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LOAN AND SECURITY AGREEMENT

Dated as of November 14, 2008

This Loan and Security Agreement (as modified from time to time, the
'''Agreement'') has been executed by DYADIC INTERNATIONAL (USA), INC. (formerly
known as Dyadic International, Inc.), a Florida corporation (“Dyadic Florida”),
and DYADIC INTERNATIONAL, INC., a Delaware corporation (“Dyadic Delaware” and
together with Dyadic Florida, the "Debtor"), as debtor, in favor of the MARK
A.  EMALFARB TRUST, under agreement dated October 1, 1987, as amended (the “MAE
Trust”), Francisco Trust, under agreement dated February 29, 1996, as amended,
and Mark A. Emalfarb, individually (“MAE”), collectively, as secured party
(together with any successor, assign or subsequent holder, individually and
collectively referred to as the "Secured Party"), with its main office c/o the
MAE Trust at 193 Spyglass Court, Jupiter, Florida 33477.  If more than one
person or entity executes this Agreement, the term "Debtor" refers to each of
them individually and some or all of them collectively, and their obligations
hereunder shall be joint and several.

Each Debtor is jointly and severally indebted to MAE Trust pursuant to the terms
of that certain Revolving Note dated as of May 29, 2003, as amended, in the
original principal amount of Three Million Dollars ($3,000,000) (the “Prior
Note”).  The Prior Note is secured by, among other things, a certain Security
Agreement dated as of May 7, 2000, as amended, and a Security Agreement dated as
of May 29, 2003, as amended (collectively, “Prior Security Agreement”), pursuant
to which Dyadic Florida granted a security interest in and to certain personal
property owned by Debtor as more particularly described in the Prior Security
Agreement.

Debtor acknowledges and agrees that (i) certain defaults exist under the Prior
Note and Prior Security Agreement, (ii) Debtor has received proper notice and
opportunities to cure such defaults under the terms of the Prior Note and Prior
Security Agreement, and (iii) Debtor has failed to cure such defaults as of the
date hereof.

As of the date hereof, the outstanding principal balance of the Prior Note is
Two Million Four Hundred Twenty-Four Thousand Two Hundred Ninety-Four and No/100
Dollars ($2,424,294.00), plus accrued and unpaid interest (such principal and
accrued and unpaid interest being hereinafter referred to as the “Loan”).

Notwithstanding the existence of such uncured defaults, until the first to occur
of the maturity date specified in the Amended Note (as hereinafter defined) or
the date upon which a Default (as hereinafter defined) shall occur, Secured
Party has agreed to forbear on the exercise of its rights under the Prior Note
and Prior Security Agreement in exchange for Debtor’s agreement to (i) execute
and deliver that certain Amended and Restated Note dated as of even date
herewith (the “Amended Note”) in the original principal amount of Two Million
Four Hundred Twenty Four Thousand Two Hundred Ninety Four and No/100 Dollars
($2,424,294), and (ii) otherwise observe and comply with the terms and
conditions set forth herein.

 
 

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NOW THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, Debtor
agrees as follows:

1.           DEFIN1TIONS.  As used in this Agreement:

(a)           “Account”, “Account Debtor”, “Chattel Paper”, “Commercial Tort
Claims”, “Deposit Accounts”, “Documents”, “Equipment”, “Fixtures”, “General
Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”,
“Letter of Credit Rights”, “Proceeds” and “Tangible Chattel Paper” shall have
the respective meanings assigned to such terms, as of the date of this
Agreement, in the Uniform Commercial Code.

(b)             Capitalized terms not expressly defined herein shall have the
meaning ascribed to such terms in the Amended Note.

(c)           “Collateral” shall mean the property of Debtor described in
Section 2 hereof, together with all other personal property of Debtor now or
hereafter pledged to Secured Party to secure, either directly or indirectly,
repayment of the Secured Obligations.

(d)           “License Agreement” shall have the meaning set forth in Section 8
hereof.

(e)           “Loan Documents” shall mean all documents evidencing and securing
Loan, including, without limitation, the documents described in Section 6.

(f)           “Secured Obligations” shall mean and include without limitation
any and all of Debtor’s indebtedness, liabilities and other obligations to any
Secured Party of every kind, nature and description, direct or indirect, joint
or several, absolute or contingent, due or to become due, now existing or
hereafter arising including, without limitation, the indebtedness and
liabilities under the Amended Note, this Agreement and the other Loan Documents
including, without limitation: (i) all obligations to perform acts or refrain
from taking any action, (ii) each and all of the obligations of any Debtor owing
to any Secured Party, whether now existing or hereafter arising, (iii) all
indemnification and other obligations arising pursuant to any
contract,  agreement, or any bylaw of any Debtor or under applicable law, (iv)
the damages due MAE by reason of claims asserted by him in that certain
arbitration proceeding between Mark A. Emalfarb, claimant, and Dyadic, Inc.,
respondent (American Arbitration Association # 32 460 00765 07), (iv) claims of
MAE Trust and Francisco Trust relating to their conversion of indebtedness into
shares of capital of Dyadic Florida or Dyadic Delaware, and (v) any other claim
against any of Debtor.

(g)           “Uniform Commercial Code” shall mean the Uniform Commercial Code
as adopted in the State of Florida, including all of its revisions, amendments
and modifications that may occur during the term of this Agreement.

2.           SECURITY INTEREST.  As security for the payment or other
satisfaction of all Secured Obligations, Debtor hereby assigns to Secured Party
and grants to Secured Party a continuing security interest in all of Debtor’s
personal property, including, without limitation, the

 
 

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following property of Debtor, whether now or hereafter owned (in whole or in
part), existing, acquired or arising and wherever now or hereafter located:  (a)
all Accounts and all Goods whose sale, lease or other disposition by Debtor has
given rise to Accounts and have been returned to, or repossessed or stopped in
transit by, Debtor; (b) all Chattel Paper, Instruments, Documents and General
Intangibles (including, without limitation, all patents, patent applications,
trademarks, trademark applications, tradenames, trade secrets, goodwill,
copyrights, copyright applications, registrations, licenses, software,
franchises, customer lists, tax refund claims, claims against carriers and
shippers, guarantee claims, contract rights including, without limitation,
leases and grants, payment intangibles, security interests, security deposits,
rights to indemnification, strains and micro-organisms and related mutants and
derivatives thereof now existing or hereafter produced, fermentation processes
and protocols, proprietary and confidential information and materials, sequenced
genome, annotated genome, genes, genetic material, research and development
projects, research tools and materials, research equipment and supplies and
know-how); (c) all Inventory including, without limitation, raw materials; (d)
all Goods (other than Inventory) including, without limitation, Equipment,
vehicles and Fixtures; (e) all Investment Property; (f) all Deposit Accounts,
bank accounts, prepaid expenses and all deposits and cash; (g) all Letter of
Credit Rights; (h) all Commercial Tort Claims, and all other claims and causes
of action, whether in contract, tort or otherwise; (i) any property of Debtor
now or hereafter in the possession, custody or control of Secured Party or any
agent or any parent, affiliate or subsidiary of any of Secured Party or any
participant with MAE Trust in the Loan, if any, for any purpose (whether for
safekeeping, deposit, collection, custody, pledge, transmission or otherwise);
(j) all other personal property described in the Prior Security Agreements; and
(k) all additions and accessions to, substitutions for, and replacements,
products and Proceeds of the foregoing property, including, without limitation,
proceeds of all insurance policies insuring the foregoing property, and all of
Debtor’s books and records relating to any of the foregoing and to Debtor’s
business.

3.           SECURED OBLIGATIONS.  The Collateral shall secure the payment and
performance of each and all of the Secured Obligations.  This Agreement shall
continue and remain in effect notwithstanding that at any particular time there
may be no Secured Obligations outstanding.  Notwithstanding the foregoing, this
Agreement shall terminate when Secured Party gives the Debtor written notice
that the Secured Obligations and all amounts payable thereunder have been fully
paid, and that all commitments and obligations of Secured Party with respect to
the Secured Obligations have terminated.

4.           REPRESENTATIONS.  Debtor hereby represents and warrants to Secured
Party that:

(a)           Each Debtor is existing and in good standing under the laws of
their state or other jurisdiction of formation, are duly qualified, in good
standing and authorized to do business in each jurisdiction where failure to do
so might have a material adverse impact on the consolidated assets, condition or
prospects of Debtor; the execution, delivery and performance of this Agreement
and all related documents and instruments are within Debtor's powers and have
been authorized by all necessary corporate, action.

(b)           The execution, delivery and performance of this Agreement and all
related documents and instruments have received any and all necessary
governmental approval, and do

 
 

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not and will not contravene or conflict with any provision of law, charter or
by-laws of any Debtor or any agreement affecting such Debtor or its property.

(c)           There has been no material adverse change in the business,
condition, properties, assets, operations or prospects of Debtor since the date
of the latest financial statements, if any, provided on behalf of Debtor to
Secured Party.

(d)           No financing statement, mortgage, notice of judgment, or any
similar instrument (other than those security interests in existence at the
execution of the Loan Documents which have been disclosed to and approved by
Secured Party) covering any of the Collateral is on file in any public office.

(e)           Debtor is the lawful owner of all Collateral, free and clear of
all liens, pledges, charges, mortgages, and claims other than any in favor of
Secured Party, except liens for current taxes not delinquent and those liens
previously disclosed to Secured Party.

(f)           All Accounts and Inventory of Debtor are genuine, are in all
respects what they purport to be, are not evidenced by a judgment, and represent
undisputed, bona fide transactions completed or to be completed in accordance
with the terms and conditions of any document related thereto; none of the
Collateral has been sold or pledged to any other person or entity, except as
previously disclosed to Secured Party; and each Debtor has no knowledge of any
fact or circumstance which would impair the validity or collectability of any of
the Collateral.

(g)           Debtor has filed or caused to be filed all federal, state, and
local tax returns that are required to be filed, and has paid or has caused to
be paid all of its taxes, including without limitation any taxes shown on such
returns or on any assessment received by it, to the extent that such taxes have
become due.

5.           COVENANTS OF DEBTOR.  Debtor agrees that so long as this Agreement
remains in effect, it will:

(a)           NOTIFY SECURED PARTY IN WRITING AT LEAST THIRTY (30) DAYS IN
ADVANCE OF ANY CHANGE WHATSOEVER IN THE NAME OF DEBTOR OR THE NAME(S) UNDER
WHICH DEBTOR CONDUCTS BUSINESS, ANY NEW NAMES UNDER WHICH DEBTOR INTENDS TO DO
BUSINESS, AND ANY NEW ADDRESSES AT OR FROM WHICH DEBTOR INTENDS TO DO BUSINESS
OR TO KEEP COLLATERAL OF ANY KIND;

(b)           provide and maintain insurance with respect to the Collateral, the
operation of Debtor's business, and certain employees or officers of Debtor as
required by Secured Party from time to time; all such insurance shall be in such
amounts and against such risks as shall be satisfactory in all respects to
Secured Party, with Secured Party named as additional insured and loss payee;

(c)           defend the Collateral against the claims and demands of all
persons other than Secured Party and promptly pay all taxes, assessments, and
charges upon the Collateral; and not

 
 

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sign (or permit to be signed), without the prior consent of Secured Party, any
financing statements or other documents creating or perfecting a lien upon or
security interest in any of the Collateral except in favor of Secured Party, or
otherwise create, suffer, or permit to exist any liens or security interests
upon any Collateral other than in favor of Secured Party, except tax liens,
provided that such liens are removed before related taxes become delinquent;

(d)           execute such financing statements and other documents (and pay the
cost of filing and recording the same in all public offices deemed necessary by
Secured Party) and do such other acts as Secured Party may request to establish
and maintain a valid and perfected security interest in the Collateral free and
clear of all other liens and claims, except tax liens, provided that such liens
are removed before related taxes become delinquent;

(e)           deliver to Secured Party any certificates or other documents of
title representing or issued with respect to any of the Collateral, with Secured
Party's security interest and lien endorsed thereon, and record such
certificates or documents with all appropriate regulatory agencies;

(f)           furnish to Secured Party, immediately upon the request of Secured
Party, any evidence of ownership of the Collateral, including without limitation
bills of sale, paid invoices, certificates of title, or applications for title;

(g)           keep at its address for notices set forth under or opposite its
signature hereto its records concerning the Collateral, which records shall be
of such character as will enable Secured Party to determine at any time the
status of the Collateral; furnish to Secured Party such information concerning
Debtor, the Collateral, and the account debtors as Secured Party may from time
to time reasonably request; and permit Secured Party from time to time, at
reasonable times, to inspect the Collateral and to inspect, audit, and make
copies of, and extracts from, all records and all other papers in the possession
of Debtor pertaining to the Collateral and the account debtors; Secured Party
shall have the right at any reasonable time or times to make direct verification
with the account debtors of any and all of the accounts

(h)           keep and maintain the Collateral in good operating condition and
repair, and make all necessary replacements and renewals to the Collateral so
that the value and operating efficiency thereof shall at all times be maintained
and preserved;

(i)           make appropriate entries upon its financial statements and its
books and records disclosing Secured Party's security interest in the
Collateral;

(j)           provide to Secured Party from time to time such financial
statements of and other information concerning Debtor as Secured Party shall
reasonably request;

(k)           if at any time any of the Collateral shall be or become evidenced
by any instrument, note, or other document, immediately deliver such instrument,
note, or document to Secured Party, endorsed as requested by Secured Party;

 
 

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(l)           immediately notify Secured Party of any material loss or
depreciation in the value of the Collateral;

(m)           not open any new deposit accounts without the prior written
approval of Security Party;

(n)           not amend the License Agreement (as hereinafter defined) without
the prior written approval of Secured Party; and

(o)           except if and to the extent specifically permitted by this
Agreement, not sell, transfer, or otherwise dispose of any Collateral (other
than a sale or disposition of any Inventory no longer useful in connection with
the operation of Debtor's business, provided that prior to the sale or other
disposition thereof such Inventory has been replaced by other Inventory of at
least equal value and utility which is subject to the lien of this Agreement
with the same priority as the Inventory so sold or disposed of, except for
Dyadic Florida’s liquidation of Inventory without purchasing replacement
Inventory from and after June 21, 2008 to the date of a Default under this
Agreement) without Secured Party's prior written consent.

6. DOCUMENTATION:  Debtor agrees to deliver to Secured Party contemporaneously
with the execution of this Agreement except as otherwise indicated, the
following documents in form and substance acceptable to Secured Party:

(a) Amended and Restated Note;

(b) Collateral Assignment of Inventions and Patents and Patent Applications
(“Collateral Patent Assignment”);

(c) One or more blank assignments under the terms of the Collateral Patent
Assignment;

(d) Collateral Assignment of Trademarks (“Collateral Trademark Assignment”);

(e) One or more blank assignments under the terms of the Collateral Trademark
Assignment;

(f) UCC Financing Statement regarding patents to be filed with the United States
Patent and Trademark Office;

(g) UCC Financing Statements for Debtor to be filed with the respective
Secretaries of State of the states of formation of each Debtor;

(h) all documentation required under applicable law to perfect and enforce same;

(i) Control Agreement between Debtor, Secured Party and Citibank.

 
 

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Such documentation as necessary to reprice stock warrants to purchase to
1,500,000 shares of common stock of Dyadic Delaware (the “Common Stock”) issued
to MAE Trust and other loan participants in connection with the Prior Note.  The
purchase price for such warrants shall be repriced to equal the price per share
equal to the Average Closing Price for the Common Stock during the Trading
Period (as hereinafter defined).  For purposes of this paragraph, certain
capitalized terms shall be defined as follows:

“Trading Period” shall mean the period commencing November 12, 2008 and ending
December 23, 2008.   In the event the Common Stock shall cease to be publicly
traded during such period, then the Trading Period shall sooner end on the last
Trading Day during which the Common Stock was traded during such period.

“Average Closing Price” shall mean the average of the closing prices for the
Common Stock on each Trading Day during the Trading Period; provided, however,
if on any Trading Day during the Trading Period, no shares of Common Stock are
traded, then, for the purposes of such calculation, the closing price for such
Trading Day shall be the average of the closing prices for  the Trading Days
preceding and following the day(s) during which no such trading occurred.

 
“Trading Day” shall mean a day in which the Common Stock is available to be
publicly traded on the “Bulletin Board” or any recognized public exchange.”

(j) Prior to December 15, 2008, a written agreement of Dyadic Nederland BV, a
Dutch corporation, (“Dyadic BV”) pursuant to which Dyadic BV grants to Secured
Party a legal, valid and binding lien, pledge, mortgage and security interest in
any and all: equipment and other personal property owned by Dyadic BV,
including, without limitation, all grants and other funding sources, patents,
patent applications, trademarks, trademark applications, tradenames, trade
secrets, goodwill, copyrights, copyright applications, registrations, licenses,
software, franchises, customer lists, tax refund claims, claims against carriers
and shippers, insurance claims, claims against board members, employees and
officers, auditors and lawyers, and other professionals, guarantee claims,
contract rights, payment intangibles, security interests, security deposits,
rights to indemnification, strains and micro-organisms and related mutants and
derivatives thereof now existing or hereafter produced, fermentation processes
and protocols, proprietary and confidential information and materials, sequenced
genome, annotated genome, genes, genetic material, research and development
projects, research tools and materials, research equipment and supplies and
know-how); all inventory; all goods (other than inventory), including, without
limitation, equipment, vehicles and fixtures; all investment property; all
deposits, accounts, bank accounts, prepaid expenses and all cash; all rights
under letters of rights; all commercial tort and other claims; any property of
Debtor or Dyadic BV now or hereafter in the possession, custody or control
of  Dyadic BV or any agent, if any, for any purpose (whether for safekeeping,
deposit, collection, custody, pledge, transmission or otherwise); all other
personal property of Dyadic BV; and all additions and accessions to,
substitutions for, and replacements, products and proceeds of the foregoing
property, including, without limitation,

 
 

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(k) proceeds of all insurance policies insuring the foregoing property, and all
of Dyadic BV’s books and records relating to any of the foregoing and to its
business;

(l) Prior to December 15, 2008, agreements with any of the following to the
extent desired by Secured Party to enable Secured Party to achieve as additional
collateral security all property of Debtor and its subsidiaries, all in form and
substance acceptable to Secured Party: (i) Bio-Technical Resources, of
Manitowoc, Wisconsin, (ii) TNO, of the Netherlands, (iii) Ferm-Tech, Ltd of
Moscow Russia, (iv) Polfa Tarchomin SA, of Warsaw, Poland SA, (v) Martek
Biosciences Corporation, of Kingstree, South Carolina, (vi) Enmex, S.A. de C.V.,
of Tlalnepantla, Edo de Mexico, (vii) the owner of each facility in which
research, development, production or processing is taking place on behalf of
Debtor or any of its subsidiaries, (viii) each financial institution holding
deposits or other assets of Debtor or any subsidiary of any of Debtor, and (ix)
each landlord of any premises leased by any of Debtor, Dyadic BV or their
respective subsidiaries.

7.           USE OF THE INVENTORY.  Until notice to the contrary is given by
Secured Party, Debtor may use, consume, and sell Inventory in carrying on its
business in the ordinary course of business substantially in the same manner as
now conducted, but a sale in the ordinary course of business shall not include
any transfer or sale in satisfaction, partial or complete, of a debt owed by
Debtor.

8.           CODEXIS LICENSE.  Secured Party has consented to Debtor’s execution
of a certain non-exclusive license to Codexis, Inc., a Delaware corporation
(“Codexis”) for the use of certain patents and other property as more
particularly described in that certain License Agreement dated on or about
November 14, 2008 (the “License Agreement”).  In connection therewith, MAE
assigned and transferred certain patent rights to Dyadic Florida, and Secured
Party entered into a certain Non-Disturbance Agreement by and among them, Debtor
and Codexis, which among other things, permits Codexis certain rights to the use
of the licensed property notwithstanding a Default by Debtor under the terms of
the Amended Note or this Agreement.  Debtor acknowledges that Secured Party’s
consent to the restrictions on its exercise of the Collateral pursuant to the
Non-Disturbance Agreement constitutes additional consideration for the Debtor’s
performance of its obligations under the Amended Note and this Agreement.

9.           COLLECTIONS.

(a)           Until notice to the contrary is given by Secured Party, Debtor (i)
shall collect the accounts for Secured Party at Debtor's own expense, and (ii)
may grant, in the ordinary course of business, to any party obligated on any of
the Collateral, any rebate, refund, or allowance to which such party may be
lawfully entitled and accept in connection therewith the return of any goods the
sale or lease of which shall have given rise to such accounts.

(b)           At any time and from time to time, whether before or after the
occurrence of a Default, Secured Party, at Debtor's expense, may or, upon
request of Secured Party, Debtor shall, notify any account debtors of the
existence of this Agreement and direct such account debtors to pay directly to
Secured Party the amounts due or to become due from such account debtors.

 
 

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Each account debtor so notified and directed may accept the receipt of Secured
Party for any such payment as a full release of any amounts so paid.

(c)           Secured Party may enforce collection of any or all of the
Collateral by suit or otherwise, and surrender, release, or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder.

(d)           Secured Party at any time may, and upon direction of Debtor or
upon the happening of a Default shall, apply all payments received from account
debtors to the Secured Obligations when due (whether by acceleration or
otherwise) and may credit any balance after such payment to the account of
Debtor.

10.           WARRANTY-FUTURE.  The request or application by Debtor for any
Secured Obligations secured hereby shall be a representation and warranty by
Debtor as of the date of such request or application that: (i) no Default or
Unmatured Event of Default (in each case as defined herein) has occurred or is
continuing as of such date; and (ii) Debtor's representations and warranties
herein are true and correct as of such date as though made on such date, except
that Section 4(c) shall be deemed to refer to the then most recent financial
statements furnished to Secured Party.

11.           EVENTS OF DEFAULT.  The occurrence and continuation of any of the
following described events shall constitute a "Default":

(a)           failure to pay, when and as due, any principal, interest or other
amounts payable hereunder or in connection with any of the Secured Obligations,
or failure to comply with or perform any agreement or covenant of Debtor
contained herein, failure to pay when and as due, any principal, interest, or
other amounts payable to Lender under any other notes executed and delivered to
Lender by Borrower; or

(b)           any default, event of default, or similar event shall occur or
continue beyond the expiration of any applicable notice and cure period under
any Loan Document, or any such Loan Document shall not be, or shall cease to be,
enforceable in accordance with its terms; or

(c)           there shall occur any default or event of default which shall
continue beyond the expiration of any applicable notice and cure period, or any
event or condition that might become such with notice or the passage of time or
both, or any similar event, or any event that requires the prepayment of
borrowed money or the acceleration of the maturity thereof, under the terms of
any evidence of indebtedness or other agreement issued or assumed or entered
into by Debtor, or under the terms of any indenture, agreement, or instrument
under which any such evidence of indebtedness or other agreement is issued,
assumed, secured, or guaranteed; or

(d)           any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of Debtor
to any Secured Party is false or misleading in any material respect on the date
as of which the facts therein set forth are stated or certified; or

 
 

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(e)           any guaranty of or pledge of collateral security for the Secured
Obligations, including without limitation this Agreement, shall be repudiated or
become unenforceable or incapable of performance; or

(f)           any of Debtor shall fail to maintain its existence in good
standing in its state of formation or shall fail to be duly qualified, in good
standing and authorized to do business in each jurisdiction where failure to do
so might have a material adverse impact on the consolidated assets, condition or
prospects of any of Debtor; or

(g)           any of Debtor shall dissolve, liquidate, merge, consolidate, or
cease to be in existence for any reason; or

(h)           MAE, without his written consent, is not an employee of Dyadic
Florida and Dyadic Delaware with at least the same level of compensation and
benefits currently received by him; or

(i)           MAE, without his written consent, is not the chief executive
officer of each of Dyadic Florida, Dyadic Delaware and Dyadic BV; or

(j)           MAE, without his written consent, is not a director of each of
Dyadic Florida, Dyadic Delaware and Dyadic BV; or

(k)           any proceeding (judicial or administrative) shall be commenced
against Debtor, or with respect to any assets of Debtor, which shall threaten to
have a material and adverse effect on the assets, condition or prospects of
Debtor and such proceeding shall not be discharged or dismissed within ten (10)
days of Secured Party’s written notice thereof to Debtor; or final judgment(s)
and/or settlement(s) shall be entered or agreed to in any suit or action
commenced against Debtor; or

(l)           Debtor shall hereafter grant or any person (other than Secured
Party) shall hereafter obtain a security interest in any of the Collateral,
without Secured Party's written consent, or a court shall determine that Secured
Party does not have valid perfected security interest in any of the Collateral
enforceable in accordance with the terms hereof, or any notice of a federal tax
lien against Debtor shall be filed with any public recorder which lien is not
being contested in good faith; or

(m)           there shall be any material loss or depreciation in the value of
any of the Collateral for any reason (other than Dyadic Florida’s liquidation of
inventory from and after June 21, 2008 to the date of a Default under this
Agreement without purchasing replacement inventory), or Secured Party shall
otherwise reasonably deem itself insecure; or, unless expressly permitted by
this Agreement or the related documents, all or any part of any of the
Collateral or any direct, indirect, legal, equitable or beneficial interest
therein is assigned, transferred or sold without Secured Party's prior written
consent; or

 
 

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(n)           any bankruptcy, insolvency, reorganization, arrangement,
readjustment, liquidation, dissolution, or similar proceeding, domestic or
foreign, is instituted by or against Debtor, or Debtor shall take any steps
toward, or to authorize, such a proceeding; or

(o)           Debtor shall become insolvent, generally shall fail or be unable
to pay its debts as they mature, shall admit in writing its inability to pay its
debts as they mature, shall make a general assignment for the benefit of its
creditors, shall enter into any composition or similar agreement, or shall
suspend the transaction of all or a substantial portion of its usual business.

Notwithstanding the foregoing, or anything contained herein or in any of the
Loan Documents, Debtor's failure to pay all of the Secured Obligations on the
Maturity Date shall constitute a Default, and Secured Party shall be under no
obligation to provide any notice of the Maturity Date, or failure to pay, and
Debtor shall have no right or opportunity to cure such Default.

12.           DEFAULT REMEDIES.

(a)           Notwithstanding any provision of any document or instrument
evidencing or relating to any Secured Obligations, if Debtor is in Default under
the terms of this Agreement, the Secured Obligations shall be immediately and
automatically due and payable without action of any kind on the part of Secured
Party.  Upon the occurrence and during the continuance of any Default, Secured
Party may exercise any rights and remedies under this Agreement, any related
document or instrument (including without limitation any pertaining to
Collateral), and at law or in equity.

(b)           If any Default shall have occurred and be continuing, then, in
addition to having the right to exercise any rights and remedies of a secured
party upon default under the Uniform Commercial Code in effect in the State
where the main office of Secured Party and/or any Collateral is located, Secured
Party may, in its sole discretion, exercise any rights or powers set forth in
this Agreement.  Upon request of Secured Party, Debtor shall promptly assemble
the Collateral and deliver it to a place designated by Secured Party.  Without
limiting any other provision hereof, Debtor shall pay all related expenses,
including, without limitation, Secured Party's attorneys' fees.  If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if mailed at least ten days before such disposition, postage prepaid, addressed
to Debtor at the address of Debtor shown below.  Secured Party shall, in
addition to and not in limitation of all rights of offset under applicable law,
have the right to appropriate and apply all of the Collateral in its possession
to payment of the Secured Obligations.  Secured Party may proceed to sell or
otherwise dispose of the Collateral at public or private sale for cash or
credit; provided, however, that Debtor shall be credited with proceeds of such
sale only when the proceeds are actually received by Secured Party.  Secured
Party may apply any proceeds of the Collateral to the payment of expenses and
costs to exercise of Secured Party's rights hereunder, and any balance of such
proceeds shall be applied toward the Secured Obligations in such order as
Secured Party shall determine in its sole discretion.  Any balance remaining
shall be returned to Debtor.

 
 

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(c)           Secured Party may, by written notice to Debtor, at any time and
from time to time, waive any Default or "Unmatured Event of Default" (as defined
below), which shall be for such period and subject to such conditions as shall
be specified in any such notice.  In the case of any such waiver, Secured Party
and Debtor shall be restored to their former position and rights hereunder, and
any Default or Unmatured Event of Default so waived shall be deemed to be  cured
and not continuing; but no such waiver shall extend to or impair any subsequent
or other Default or Unmatured Event of Default.  No failure to exercise, and no
delay in exercising, on the part of Secured Party of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies of
Secured Party herein provided are cumulative and not exclusive of any rights or
remedies provided by law.  "Unmatured Event of Default" means any event or
condition which might become a Default with if continuing after notice or the
passage of time or both.

13.           RIGHTS OF SECURED PARTY.  Secured Party may, from time to time, at
its option (but shall have no duty to):

(a)           perform any agreement of Debtor hereunder that Debtor shall have
failed to perform

(b)           take any other reasonable action which Secured Party deems
necessary or desirable for the preservation of the Collateral or Secured Party's
interest therein and the carrying out of this Agreement or any of the other Loan
Documents, including without limiting the generality of the foregoing: (i) any
action to collect or realize upon the Collateral; (ii) the discharge of taxes,
liens, security interests or other encumbrances at any time levied or placed on
the Collateral; (iii) the discharge or keeping current of any obligation of
Debtor having effect on the Collateral; or (iv) receiving, endorsing and
collecting all checks and other orders for the payment of money made payable to
Debtor representing any dividend, interest payment or other distribution payable
or distributable in respect of the Collateral or any part thereof, and to give
full discharge for the same; and

(c)           file, or cause to be filed, photocopies or carbon copies of any
financing statement or other Loan Document respecting any right of Secured Party
in the Collateral, and any such photocopy or carbon copy of the signature of
Debtor on such photocopy or carbon copy shall be deemed an original for purposes
of such filing.  Debtor hereby authorizes Secured Party to sign financing
statements on Debtor's behalf to be filed in all jurisdictions in which such
authorization is permitted.

Debtor hereby appoints Secured Party as Debtor's attorney in fact, which
appointment is and shall be deemed to be irrevocable and coupled with an
interest, for purposes of performing acts and signing and delivering any
agreement, document, or instrument, on behalf of Debtor in accordance with this
Section.  Debtor will, on demand, reimburse Secured Party for all reasonable
expenses so incurred by Secured Party.  In the event Debtor fails to reimburse
Secured Party on demand, the amount of such expenses shall accrue interest
thereon at the rate of fourteen percent (14%).

 
 

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14.           FURTHER ASSURANCES.  Debtor agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements, and instruments, as Secured Party may at any time request in
connection with the administration or enforcement of this Agreement or related
to the Collateral or any part thereof or in order better to assure and confirm
unto Secured Party its rights, powers and remedies hereunder, including without
limitation, delivery of possession to Secured Party of any certificates or other
collateral which may be perfected solely by means of possession by a secured
party under the Uniform Commercial Code.

15.           OBLIGATIONS UNCONDITIONAL; WAIVER OF DEFENSES.  Debtor irrevocably
agrees that no fact or circumstance whatsoever which might at law or in equity
constitute a discharge or release of, or defense to the obligations of, a
guarantor or surety shall limit or affect any obligations of Debtor under this
Agreement or any document or instrument executed in connection
herewith.  Without limiting the generality of the foregoing:

(a)           Secured Party may at any time and from time to time, without
notice to Debtor, take any or all of the following actions without affecting or
impairing the liability of Debtor on this Agreement:

(i)           renew or extend time of payment of the Secured Obligations;

(ii)           accept, substitute, release or surrender any security for the
Secured Obligations; and

(iii)           release any person primarily or secondarily liable on the
Secured Obligations (including without limitation any indorser, and any
guarantor)

(b)           No delay in enforcing payment of the Secured Obligations, nor any
amendment, waiver, change, or modification of any terms of any document or
instrument which evidences or is given in connection with the Secured
Obligations, shall release Debtor from any obligation hereunder.  The
obligations of Debtor under this Agreement are and shall be primary, continuing,
unconditional and absolute (notwithstanding that at any time or from time to
time all of the Secured Obligations may have been paid in full), irrespective of
the value, genuineness, regularity, validity or enforceability of any documents
or instruments respecting or evidencing the Secured Obligations.  In order to
hold Debtor liable or exercise rights or remedies hereunder, there shall be no
obligation on the part of Secured Party, at any time, to resort for payment to
any guarantor or to any other security for the Secured Obligations.  Secured
Party shall have the right to enforce this Agreement as against any one or all
of Debtor and irrespective of whether or not other proceedings or steps are
being taken against any other property securing the Secured Obligations or any
other party primarily or secondarily liable on any of the Secured Obligations.

(c)           Expect as otherwise provided in any note, agreement, instrument or
document evidencing the Secured Obligations, Debtor irrevocably waives
presentment, protest, demand, notice of dishonor or default, notice of
acceptance of this Agreement, notice of any loans made, extensions granted or
other action taken in reliance hereon, and all demands and notices of any kind
in connection with this Agreement or the Secured Obligations.

 
 

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(d)           While this Agreement remains in full force and effect, Debtor
waives any claim or other right which Debtor might now have or hereafter acquire
against any other person primarily or contingently liable on the Secured
Obligations (including without limitation any maker, indorser or guarantor) or
that arises from the existence or performance of Debtor's obligations under this
Agreement, including without limitation any right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim or
remedy of Secured Party against Debtor or any other person primarily or
contingently liable on the Secured Obligations (including without limitation any
maker, indorser or guarantor) or any other collateral security for the Secured
Obligations, which Secured Party now has or hereafter acquires, however arising.

16.           NOTICES.  All notices, requests and demands to or upon the
respective parties hereto shall be deemed to have been given or made when
deposited in the mail, postage prepaid, addressed if to Secured Party to its
main office indicated above, and if to Debtor to its address set forth below, or
to such other address as may be hereafter designated in writing by the
respective parties hereto or, as to Debtor, may appear in Secured Party's
records.

17.           COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, and by the parties on separate
counterparts which, taken together, shall constitute one and the same
instrument.  Any signed counterpart delivered by facsimile or email "pdf" shall
be effective as a signed counterpart. Upon request of any party, facsimile
signature or email "pdf", shall be replaced with an original signature as
promptly as practicable.
 

18.           MISCELLANEOUS.  This Agreement and any document or instrument
executed in connection herewith shall be governed by and construed in accordance
with the internal laws of the State of Florida.  Unless the context requires
otherwise, wherever used herein the singular shall include the plural and vice
versa, and the use of one gender shall also denote the other.  Captions herein
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof; references herein to Sections or provisions without
reference to the document in which they are contained are references to this
Agreement.  This Agreement shall bind Debtor, its heirs, trustees (including
without limitation successor and replacement trustees), executors, personal
representatives, successors and assigns, and shall inure to the benefit of
Secured Party, its successors and assigns, except that Debtor may not transfer
or assign any of its rights or interest hereunder without the prior written
consent of Secured Party.  Debtor agrees to pay upon written demand all
reasonable expenses (including without limitation attorneys' fees, legal costs
and expenses, whether in or out of court, in original or appellate proceedings
or in bankruptcy) incurred or paid by Secured Party or any holder hereof in
connection with the enforcement or preservation of its rights hereunder or under
any document or instrument executed in connection herewith.  If there shall be
more than one person or entity constituting Debtor, each of them shall be
primarily, jointly and severally liable for all covenants and obligations
hereunder.  Each representation and warranty of Debtor herein shall be deemed to
be jointly made by each Debtor hereunder.

 
 

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IN WITNESS WHEREOF, the undersigned have caused this Loan and Security Agreement
to be executed and delivered as of the 14th day of November, 2008.

DYADIC INTERNATIONAL (USA), INC., a Florida corporation

By: /s/ Vito G. Pontrelli
Name:   Vito G. Pontrelli
Title:  Interim CFO

Address of Debtor for
Notices:                                                    DYADIC
INTERNATIONAL, INC., a
140 Intracostal Pointe
Drive                                                                       Delaware
corporation
Suite 404
Jupiter, Florida 33477
By: /s/ Vito G. Pontrelli
Name:   Vito G. Pontrelli
Title:  Interim CFO

SECURED PARTY:

FRANCISCO TRUST, under agreement dated February 28, 1996

By: /s/ Morley Alperstein
Morley Alperstein, Trustee
Address of Secured Party
For
Notices:                                                                               
       /s/ Mark A. Emalfarb
193 Spyglass
Court                                                                       
  Mark A. Emalfarb, Individually
Jupiter, Florida 33477
THE MARK A. EMALFARB
TRUST under Agreement dated
October 1, 1987, as amended

By: /s/ Mark A. Emalfarb, trustee
Mark A. Emalfarb, Trustee

 
 

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