.
If at any time during the term of this Mortgage title to a portion of the
Property that does not constitute “a material part” of the Property shall be
taken as aforesaid, all of the award or proceeds collected by Mortgagee pursuant
to Subparagraph 18.A hereof, shall, [i] be applied to reduce the Debt or [ii] be
held by Mortgagee, and applied and paid over toward the costs of demolition,
repair and restoration, substantially in the same manner and subject to the same
conditions as those provided in Paragraph 17 hereof with respect to insurance
and other monies. Any balance remaining in the hands of Mortgagee after payment
of such costs of demolition, repair and restoration shall be retained by
Mortgagee and applied in reduction of the Debt. In the event that the costs of
such demolition, repairs and restoration shall exceed the new amount collected
by Mortgagee, Mortgagor shall pay the deficiency.

                    D.     Temporary Use or Taking. If at any time during the
term of this Mortgage the temporary use of the whole or any part of the Property
shall be taken in condemnation proceedings, all of the award or proceeds
collected by Mortgagee pursuant to Subparagraph 17.A hereof shall be held by
Mortgagee and applied by Mortgagee toward the payment of the monthly interest
payment or of the monthly payments of principal and interest due on the Debt
until such time as the Debt is completely satisfied and paid, except that, if
such taking by condemnation proceedings results in changes and alterations to
the Property or any part thereof that would necessitate an expenditure to
restore the Property or any part thereof to its former condition, then such
portion of the award or proceeds as in Mortgagee’s reasonable estimation shall
be necessary to cover the cost of restoration shall at the option of Mortgagee
be retained by Mortgagee, without application as aforesaid, and be applied and
paid over toward the restoration of the Property, or any part thereof, to its
former condition in substantially the same manner and subject to the same
conditions as those provided in Paragraph 17 hereof with respect to insurance
and other monies. In the event that the costs of such restoration shall exceed
the net amount collected by Mortgagee, Mortgagor shall pay or cause to be paid
the deficiency.

                    E.     Reimbursement of Costs, Fees and the Like. In the
case of any taking covered by the provisions of this Paragraph, Mortgagor shall
be entitled as a first priority to reimbursement out of any award or awards for
all reasonable costs, fees, and expenses incurred in the determination and
collection of any such awards.

                    F.     Payments Pending Receipt of Award. Notwithstanding
any taking by condemnation proceedings, Mortgagor shall continue to pay interest
on the Debt at the rates provided in the Note until any such award or payment
shall have been actually received by Mortgagee and applied to the principal sum
as provided in this Paragraph, if it is to be so applied under this Paragraph.
Any reduction in the principal sum resulting from Mortgagee’s application of
such award or payment as hereinafter set forth shall be deemed to take effect
only on the date of such application. If prior to Mortgagee’s receipt of such
award or payment the Property shall have been sold to Mortgagee or its nominee
on foreclosure of this Mortgage, Mortgagee shall have the right to receive and
retain the entire award or payment.

                    G.     No Postponement or Abatement of Scheduled
Installments. In no event shall the application to the Debt of any payment to
Mortgagee pursuant to this Paragraph postpone, abate or reduce any of the
periodic installments of principal or interest thereafter to become due under
the Loan Agreement, the Note, and the other Loan Documents until such amounts
are paid in full.

          19.     Indemnity for Costs. Mortgagor will indemnify against, and on
demand repay Mortgagee for any loss, damage, expense, or reasonable attorneys’
fees that may be incurred by reason of any action or proceeding affecting the
Property or the title thereto or Mortgagee’s interest under this Mortgage to
which Mortgagee is made a party (by intervention or otherwise).

          20.     Change in Mortgage Tax Laws. In the event of the passage after
the date of this Mortgage of any law of the State of Kentucky deducting from the
value of the Property for the purpose of taxation any lien thereon, or changing
in any way the laws now in force for the taxation of mortgages, or debts secured
thereby, for state or local purposes, or the manner of the operation of any such
taxes so as to affect the interest of Mortgagee, then and in such event,
Mortgagor shall bear and pay the full amount of such taxes.

          21.     Intentionally omitted.

          22.     No Merger. Unless Mortgagee shall expressly consent in
writing, neither fee title nor any other estate shall, under any circumstances,
be deemed to merge with any of the Leases, notwithstanding the union of any of
the Leases and fee title or other estate, either in any lessor under any of the
Leases, in Mortgagor or in a third party by purchase or otherwise. Should
Mortgagor acquire fee title to any of the Property, such fee ownership or
interest therein shall immediately become subject to the lien of this Mortgage,
and Mortgagor shall promptly execute and deliver any instruments the Bank may
reasonably require to effect and perfect such lien.

          23.     Bankruptcy Protection. If there shall be filed by or against
Mortgagor a petition under the Bankruptcy Code, Mortgagor shall not seek to
reject any of the Leases without Mortgagee’s prior written consent. Mortgagor
hereby assigns and transfers to Mortgagee all of its right to apply to the
bankruptcy court under Section 365(d) (4) of the Bankruptcy Code for an order
extending the period during which the Leases may be rejected or assumed.

          24.     Agreements Continuing. Absolute. The agreements and
obligations of Mortgagor hereunder are continuing agreements and obligations,
and are absolute and unconditional irrespective of the genuineness, validity or
enforceability of the Loan Agreement, the Note, the other Loan Documents or any
other instrument or instruments now or hereafter evidencing the Debt or any
other agreement or agreements now or hereafter entered into by Mortgagee and
Mortgagor pursuant to which the Debt or any part thereof is issued or of any
other circumstance that might otherwise constitute a legal or equitable
discharge of such agreements and obligations; without limitation upon the
foregoing, the agreements and obligations of Mortgagor shall not in any such way
be affected by [i] any renewal, refinancing or refunding of the Debt in whole or
in part, [ii] any extension of the time of payment of the amounts due and owing
under the Loan Agreement, the Note, the other Loan Documents or any other
instrument or instruments now or hereafter evidencing the Debt or any part
thereof, [iii] any amendment to or modification of the terms of the Loan
Agreement, the Note, the other Loan Documents or other instrument or instruments
now or hereafter evidencing the Debt or any part thereof or any other agreement
or agreements now or hereafter entered into by Mortgagee and Mortgagor pursuant
to which the Debt or any part thereof is issued or secured, [iv] any
substitution, exchange or release of, or failure to preserve, perfect or
protect, or other dealing in respect of, the Property or any other property or
any security for the payment of the Debt or any part thereof, [v] any
bankruptcy, insolvency, arrangement, composition, assignment for the benefit of
creditors or similar proceeding commenced by or against Mortgagor or [vi] any
other matter or thing whatsoever whereby the agreements and obligations of
Mortgagor hereunder would or might otherwise be released or discharged.

          25.     Partial Invalidity. The invalidity per se or in any
application of any one or more paragraphs of this Mortgage or any part of any
thereof shall not affect the remaining portions of this Mortgage, all of which
are inserted conditionally on their being held valid in law.

          26.     Notices. All notices, requests, demands, directions and other
communications (collectively “notices”) under the provisions of this Mortgage
must be in writing (including telexed or telecopied communication) unless
otherwise expressly permitted under this Mortgage and must be sent by
first-class or first-class express mail, private overnight or next Business Day
courier or by telex or telecopy with confirmation in writing mailed first class,
in all cases with charges prepaid, and any such properly given notice will be
effective when received. All notices will be sent to the applicable party at the
addresses stated below or in accordance with the last unrevoked written
direction from such party to the other parties. A copy of any notice of
Mortgagee’s sale under this Mortgage shall be served on Mortgagor by certified
mail, return receipt requested, directed to the address stated below.

 

If to Mortgagor:

Large Scale Bioprocessing, Inc.

 

 

3700 AirPark Drive

 

 

Owensboro, KY 43301

 

 

(270) 926-2405 - Telephone

 

 

(270) 926-2385 - Fax

 

 

 

 

and copy to:

Gerald B. Sweeney

 

 

Sweeney Lev

 

 

460 Bloomfield Avenue, Suite 200

 

 

Montclair, NJ 07042

 

 

(973) 509-1800 - Telephone

 

 

(973) 509-1074 - Fax

 

 

 

 

It to Mortgagee:

Kentucky Technology, Inc.

 

 

1501 Bull Lea Road

 

 

Lexington, KY 40511

 

 

(859) 254-5454 - Telephone

 

 

(859) 253-1112 - Fax

 

 

 

 

and copy to:

Clifton B. Clark

 

 

Dinsmore & Shohl LLP

 

 

250 West Main Street, Suite 1400

 

 

Lexington, KY 40507

 

 

(859) 425-1043 - Telephone

 

 

(859) 425-1099 – Fax

          27.     WAIVER OF RIGHT TO HEARING PRIOR TO POSSESSION. In authorizing
Mortgagee to take possession upon an Event of Default as provided and defined
herein, Mortgagor is advised and understands that it may have a constitutional
right to notice and a hearing prior to any such taking of possession, but as an
inducement to Mortgagee to extend the credit herein referred to, Mortgagor
HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ALL RIGHTS CONFERRED BY ANY EXISTING OR
FUTURE LAW TO ANY  HEARING PRIOR TO SUCH POSSESSION AND HEREBY RELEASES
MORTGAGEE FROM ALL LIABILITY IN CONNECTION WITH ANY SUCH TAKING OF POSSESSION.

          28.     Maturity Date. The maturity date of this Mortgage, and the
date on which the last to mature of the Note matures, is June 17, 2006.

          29.     Future Advances. To the extent that the Debt is considered in
whole or in part a line of credit under KRS 382.385, the parties intend that
this Mortgage secure the line of credit. Pursuant to KRS 382.520, this Mortgage
shall secure the payment of [i] all renewals and extensions of the Debt
described herein; and [ii] any additional indebtedness, whether direct,
indirect, existing, future, contingent, or otherwise, of Mortgagor to Mortgagee,
said additional indebtedness in no event to exceed the principal sum of $0 in
addition to the principal amount of the Debt.

          To the extent that the indebtedness evidenced by any of the Debt is
deemed to be a “revolving credit plan” or “line of credit” pursuant to KRS
382.385, $2,900,000.00 is the maximum principal amount of credit that may be
extended under the line of credit or the maximum credit limit of the revolving
credit plan that, in each case, may be outstanding at any time or times under
the line of credit or revolving credit plan, and that is to be secured by this
Mortgage. It shall be a default under this Mortgage if Mortgagor requests a
release, in the manner provided by KRS 382.385 or 382.520, of any portion of the
Debt prior to the date that all of the Debt secured by this Mortgage has been
paid and the Debt has been terminated in writing, and Mortgagor hereby waives
any and all right to request such a release to the maximum extent permitted by
law.

[The Remainder of this Page is Intentionally Left Blank]

          IN WITNESS WHEREOF, Mortgagor has caused this instrument to be
executed by its officers thereunto duly authorized as of the date first above
written.

 

LARGE SCALE BIOPROCESSING, INC.

 

 

 

 

By: 

/s/ Barry A Bratcher

 

 

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

 

 

Its: Senior Director, Biomanufacturing

STATE  OF KENTUCKY                    )
                                                                                )
SS:
COUNTY OF DAVIESS                      )

          On this 17th day of December, 2004, before me, the undersigned
officer, personally appeared Barry A. Bratcher, who acknowledged himself to be
the Senior Director, Biomanufacturing, of Large Scale Bioprocessing, Inc., a
Delaware corporation, and that he, on behalf of Large Scale Bioprocessing, Inc.,
and being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation by himself as
such Senior director, Biomanufacturing.

          IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

 

/s/ Rosie A Summerville

 

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

 

Notary Public

My Commission Expires:  6-11-2006

This Mortgage was prepared by:

/s/  JOHN R. RHORER, JR.

 

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

 

John R. Rhorer, Jr.

 

DINSMORE & SHOHL, LLP

 

Lexington Financial Center

 

250 West Main Street, Suite 1400

 

Lexington, Kentucky 40507

 

Telephone: (859) 425-1000