exv10w5



 



Exhibit 10.5



MASTER LOAN AND SECURITY AGREEMENT


dated as of November 27, 2002,


by and between


FARMERS & MECHANICS BANK


and


OXFORD FINANCE CORPORATION


 






 


TABLE OF CONTENTS



	 	 	 	 	 	 
	 	 	 	Page
	 	 	 	

	SECTION 1. GENERAL PROVISIONS
	 	 	4	 
	 	1.1. Guidance Line of Credit
	 	 	4	 
	 	1.2. Advances
	 	 	4	 
	 	1.3. Interest Rate
	 	 	4	 
	 	1.4. Loan Payments
	 	 	5	 
	 	1.5. Late Charges
	 	 	5	 
	 	1.6. Required Prepayments
	 	 	5	 
	 	1.7. Voluntary Prepayments
	 	 	5	 
	 	1.8. Collateral
	 	 	6	 
	 	1.9. Closing Requirements
	 	 	7	 
	SECTION 2. REPRESENTATIONS AND WARRANTIES
	 	 	7	 
	 	2.1. Authority, Etc.
	 	 	7	 
	 	2.2. Litigation
	 	 	8	 
	 	2.3. No Subsidiaries
	 	 	8	 
	 	2.4. Financial Condition
	 	 	8	 
	 	2.5. Taxes
	 	 	8	 
	 	2.6. Title to Properties and Collateral
	 	 	8	 
	 	2.7. Borrower’s Name, Business Locations, etc.
	 	 	9	 
	 	2.8. Compliance with Laws
	 	 	9	 
	 	2.9. Material Agreements
	 	 	9	 
	 	2.10. Federal Reserve Board Regulations
	 	 	9	 
	 	2.11. ERISA
	 	 	9	 
	 	2.12. Licenses, etc.
	 	 	10	 
	 	2.13. Labor Matters
	 	 	10	 
	 	2.14. Accuracy of Information
	 	 	10	 
	 	2.15. The Eligible Loans
	 	 	10	 
	SECTION 3. AFFIRMATIVE COVENANTS
	 	 	11	 
	 	3.1. Payment of Obligations
	 	 	11	 
	 	3.2. Financial Statements and Other Reports
	 	 	11	 
	 	3.3. Conduct of Business and Maintenance of Existence
	 	 	11	 
	 	3.4. Compliance with Laws
	 	 	11	 
	 	3.5. Payment of Liabilities and Taxes
	 	 	11	 
	 	3.6. Contractual Obligations
	 	 	12	 
	 	3.7. Maintenance of Properties
	 	 	12	 
	 	3.8. Insurance
	 	 	12	 
	 	3.9. Inspection
	 	 	13	 
	 	3.10. Collection of Loan Receivables
	 	 	13	 
	 	3.11. Loan Undertakings
	 	 	13	 
	 	3.12. Further Assurances
	 	 	13	 
	 	3.13. Notice
	 	 	14	 
	 	3.14. Collections
	 	 	14	 
	 	3.15. Business Checking Account
	 	 	15	 



i







 




	 	 	 	 	 	 
	SECTION 4. NEGATIVE COVENANTS
	 	 	15	 
	 	4.1. Financial Covenants
	 	 	15	 
	 	4.2. Liens
	 	 	15	 
	 	4.3. Mergers, Acquisitions, Etc.
	 	 	15	 
	 	4.4. Sale of Assets and Liquidation
	 	 	15	 
	 	4.5. Change of Business
	 	 	16	 
	 	4.6. Change of Name, Location, Etc.
	 	 	16	 
	 	4.7. Fiscal year
	 	 	16	 
	 	4.8. Amendments
	 	 	16	 
	 	4.9. ERISA
	 	 	16	 
	SECTION 5. DEFAULT
	 	 	16	 
	 	5.1. Payment of Obligations
	 	 	16	 
	 	5.2. Perform, etc. Certain Provisions of this Agreement
	 	 	16	 
	 	5.3. Perform, etc. Other Provisions of This Agreement
	 	 	16	 
	 	5.4. Representations and Warranties
	 	 	17	 
	 	5.5. Default under Other Financing Documents
	 	 	17	 
	 	5.6. Liquidation, Termination, Dissolution, etc.
	 	 	17	 
	 	5.7. Default under Other Indebtedness
	 	 	17	 
	 	5.8. Attachment
	 	 	17	 
	 	5.9. Judgments
	 	 	17	 
	 	5.10. Inability to Pay Debts, etc.
	 	 	18	 
	 	5.11. Bankruptcy
	 	 	18	 
	 	5.12. Receiver, etc.
	 	 	18	 
	 	5.13. Financial Condition
	 	 	18	 
	 	5.14. Insecure
	 	 	18	 
	 	5.15. Prospect of Payment
	 	 	18	 
	SECTION 6. RIGHTS AND REMEDIES
	 	 	18	 
	 	6.1. Rights and Remedies
	 	 	18	 
	 	6.2. Default Rate
	 	 	20	 
	 	6.3. Liens, Set-Off
	 	 	20	 
	 	6.4. Enforcement Costs
	 	 	21	 
	 	6.5. Application of Proceeds
	 	 	21	 
	 	6.6. Remedies, etc. Cumulative
	 	 	21	 
	 	6.7. No Waiver, Etc.
	 	 	21	 
	SECTION 7. MISCELLANEOUS
	 	 	22	 
	 	7.1. Course of Dealing; Amendment
	 	 	22	 
	 	7.2. Waiver of Default
	 	 	22	 
	 	7.3. Notices
	 	 	22	 
	 	7.4. Right to Perform
	 	 	23	 
	 	7.5. Fee; Costs and Expenses
	 	 	23	 
	 	7.6. Consent to Jurisdiction
	 	 	23	 
	 	7.7. Assignment and Participations
	 	 	24	 
	 	7.8. Definitions; Certain Definitional Provisions
	 	 	25	 
	 	7.9. Entire Agreement; Severability
	 	 	26	 
	 	7.10. Survival
	 	 	27	 



ii






 




	 	 	 	 	 	 
	 	7.11. Successors and Assigns
	 	 	27	 
	 	7.12. Applicable Law
	 	 	27	 
	 	7.13. Time of Essence
	 	 	27	 
	 	7.14. Duplicate Originals and Counterparts
	 	 	27	 
	 	7.15. Headings
	 	 	27	 





	 	 	 
	EXHIBITS	 
	
	 
	No. 1:	 	
Loan Request
	No. 2:	 	
Promissory Note
	No. 3:	 	
List of Other Locations
	No. 4:	 	
List of Plans
	No. 5:	 	
List of Prepaid Amounts Under Eligible Loan
	No. 6:	 	
Notice of Assignment



iii






 



MASTER LOAN AND SECURITY AGREEMENT



     THIS MASTER LOAN AND SECURITY AGREEMENT (this “Agreement”) is made as of
the 27th day of November, 2002, by and between FARMERS & MECHANICS BANK, its
successors and assigns (the “Bank”), and OXFORD FINANCE CORPORATION, its
successors and permitted assigns (“Borrower”).


     Borrower has heretofore entered into, or hereafter will enter into,
certain Master Loan and Security Agreements and certain promissory notes
executed pursuant thereto with the borrowers specified therein, pursuant to
which Borrower has made, or hereafter will make, loans to such borrowers,
secured by the collateral specified therein.


     From time to time, Borrower may request that the Bank lend to Borrower
certain sums on the terms and conditions specified herein. The Bank may
consider such requests on the terms and conditions specified herein.


     NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) in
hand paid, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:


SECTION 1.    GENERAL PROVISIONS.


     1.1.    Guidance Line of Credit. From time to time, Borrower may request that the
Bank lend to Borrower certain sums (not to exceed $7,500,000 at any time
outstanding) on the terms and conditions set forth herein, by submitting a
written request therefor in substantially the form attached hereto as Exhibit
No. 1 (the “Loan Request”). Upon receipt of a Loan Request, the Bank may, but
shall not be obligated to, consider such request and, subject to the approval
of the Bank’s Chief Credit Officer, the Bank may, at its sole discretion,
approve such request. The availability of this guidance line of credit shall
expire on April 30, 2003, unless expressly extended in writing by the Bank.


     1.2.    Advances. (a) Each advance hereunder is referred to as an “Advance” and
all Advances hereunder are referred to as the “Loan”. The maximum Advance made
hereunder with respect to each Eligible Loan shall be calculated as fifty
percent (50%) of the amount of such Eligible Loan, discounted to present value
at the Bank’s like term cost of funds plus three hundred twenty (320) basis
points.


               (b)    The obligation to repay each Advance hereunder shall be evidenced by a
promissory note payable by Borrower to the order of the Bank in substantially
the form attached hereto as Exhibit Nos. 2 or 3 (each being referred to as a
“Promissory Note” and being collectively referred to as the “Promissory
Notes”).


     1.3.    Interest Rate. The interest rate applicable with respect to each Advance
(the “Interest Rate”) shall be selected by Borrower, as specified in the
applicable Loan Request; and shall be either (a) a fixed percentage per annum
(the “Fixed Rate”) equal to the sum of the Bank’s like term cost of funds plus
three hundred twenty (320) basis points; or (b) a floating percentage per annum
(the “Floating Rate”) equal to the sum of the Base Rate plus one (1)


 






 


percent. Interest shall be computed on the basis of a three hundred sixty (360)
day year consisting of twelve (12) 30-day months.


     1.4.    Loan Payments. (a) Each Advance shall be payable in consecutive monthly
installments of: principal and interest (if the Fixed Rate is elected with
respect to such Advance) or principal plus interest (if the Floating Rate is
elected with respect to such Advance); over a period coterminous with the then
remaining term of the Eligible Loan with respect to which such Advance is made.
Payment shall be made in arrears on the fifteenth day of the month for each
month during the term of the Advance.


               (b)    Whenever any payment to be made by the Borrower under the provisions
of this Agreement is due on a day which is not a Business Day (as hereinafter
defined), the due date thereof shall be extended to the next succeeding
Business Day and, in the case of any payment which bears interest, such
extension of time shall be included in computing interest on such payment.


               (c)    All payments and prepayments of the unpaid balance of the principal
amount of the Promissory Notes, interest thereon and any other amounts payable
hereunder or thereunder shall be paid without set-off or counterclaim in lawful
money of the United States of America in immediately available funds during
regular business hours of the Bank at: Farmers & Mechanics Bank, 110 Thomas
Johnson Drive, P. O. Box 518, Frederick, Maryland 21705, or at such other
place as the Bank or any other holder of a Promissory Note may at any time or
from time to time designate in writing to the Borrower.


     1.5.    Late Charges. If the Borrower fails to make any payment of principal,
interest, prepayments, fees or any other amount becoming due pursuant to the
provisions of this Agreement, within five (5) days of the date due and payable,
the Borrower shall pay to the Bank a late charge equal to five (5) percent of
the amount of such payment. Such five (5) day period shall not be construed in
any way to extend the due date of any such payment. Late charges are imposed
for the purpose of defraying the Bank’s expenses incident to the handling of
delinquent payments, and are in addition to, and not in lieu of, the exercise
by the Bank of any rights and remedies hereunder or under applicable laws and
any fees and expenses of any agents or attorneys which the Bank may employ upon
Default.


     1.6.    Required Prepayments. (a) The Borrower shall prepay the applicable
Advance as and to the extent that the Eligible Loan with respect to which such
Advance was made ceases to be an Eligible Loan. Notwithstanding the foregoing,
in lieu of such prepayment, Borrower may provide to the Bank additional
Eligible Loans requiring payment of installments in such number and amount as
may be satisfactory to the Bank.


               (b)    If
the Borrower obtains a credit facility satisfactory to it which is
of a sufficient size as to permit the Borrower to pay in full the then
outstanding Obligations, at the Bank’s option, upon thirty (30) days’ prior
written notice, the Bank may require the Borrower to prepay the Loan by payment
of the entire principal balance of the Loan, together with payment of all
interest thereon accrued through the date of prepayment.


     1.7.    Voluntary Prepayments. Within the limitations set forth herein and
subject to the provisions of this Agreement, the Borrower may prepay the Loan
at any time in whole or in part


5






 


from time to time without premium or penalty, and any such prepayment need not
be accompanied by payment of interest on the amount prepaid except that any
prepayment of the Loan which constitutes a final payment of the entire
principal balance of the Loan shall be accompanied by payment of all interest
thereon accrued through the date of prepayment. Borrower shall provide not
less than thirty (30) days’ prior written notice to the Bank of any proposed
prepayment of the Loan, in whole or in part. If such prepayment is a partial
prepayment, Borrower’s notice shall specify the Promissory Note(s) to be
prepaid. Such prepayments shall be applied first to accrued and unpaid
interest on the principal amount of the Promissory Note(s) to be prepaid and
then to the unpaid balance of the principal amount of such Promissory Note(s).


     1.8.    Collateral. (a) In order to secure the full and punctual payment of the
Obligations (as hereinafter defined) in accordance with the terms thereof, and
to secure the performance of this Agreement and the other Financing Documents,
both now in existence and hereafter created (as the same may be renewed,
extended or modified), the Borrower hereby pledges and assigns to the Bank, and
grants to the Bank a continuing lien and security interest in and to all of the
following property of the Borrower, both now owned and existing and hereafter
created, acquired and arising and regardless of where located (all such
property being herein called the “Collateral”): (i) all of the Borrower’s Loan
Receivables relating to Eligible Loans specified as collateral on the written
request by Borrower for the Loan, (ii) all of the Borrower’s interest in and to
the collateral now or hereafter securing the Eligible Loan specified as
collateral on the written request by Borrower for the Loan, together with all
additions, parts, accessories, attachments, and accessions now and hereafter
affixed thereto and/or used in connection therewith, and all replacements
thereof and substitutions therefor as are now or hereafter subject to any
Eligible Loan specified as collateral on the written request by Borrower for
the Loan (the foregoing being herein called the “Collateral”), (iii) all right,
title and interest (including, without limitation, any security interest) of
the Borrower in and to the Eligible Loans specified as collateral on the
written request by Borrower for the Loan, (iv) all of the Borrower’s books and
records pertaining to any of the collateral described in clauses (i), (ii), and
(iii) immediately above, and (v) all cash and noncash proceeds of the
Collateral described in clauses (i), (ii), and (iii) immediately above,
including, without limitation, all cash and noncash proceeds deposited in any
deposit account, and all chattel paper, instruments, inventory, equipment,
general intangibles and goods (as such terms are defined by the UCC) or other
property purchased or acquired with cash or noncash proceeds of such
Collateral.


               (b)    Notwithstanding
the assignment of and grant of security interest in
the Eligible Loans specified as collateral on the written request by Borrower
for the Loan, no obligations (including, without limitation, the obligation to
collect the installments payable thereunder) of the lender under the Eligible
Loans specified as collateral on the written request by Borrower for the Loan
are assigned to or assumed by the Bank, and the Borrower acknowledges that it
is and shall continue to be responsible for such obligations.


               (c)    The
Borrower may not dispose of or further encumber any of the
Collateral without the prior written consent of the Bank, notwithstanding the
fact that proceeds constitute a part of the Collateral hereunder. The Borrower
agrees that, with respect to the Collateral, the Bank shall have all of the
rights and remedies of a secured party under the UCC. The Borrower hereby
authorizes the Bank to file UCC statements describing the Collateral.


6






 


     1.9.    Closing Requirements.


               (a)    Concurrently
with the execution hereof or on or prior to the date on
which the Bank makes the initial Advance hereunder, the Borrower shall cause to
be done or provided to the Bank, as the case may be, the following: (1)
resolutions of the Board of Directors or validly authorized Executive Committee
of the Borrower, certified by the Secretary or an Assistant Secretary of the
Borrower, duly authorizing: the borrowing of funds hereunder, and the
execution, delivery and performance of this Agreement and the other Financing
Documents; and (2) an opinion of counsel for the Borrower satisfactory as to
form and substance to the Bank, as to each of the matters set forth in Sections
2.1, 2.2., 2.3, 2.8, 2.9 and 2.15(c) and (d).


               (b)    On
or before each date on which the Bank makes an Advance hereunder,
the Borrower shall cause to be done or provided to the Bank, as the case may
be, the following: (1) a Loan Request not less than ten (10) Business Days
before the date on which the Advance is to be made; (2) a certificate executed
by the Secretary or an Assistant Secretary of the Borrower, certifying that:
(i) the representations and warranties of the Borrower contained herein remain
true and correct as of such date; (ii) no Event of Default or Default has then
occurred hereunder; and (iii) no default or event which, with the giving of
notice, or the lapse of time, or both, would become a default thereunder, has
then occurred with respect to the Eligible Loan to which such Advance relates;
(3) a Promissory Note in the amount of the Advance, duly executed on behalf of
the Borrower; (4) a Notice of Assignment with respect to the Eligible Loan; (5)
the original executed documents (including, without limitation, the promissory
note endorsed by the Borrower to the order of the Bank) comprising the Eligible
Loan to which such Advance relates; (6) with respect to any letter of credit
which constitutes a portion of the Collateral, the Borrower shall cause to be
executed and delivered an assignment of proceeds of such letter of credit in
favor of the Bank as collateral security hereunder; and (7) such documents
shall have been delivered, and such filings shall have been made and other
actions taken, as reasonably may be required by the Bank and its counsel to
perfect a valid, first priority security interest granted by the Borrower to
the Bank with respect to the Collateral.


     SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Bank that the following statements are true, correct and
complete as of the date hereof and as of the date on which each Advance is made
hereunder:


     2.1.    Authority, Etc. The Borrower is a corporation duly organized and in good
standing under the laws of the State of Maryland and is qualified to do
business in the Commonwealth of Virginia and all states where the Borrower
conducts business, except where the failure to qualify would not have a
material adverse effect on the business of the Borrower as presently conducted.
The Borrower has the full power and authority to execute, deliver and perform
this Agreement and the other Financing Documents to which the Borrower is a
party. Neither such execution, delivery and performance, nor compliance by the
Borrower with the provisions of this Agreement and of the other Financing
Documents to which the Borrower is a party will conflict with or result in a
breach or violation of the Borrower’s articles of incorporation or by-laws or
any judgment, order, regulation, ruling or law to which the Borrower is subject
or any contract or agreement to which the Borrower is a party or to which any
of the Borrower’s assets and properties is subject, or constitute a default
thereunder. The execution, delivery and performance of this Agreement and all
other Financing Documents to which the Borrower is a party have been duly
authorized and approved by all necessary corporate action by the Borrower and
do not


7






 




require the consent or approval of, the giving of notice to, the registration
with, or the taking of any other action in respect of, any Federal, state or
foreign governmental authority or agency, except as contemplated herein. This
Agreement and all other Financing Documents to which the Borrower is a party
constitute (or, upon execution, will constitute) the legal, valid and binding
obligations of the Borrower enforceable in accordance with their terms except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally.


     2.2.    Litigation. There is no litigation or proceeding pending or, to the
knowledge of any representative of the Borrower signing this Agreement on
behalf of the Borrower, threatened against or affecting the Borrower which
might materially adversely affect the business, financial condition or
operations of the Borrower or the ability of the Borrower to perform and comply
with this Agreement or the other Financing Documents to which the Borrower is a
party.


     2.3.    No Subsidiaries. The Borrower does not directly or indirectly own or
control securities or other ownership interests in any corporation,
partnership, association, organization or other business entity representing
more than fifty percent (50%) of the ordinary voting power thereof.


     2.4.    Financial Condition. The Borrower has heretofore furnished to the Bank a
balance sheet dated as of June 30, 2002, and related statements of income,
shareholders’ equity and changes in cash flows, internally prepared by
Borrower. Such financial statements and all other financial statements and
information furnished or to be furnished to the Bank hereunder have been and
will be prepared in accordance with generally accepted accounting principles
consistently applied (“GAAP”) and fairly present the financial condition of the
Borrower as of the dates thereof and the results of the Borrower’s operations
for the periods covered thereby. No material adverse change in the business,
financial condition, prospects or operations of the Borrower has occurred since
the date of such financial statements. The Borrower has no indebtedness (as
hereinafter defined) or liabilities other than that reflected on such financial
statements or expressly permitted by the provisions of this Agreement.


     2.5.    Taxes. The Borrower has filed all federal, state and local income,
excise, property and other tax returns which are required to be filed and has
paid all taxes as shown on such returns or assessments received by the Borrower
(including, without limitation, all FICA payments and withholding taxes, if
appropriate), except for such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided. No tax liens have
been filed and no claims are being asserted with respect to such taxes or
assessments.


     2.6.    Title to Properties and Collateral. The Borrower has good title to all of
the Eligible Loans and a first priority perfected security interest in, and
lien on, all of the Collateral, subject to no liens, security interests or
other encumbrances except for those of the Bank and the interest of the
borrowers under the Eligible Loans specified as collateral on the written
request by Borrower for the Loan. Upon the last to occur of: (a) the making
of the Advance by the Bank to the Borrower relating to an Eligible Loan, (b)
delivery of the original documents comprising the Eligible Loan, and (c) filing
in the office of the State Department of Assessments and Taxation of Maryland
of UCC financing statements naming the Borrower, as debtor, and the Bank, as
secured party, and describing the Collateral relating to such Advance, the Bank
will have a valid, perfected first priority security interest in the
Collateral.


8






 


     2.7.    Borrower’s Name, Business Locations, etc. The correct legal name of the
Borrower is that specified on the signature page of this Agreement. Within
twelve (12) years previous to the date hereof, the Borrower has not changed its
legal name, been the surviving corporation in a merger or changed the location
of its chief executive office other than within Alexandria, Virginia. The
Borrower does not do business under any trade or fictitious names. The chief
executive office of the Borrower and the place where its records concerning
Loan Receivables and other Collateral are kept is 133 North Fairfax Street,
Alexandria, Virginia 22314. Each other location at which the Borrower
conducts business or keeps any of the Collateral is listed on Exhibit No. 4
attached hereto. The Organizational Number of the Borrower is D06508667.


     2.8.    Compliance with Laws. The Borrower is not in violation of any applicable
federal, state or local law, statute, rule, regulation or ordinance, except for
violations that would not have a material adverse effect on the Borrower’s
condition (financial, operational or otherwise), properties, business or
prospects, and has not received any notice nor is the subject of any
investigation to the effect that the Borrower’s operations are not in material
compliance with any such law, statute, rule, regulation or ordinance,
including, without limitation, applicable environmental, health and safety laws
and regulations.


     2.9.    Material Agreements. The Borrower is not in default or breach in the
performance, observance or fulfillment of any of the terms, conditions or
provisions of any instrument, agreement or document to which the Borrower is a
party (including, without limitation, any instrument or agreement evidencing or
made in connection with any indebtedness or liabilities) which default or
breach might have a material adverse effect on the Borrower’s business,
properties, operations or financial condition.


     2.10.    Federal Reserve Board Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying “margin
stock” within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System of the United States (the “Board”) and no part of the
proceeds of the Loans will be used for any purpose which entails a violation of
Regulations U, G, T or X of the Board.


     2.11.    ERISA. Exhibit No. 5 contains a true and complete list of each pension,
employee benefit, multi-employer, profit sharing, savings, stock bonus, 401(k)
or other deferred compensation plan (“Plan”) subject to the requirements of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), which is
now or previously has been sponsored or maintained by the Borrower, or to which
the Borrower has made contributions or is required to make contributions. The
Borrower satisfied all termination and distribution requirements of the PBGC
(as hereinafter defined) with respect to any Plan terminated by the Borrower
prior to the date hereof. No lien exists against the Borrower in favor of the
Pension Benefit Guaranty Corporation (“PBGC”), and no “reportable event” (as
such term is defined in ERISA) has occurred with respect to any Plan. The
Borrower has not incurred any “accumulated funding deficiency” within the
meaning of ERISA or any liability to the PBGC in connection with any Plan. The
Borrower has no withdrawal or other liability (absolute, contingent or
otherwise) with respect to any multi-employer plan as defined by Section 3(37)
of ERISA. Since September 2, 1974, the Borrower has complied in all material
respects with all provisions of ERISA and with all provisions of each Plan.


9






 


     2.12.    Licenses, etc. The Borrower has obtained and now holds all licenses,
permits, franchises, patents, trademarks, copyrights and trade names which are
necessary to the conduct of the business of the Borrower as now conducted, free
of any conflict with the rights of any other person, except as would not have a
material adverse effect on the Borrower’s condition (financial, operational or
otherwise), properties, business or prospects.


     2.13.    Labor Matters. The Borrower is not subject to any collective bargaining
agreements or any agreements, contracts, decrees or orders requiring the
Borrower to recognize, deal with or employ any persons organized as a
collective bargaining unit or other form of organized labor. There are no
strikes or other material labor disputes pending or threatened against the
Borrower. The Borrower has complied in all material respects with the Fair
Labor Standards Act.


     2.14.    Accuracy of Information. No information, exhibit, report, statement,
certificate or document furnished by the Borrower or any other person to the
Bank in connection with the Loan, this Agreement or the other Financing
Documents or the negotiation thereof contains any material misstatement of fact
or omitted to state a material fact or any fact necessary to make the
statements contained herein or therein not misleading.


     2.15.    The Eligible Loans. (a) The originals of the Eligible Loans specified as
collateral on the written request by Borrower for the Loan delivered to the
Bank are true, correct and complete; (b) all signatures, names, addresses,
amounts and other statements and facts contained in the Eligible Loans
specified as collateral on the written request by Borrower for the Loan are
true, accurate and complete; (c) the Eligible Loans specified as collateral on
the written request by Borrower for the Loan constitute the legal, valid and
binding obligation of the parties thereto, enforceable in accordance with the
terms thereof; (d) the Eligible Loans specified as collateral on the written
request by Borrower for the Loan and the transactions evidenced thereby conform
to all applicable laws and regulations, and constitute a valid, perfected first
priority security interest in the Collateral thereunder; (e) the Eligible Loans
specified as collateral on the written request by Borrower for the Loan are
free from all defenses, setoffs and counterclaims; (f) there are no agreements
or understandings respecting the Eligible Loans specified as collateral on the
written request by Borrower for the Loan, verbal or written, between the
Borrower and the borrowers with respect to the Eligible Loans specified as
collateral on the written request by Borrower for the Loan other than those
expressed in the Eligible Loans specified as collateral on the written request
by Borrower for the Loan; (g) to Borrower’s knowledge, no default or event
which, with the passage of time or the giving of notice, or both, would become
a default under the Eligible Loans specified as collateral on the written
request by Borrower for the Loan, has occurred under the Eligible Loans
specified as collateral on the written request by Borrower for the Loan; (h)
except as set forth on Exhibit No. 6 attached hereto, no monies due under the
Eligible Loans specified as collateral on the written request by Borrower for
the Loan have been prepaid and no deposits have been made by the borrowers
thereunder; and (i) as of the date on which a Loan is made with respect to any
Eligible Loans specified as collateral on the written request by Borrower for
the Loan, the installments specified in the Eligible Loans specified as
collateral on the written request by Borrower for the Loan as then being
outstanding will then remain due and payable in accordance with the terms of
the Eligible Loans specified as collateral on the written request by Borrower
for the Loan.


10






 


SECTION 3.    AFFIRMATIVE COVENANTS. The Borrower covenants and agrees with the
Bank that so long as any of the Obligations (or commitments therefor) shall be
outstanding, the Borrower shall:


     3.1.    Payment of Obligations. Punctually pay the principal of and interest on
the Loan and the other Obligations, at the times and places, in the manner and
in accordance with the terms of this Agreement and the other Financing
Documents.


     3.2.    Financial Statements and Other Reports. Maintain at all times a system of
accounting established and administered in accordance with sound business
practices, and will deliver, or cause to be delivered, to the Bank (a) as soon
as available but in no event more than forty-five (45) days after the end of
each month in each fiscal year of the Borrower, the balance sheet of the
Borrower as of the end of such month and the related statements of income and
retained earnings for such month internally prepared and in form and content
satisfactory to the Bank, (b) as soon as available, but in no event more than
one hundred twenty (120) days after the end of each fiscal year of the
Borrower, the balance sheet of the Borrower as of the end of such year and the
related statements of income, retained earnings and cash flows for such year
certified by independent certified public accountants selected by the Borrower
and satisfactory to the Bank, (c) concurrently with the delivery of the
financial statements described in clause (a) above, a certificate of the chief
financial officer or chief executive officer of the Borrower setting forth the
computations in reasonable detail and satisfactory to the Bank demonstrating
compliance with the covenants contained in Section 4.1 hereof for the fiscal
quarter to which such financial statements relate, (d) within fifteen (15) days
after the end of each month (and at any other time upon request by the Bank),
an accounts receivable aging report with respect to all of the Borrower’s
accounts receivable, and a contractual and recency aging of the Eligible Loans
specified as collateral on a written request by Borrower for the Loan described
herein, in each case certified by the chief financial officer or chief
executive officer of the Borrower, (e) at such reasonable intervals as the Bank
may require, such assignments, schedules, statements, reports, certifications,
records and other documents with respect to the Collateral in such form and
detail satisfactory to the Bank, (f) upon the request of the Bank, a copy of
the most recently filed annual report for each Plan, and (g) promptly upon
request of the Bank such other information, reports or documents respecting the
business, properties, operation or financial condition of the Borrower as the
Bank may at any time and from time to time reasonably request.


     3.3.    Conduct of Business and Maintenance of Existence. Continue to engage in
business of the same general type as now being conducted by the Borrower, and
do and cause to be done all things necessary to maintain and keep in full force
and effect its corporate existence in good standing in each jurisdiction in
which it conducts business.


     3.4.    Compliance with Laws. Comply with all laws, rules, regulations and
decrees to which the Borrower may be subject, a violation of which may have a
material adverse effect on the business, operation or financial condition of
the Borrower.


     3.5.    Payment of Liabilities and Taxes. Pay, when due, all of its indebtedness
and liabilities, and pay and discharge promptly all taxes, assessments and
governmental charges and levies (including, without limitation, FICA payments
and withholding taxes) upon the Borrower or upon the Borrower’s income, profits
or property (including, without limitation, the Collateral),


11






 


except to the extent the amount or validity thereof is contested in good faith
by appropriate proceedings so long as adequate reserves have been set aside
therefor.


     3.6.    Contractual Obligations. Comply with any agreement or undertaking to
which the Borrower is a party, except where such noncompliance would not have a
material adverse effect on the Borrower’s condition (financial, operational or
otherwise), properties, business or prospects, and maintain in full force and
effect all Eligible Loans specified as collateral on the written request by
Borrower for the Loan.


     3.7.    Maintenance of Properties. Do all things necessary to maintain, preserve,
protect and keep its properties in good repair, working order and condition,
and make all necessary and proper repairs, renewals and replacements so that
the Borrower’s business may be properly conducted at all times, unless the
failure to do so would not have a material adverse effect on the business,
operation or financial condition of the Borrower. The Borrower shall promptly
notify the Bank of any event causing deterioration, loss or depreciation in
value of any substantial portion of the Collateral and the amount of such loss
or depreciation. The Borrower shall perform, observe, and comply with all of
the terms and provisions to be performed, observed or complied with by it under
the Eligible Loans specified as collateral on the written request by Borrower
for the Loan, and each other contract, agreement or obligation relating to the
Collateral. The Bank shall have no duty to, and the Borrower hereby releases
the Bank from all claims for loss or damage caused by the failure of the Bank
to, collect, protect, preserve or enforce any of the Collateral or preserve
rights against account debtors and prior parties to the Collateral, except as
may be caused by the Bank’s willful misconduct or gross negligence.


     3.8.    Insurance. (a) Maintain with financially sound, well rated and reputable
insurance companies insurance in such amounts and covering such risks as is
consistent with sound business practice, and in any event as is ordinarily and
customarily carried by companies similarly situated and in the same or similar
businesses as the Borrower. The Borrower will pay, when due, all premiums on
such insurance and will furnish to the Bank, upon request, evidence of payment
of such premiums and other information as to the insurance carried by the
Borrower.


               (b) In
addition, the Borrower will cause (either by its own actions or by
enforcing the obligations of the borrowers under the Eligible Loans specified
as collateral on the written request by Borrower for the Loan) such borrower to
insure the Collateral as provided in the Eligible Loans specified as collateral
on the written request by Borrower for the Loan.


               (c) After
the occurrence of any Default hereunder, each policy of such
insurance covering the Collateral shall contain a provision or endorsement
satisfactory to the Bank naming the Bank as loss payee or mortgagee and
providing that (A) such policy may not be cancelled or altered without at least
thirty (30) days’ prior written notice to the Bank, and (B) no act or default
of the Borrower or any other person shall affect the right of the Bank to
recover under such policy. The Borrower hereby irrevocably (x) assigns and
grants to the Bank a security interest in any and all proceeds of each such
insurance policy covering the Collateral, (y) directs each insurance company to
pay all such proceeds directly to the Bank, and (z) constitutes and appoints
the Bank (and all officers, employees or agents designated by the Bank) as the
Borrower’s true and lawful attorney-in-fact (coupled with an interest) with
authority and power on behalf of the Borrower to make, adjust, settle or
compromise all claims under each such insurance policy, to collect and receive
all proceeds payable under each such insurance policy and to endorse any


12






 


check, draft or instrument for such proceeds. Notwithstanding the foregoing,
so long as no Event of Default or Default has occurred and is continuing, the
Bank may elect not to adjust any such claim, in which case the Borrower will
adjust such claim, or, if the Bank elects to adjust such claim, it will not
settle or compromise the same without the Borrower’s prior approval, which
shall not be unreasonably withheld. Until such time as an Event of Default or
Default has occurred and is continuing, the Bank and the Borrower will mutually
agree upon a reasonable application of the net proceeds of any such insurance
to replace or restore the damaged or destroyed Collateral or to the payment of
the Obligations, whether matured or unmatured, but, if the Bank and the
Borrower cannot agree upon a reasonable application of such net proceeds within
fifteen (15) days of receipt thereof, such proceeds shall be applied as
determined by the Bank in its sole discretion. If an Event of Default or
Default has occurred and is continuing, the net proceeds of any such insurance
shall be applied, as the Bank shall determine in its sole discretion, to
replace or restore the damaged or destroyed Collateral, in a manner and on
terms satisfactory to the Bank, or to payment of the Obligations (whether
matured or unmatured) in such manner and at such times as the Bank may
determine in its sole discretion.


     3.9.    Inspection. Permit the Bank, by its representatives and agents, at the
expense of the Borrower, to inspect any of the properties, books and financial
records of the Borrower, to examine and make copies of the books of accounts
and other financial records of the Borrower, and to discuss the affairs,
finances and accounts of the Borrower with, and to be advised as to the same
by, the Borrower (or its representatives) at such reasonable times and
intervals as the Bank may designate. In connection with the foregoing, the
Bank and its representatives and agents, at the expense of the Borrower, shall
have the right to conduct an annual field audit and (a) enter any business
premises of the Borrower or any other premises where the Collateral and the
records relating thereto may be located and to audit, appraise, examine and
inspect the Collateral and all records related thereto and to make extracts
therefrom and copies thereof, and (b) verify under reasonable procedures the
validity, amount, quality, quantity, value and condition of, and any other
matter relating to, the Collateral, including contacting account debtors or any
person possessing any of the Collateral.


     3.10.    Collection of Loan Receivables. Collect the Loan Receivables relating to
Eligible Loans specified as collateral on the written request by Borrower for
the Loan only in the ordinary course of business, and shall not, without the
Bank’s prior written consent, compromise or adjust the amount of any Loan
Receivable or extend the time for payment of any Loan Receivable that, as the
result of any such compromises or adjustments, would cause the Eligible Loan to
which such Loan Receivable relates to fail to satisfy the criteria set forth
herein for an Eligible Loan.


     3.11.    Loan Undertakings. Without the prior written consent of the Bank, the
Borrower shall not consent to, approve or otherwise acquiesce in any
modification of the terms of the Eligible Loans, or waive any term or condition
of the Eligible Loans, or take any action whatsoever with respect to the
Eligible Loans (other than collection of the Loan Receivables in accordance
with the provisions of Sections 3.10 and 3.14(a) hereof).


     3.12.    Further Assurances. Defend the interest of the Borrower to the
Collateral and the security interest and lien thereon of the Bank against all
persons and against all security interests and liens on the Collateral adverse
to those of the Bank. The Borrower will, from time to time, at the expense of
the Borrower, execute, deliver, acknowledge and cause to be duly filed,
recorded or registered any statement, assignment, instrument, paper, agreement
or other



13






 




document and take any other action that from time to time may be necessary or
desirable, or that the Bank may reasonably request, in order to create,
preserve, continue, perfect, confirm or validate the security interest and lien
of the Bank on the Collateral or to enable the Bank to obtain the full benefits
of this Agreement or to exercise and enforce any of its rights, powers and
remedies hereunder or under applicable laws. The Borrower shall pay all costs
of, and incidental to, the filing, recording or registration of any such
document as well as any recordation, transfer or other tax required to be paid
in connection with any such filing, recordation or registration. The Borrower
hereby covenants to save harmless and indemnify the Bank from and against any
liability resulting from the failure to pay any required documentary stamps,
recordation and transfer taxes and recording costs incurred by the Bank in
connection with this Agreement or the Collateral which covenant shall survive
the termination of this Agreement and the payment of all other Obligations.
If, in the reasonable opinion of the Bank, any Collateral is or may become a
part of any real estate owned or leased by the Borrower, the Borrower will,
upon the request of the Bank, furnish to the Bank in form and content
satisfactory to the Bank, a landlord’s waiver by the record owner of such real
estate and a mortgagee’s waiver by any person who has a security interest or
lien on such real estate which is or may be superior to the security interest
and lien of the Bank on such Collateral.


     3.13.    Notice. Promptly give written notice to the Bank (a) of the occurrence
of any Default or any event, development or circumstance which might materially
adversely effect the business, operations, properties or financial condition of
the Borrower, (b) of any litigation instituted or threatened against the
Borrower or any judgment against the Borrower where claims against the Borrower
exceed $100,000 and are not covered in full by insurance, (c) of any notice of
a claim against or investigation of the Borrower or any of the Borrower’s
properties with respect to any applicable Federal, state or local
environmental, health or safety laws, statutes, rules or regulations, (d) of
the occurrence of any “reportable event” within the meaning of ERISA or any
assertion of liability of the Borrower by the PBGC, (e) thirty (30) days prior
to any contemplated change in the name or address of the Borrower, and (f) of
the occurrence of any default under an Eligible Loan or of a casualty with
respect to any of the collateral under an Eligible Loan.


     3.14.    Collections.


               (a)    Until
the Borrower’s authority to do so is terminated by the Bank
pursuant to subsection (b) below, enforce and collect at the Borrower’s cost
and expense in accordance with the collection practices customary in the
Borrower’s business payment of all amounts due and payable on or in respect of
Loan Receivables relating to Eligible Loans specified as collateral on the
written request by Borrower for the Loan on the Bank’s behalf and for the
Bank’s account as the Bank’s property in trust for the Bank, and use the
proceeds of all such payments for the Borrower’s general business purposes so
long as such use is not inconsistent with the provisions of this Agreement.


               (b)    At
any time after a Default, the Bank may terminate the authority
given to the Borrower in subsection (a) above whereupon (i) the Bank shall have
the right to send to the borrowers with respect to the Eligible Loans specified
as collateral on the written request by Borrower for the Loan, the Notices of
Assignment in substantially the form of Exhibit No. 7 attached hereto (the
“Notices of Assignment”) executed and delivered by the Borrower concurrently
herewith to be held by the Lender hereunder, or otherwise to notify and direct,


14






 


and/or require the Borrower to notify and direct, all account debtors to
make all payments on or in respect of Loan Receivables relating to Eligible
Loans specified as collateral on the written request by Borrower for the Loan
directly to the Bank for deposit into a special banking account maintained by
the Bank over which the Bank has exclusive dominion, control and power of
access and withdrawal (the “Collection Account”), (ii) unless otherwise agreed
by the Bank, any cash, checks, drafts, money orders, instruments or other
remittances on or with respect to Loan Receivables relating to Eligible Loans
specified as collateral on the written request by Borrower for the Loan
received by the Borrower shall be delivered to the Bank within one (1) day of
receipt thereof by the Borrower for deposit to the Collection Account in
precisely the form in which received, except for the addition thereto of the
endorsement of the Borrower where required for collection of any checks,
drafts, money orders, instruments or other remittances which endorsement the
Borrower agrees to make and with respect thereto the Borrower hereby waives
notice of presentment, protest and non-payment, (iii) pending such deposit, the
Borrower will not commingle any such cash, checks, drafts, money orders,
instruments or other remittances with other funds or property but will hold
them separate and apart and in trust for the Bank subject to the security
interest and lien of the Bank on the Collateral hereunder, and (iv) the Bank
shall have the right at any time and from time to time to apply funds held by
it in the Collection Account to the payment of all or any part of the
Obligations, whether matured or unmatured, in such order and manner as the Bank
may determine in its sole discretion.


     3.15.    Business Checking Account. Establish and maintain a demand deposit
account with Farmers & Mechanics Bank.


SECTION 4.    NEGATIVE COVENANTS. The Borrower covenants and agrees with the Bank
that so long as any of the Obligations shall be outstanding, the Borrower shall
not, directly or indirectly:


     4.1.    Financial Covenants.  (a) Ratio of Debt to Net Worth. Permit the ratio
of its Debt to Tangible Net Worth at any time to be greater than 1:1, tested
quarterly.


               (b)    Interest
Coverage Ratio. Permit its Interest Coverage Ratio to be
less than 1.5:1.0, tested quarterly.


     4.2.    Liens. Create, incur, assume or permit to exist any lien, security
interest or encumbrance of any nature whatsoever on any of the Collateral,
except for any lien or security interest now or hereafter securing all or any
part of the Obligations and the interest of the borrowers under the Eligible
Loans. Any lien, security interest or encumbrance permitted by this Section is
called a “Permitted Lien.”


     4.3.    Mergers, Acquisitions, Etc. Without the Bank’s prior written consent
(which shall not unreasonably be withheld), enter into any merger or
consolidation or acquire or purchase all or substantially all of the assets,
properties or stock of any other person.


     4.4.    Sale of Assets and Liquidation. Sell, lease or otherwise dispose of, in
one transaction or a series of transactions, all or any substantial part of its
business, assets or properties, including, without limitation, the Collateral,
outside of the ordinary course of business or take any action to liquidate,
dissolve or wind up the Borrower or its business.


15






 


     4.5.    Change of Business. Enter into any business other than the business as
conducted by the Borrower on the date hereof.


     4.6.    Change of Name, Location, Etc. (a) Change its legal name, identity or
business structure, (b) change the location of its chief executive office or
its chief place of business, (c) change the location where it keeps its records
concerning the Collateral, (d) change the location of any Collateral under its
direct control, or (e) open a new place of business, unless the Borrower shall
have given the Bank prior written notice thereof and shall at its cost and
expense have executed, delivered, acknowledged, filed, recorded or registered
all financing statements and other documents as may be required by the Bank in
order to create, perfect, continue, preserve, confirm or validate the security
interest and lien of the Bank on the Collateral and its priority; provided,
that the Borrower shall not in any event change the location of any Collateral
if such change would cause the security interest and lien of the Bank on the
Collateral (or the perfection thereof) to lapse, or if required to be perfected
prior to such change, to cease to be perfected.


     4.7.    Fiscal year. Change its fiscal year.


     4.8.    Amendments. Amend or terminate any of the Eligible Loans specified as
collateral on the written request by Borrower for the Loan, except such
amendments that would not cause the Eligible Loan to fail to satisfy the
criteria set forth herein for an Eligible Loan.


     4.9.    ERISA. Engage in any “prohibited transaction” (as such term is defined by
ERISA), incur any “accumulated funding deficiency” (as such term is defined by
ERISA) whether or not waived, or terminate any Plan in a manner which could
result in the imposition of a lien on any property of the Borrower pursuant to
the provisions of ERISA.


SECTION 5.    DEFAULT. The occurrence of any one or more of the following events
shall constitute a default under the provisions of this Agreement, and the term
“Default” shall mean, whenever it is used in this Agreement, any one or more of
the following events (and the term “Event of Default” as used herein means one
or more of the following events, whether or not any requirement for the giving
of notice, the lapse of time, or both has been satisfied):


     5.1.    Payment of Obligations. The failure of the Borrower to pay any of the
Obligations as and when due and payable in accordance with the provisions of
this Agreement, any Promissory Note and/or any of the other Financing
Documents, whether at the due date thereof or at a date fixed for prepayment
thereof or by acceleration thereof or otherwise, and such failure shall
continue uncured for a period of five (5) days;


     5.2.    Perform, etc. Certain Provisions of this Agreement. The failure of the
Borrower to perform, observe or comply with any of the provisions of Sections
3.3, 3.8(a) or (c), 3.10, 3.14 and 3.15 of this Agreement (Affirmative
Covenants) or of Section 4 (Negative Covenants) of this Agreement;


     5.3.    Perform, etc. Other Provisions of This Agreement. The failure of the
Borrower to perform, observe or comply with any of the provisions of this
Agreement other than those covered by Sections 5.1 and 5.2 above, and such
failure is not cured to the satisfaction of the Bank within a period of thirty
(30) days after the date of written notice thereof by the Bank to the



16






 




Borrower, unless the nature of such failure is such that (a) in the reasonable
opinion of the Bank it cannot be cured within the thirty (30) day period, (b)
the Borrower institutes corrective action within the thirty (30) day period,
(c) the Borrower diligently pursues such action, and (d) such failure is cured
to the satisfaction of the Bank within a period of ninety (90) days after the
date of such written notice;


     5.4.    Representations and Warranties. If any representation and warranty
contained herein or any statement or representation made in any certificate or
any other information at any time given by or on behalf of the Borrower or
furnished in connection with this Agreement or any of the other Financing
Documents shall prove to be false, incorrect or misleading in any material
respect on the date as of which made, and any such representation or warranty
which, in the reasonable opinion of the Bank, is capable of being cured is not
cured to the satisfaction of the Bank within thirty (30) days after the date of
written notice thereof by the Bank to the Borrower, unless the nature of the
same is such that (a) in the reasonable opinion of the Bank it cannot be cured
within the thirty (30) day period, (b) the Borrower institutes corrective
action, if possible, within the thirty (30) day period, (c) the Borrower
diligently pursues such action, and (d) such representation or warranty is
cured to the satisfaction of the Bank within a period of ninety (90) days after
the date of such written notice;


     5.5.    Default under Other Financing Documents. The occurrence of a default (as
defined and described therein) under the provisions of any of the other
Financing Documents which is not cured within applicable cure periods, if any;


     5.6.    Liquidation, Termination, Dissolution, etc. If the Borrower shall
liquidate, dissolve or terminate its existence;


     5.7.    Default under Other Indebtedness. If the Borrower shall default in any
payment of any indebtedness (a) owing to the Bank (other than the Obligations
under the Financing Documents), or (b) to any other person or persons for a
principal amount in excess of $100,000 in the aggregate, beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created, or default in the observance or performance of any
other agreement or condition relating to any such indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur the effect of which default or other event is to cause
or to permit the holder or holders of such indebtedness or beneficiary or
beneficiaries of such indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause, with the giving of
notice, if required, such indebtedness to become due prior to its stated
maturity;


     5.8.    Attachment. The issuance of any attachment or garnishment against
property or credits of the Borrower serving as Collateral, or the issuance of
any attachment or garnishment against any other property or credits of the
Borrower for an amount in excess, singly or in the aggregate, of $20,000, which
shall not have been vacated, discharged, stayed or bonded pending appeal within
ninety (90) days after the issuance thereof;


     5.9.    Judgments. One or more judgments or decrees shall be entered against the
Borrower involving in the aggregate a liability in excess of $20,000, and all
such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within ninety (90) days after the entry thereof;


17






 


     5.10.    Inability to Pay Debts, etc. If the Borrower shall admit its inability
to pay its debts as they mature or shall make any assignment for the benefit of
any of its creditors;


     5.11.    Bankruptcy. If proceedings in bankruptcy, or for reorganization of the
Borrower, or for the readjustment of any of the Borrower’s debts, under the
United States Bankruptcy Code (as amended) or any part thereof, or under any
other applicable laws, whether state or federal, for the relief of debtors, now
or hereafter existing, shall be commenced against or by the Borrower and,
except with respect to any such proceedings instituted by the Borrower, shall
not be discharged within ninety (90) days of their commencement;


     5.12.    Receiver, etc. A receiver or trustee shall be appointed for the Borrower
or for any substantial part of the Borrower’s assets, or any proceedings shall
be instituted for the dissolution or the full or partial liquidation of the
Borrower and, except with respect to any such appointments requested or
instituted by the Borrower, such receiver or trustee shall not be discharged
within ninety (90) days of his or her appointment, and, except with respect to
any such proceedings instituted by the Borrower, such proceedings shall not be
discharged within ninety (90) days of their commencement;


     5.13.    Financial Condition. The occurrence of any change in the financial
condition of the Borrower which in the good faith judgment of the Bank is
materially adverse, and any such change is not cured to the satisfaction of the
Bank within thirty (30) days after the date of written notice thereof by the
Bank to the Borrower;


     5.14.    Insecure. If the Bank in good faith deems itself insecure and provides
written notice thereof to Borrower; or


     5.15.    Prospect of Payment. If the Bank in good faith determines that the
prospect of payment of any of the Obligations is impaired for any reason and
provides written notice thereof to Borrower.


SECTION 6.    RIGHTS AND REMEDIES.


     6.1.    Rights and Remedies. If any Default shall occur and be continuing, the
Bank may declare the unpaid principal amount of all Promissory Notes, together
with accrued and unpaid interest thereon, and all other Obligations then
outstanding to be immediately due and payable, whereupon the same shall become
and be forthwith due and payable by the Borrower to the Bank, without
presentment, demand, protest or notice of any kind, all of which are expressly
waived by the Borrower; provided, that, in the case of any Default referred to
in Sections 5.10, 5.11 or 5.12 above, the unpaid principal amount of all
Promissory Notes, together with accrued and unpaid interest thereon, and all
other Obligations then outstanding shall be automatically and immediately due
and payable by the Borrower to the Bank without notice, presentment, demand,
protest or other action of any kind, all of which are expressly waived by the
Borrower. Upon the occurrence and during the continuation of any Default, then
in each and every case, the Bank shall be entitled to exercise in any
jurisdiction in which enforcement thereof is sought, the following rights and
remedies, in addition to the rights and remedies available to the Bank under
the other provisions of this Agreement and the other Financing Documents, the
rights and remedies of a secured party under the UCC and all other rights and
remedies available to the



18






 




Bank under applicable law, all such rights and remedies being cumulative and
enforceable alternatively, successively or concurrently:


               (a)    The
Bank shall have the right to take possession of the Collateral,
and for that purpose, so far as the Borrower may give authority therefor or to
the extent permitted under applicable laws, to enter upon any premises on which
the Collateral or any part thereof may be situated, temporarily exclude the
Borrower therefrom only as and to the extent necessary to permit the Bank to
take possession of the Collateral (if the Bank has reason to believe that the
Borrower has misappropriated funds, committed a fraud or materially
misrepresented any representation or warranty made by it herein), and remove
therefrom all or any of the Collateral without any liability for suit, action
or other proceeding, THE BORROWER IS HEREBY WAIVING ANY AND ALL RIGHTS TO PRIOR
NOTICE AND TO JUDICIAL HEARING WITH RESPECT TO REPOSSESSION OF COLLATERAL, and
require the Borrower, at the Borrower’s expense, to assemble and deliver all or
any of the Collateral to such place or places as the Bank may designate.
Notwithstanding anything to the contrary contained above, the Bank acknowledges
that any of the terms and provisions of this Agreement granting the Bank the
right to take possession of Collateral or books and records with respect
thereto relates only to items of Collateral with respect to which a security
interest has been granted to the Bank and books and records relating to the
Eligible Loans specified as collateral on the written request by Borrower for
the Loan, and the Loan Receivables relating to Eligible Loans specified as
collateral on all written requests by Borrower for the Loan. The Bank shall
not interfere with the books and records, leases and personal property of
Borrower which do not constitute or pertain to the Collateral.


               (b)    The
Bank shall have the right to operate, manage and control all or
any of the Collateral (including use of the Collateral and any other property
or assets of the Borrower in order to continue or complete performance of the
Borrower’s obligations under any contracts of Borrower), or permit the
Collateral or any portion thereof to remain idle or store the same, and collect
all rents and revenues therefrom and sell, lease or otherwise dispose of any or
all of the Collateral upon such terms and under such conditions as the Bank, in
its sole discretion, may determine, and purchase or acquire any of the
Collateral at any such sale or other disposition, all to the extent permitted
by applicable law. Any purchaser or borrower of any of the Collateral so sold
or leased shall hold the property so sold or leased free from any claim or
right of the Borrower and the Borrower hereby waives (to the extent permitted
by law) all rights of redemption, stay or appraisal with respect thereto. The
Bank and the Borrower agree that commercial reasonableness and good faith
require the Bank to give to the Borrower no more than ten (10) days’ prior
written notice of any public sale or other disposition of the Collateral or of
the time after which any private sale or other disposition of the Collateral is
to be made.


               (c)    The
Bank shall have the right, and the Borrower hereby irrevocably
designates and appoints the Bank and its designees as the attorney-in-fact of
the Borrower, with power of substitution and with power and authority in the
Borrower’s name, the Bank’s name or otherwise and for the use and benefit of
the Bank (i) to send to the borrowers with respect to the Eligible Loans
specified as collateral on the written request by Borrower for the Loan, the
Notices of Assignment executed and delivered by the Borrower to the Bank
concurrently herewith, or otherwise to notify account debtors and other persons
obligated to make payments or other remittances on or with respect to the
Collateral to make such payments and other remittances directly to the Bank,
(ii) to demand, collect, sue for, take control of, compromise,


19






 


settle, change the terms of, release, exchange, substitute, extend, renew
or otherwise deal with, the Collateral or any account debtor or other person
obligated on or under the Collateral in any manner as the Bank may deem
advisable, (iii) to remove from any place of business of the Borrower all
records in respect of the Collateral and, at the cost and expense of the
Borrower, to make use of any place of business of the Borrower as may be
necessary or desirable to administer, control, collect, sell or otherwise
dispose of the Collateral, (iv) to receive and endorse the Borrower’s name on
any checks, drafts, money orders or other instruments of payment relating to
any of the Collateral, (v) to sign and send verifications of Loan Receivables
relating to Eligible Loans specified as Collateral on the written request by
Borrower for the Loan or other Collateral and sign any proofs of claim or loss,
(vi) to commence, prosecute or defend any action, suit or proceeding relating
to the Collateral or the collection, enforcement or realization upon the
Collateral, (vii) to adjust and compromise any claims under insurance policies
relating to the Collateral, and (viii) to use, sell, assign, transfer, pledge,
make any agreement with respect to or otherwise deal with any or all of the
Collateral and to do all other acts and things necessary to carry out this
Agreement as though the Bank were absolute owner of the Collateral. This power
of attorney, being coupled with an interest, is irrevocable and all acts by the
Bank and its designees pursuant thereto are hereby ratified and confirmed by
the Borrower. Neither the Bank nor any of its designees shall be liable for
any acts of commission or omission, nor for any error of judgment or mistake of
fact or law other than acts of actual fraud, willful misconduct or gross
negligence. The provisions of this subsection shall not (A) be construed as
requiring or obligating the Bank or any designee to take any action authorized
hereunder and any action taken or any action not taken hereunder shall not give
rise to any liability on the part of the Bank or its designees or to any
defense, claim, counterclaim or offset in favor of the Borrower, (B) be
construed to mean the Bank has assumed any of the obligations of the Borrower
under any instrument or agreement as the Bank shall not be responsible in any
way for the performance of the Borrower of any of the provisions thereof, and
(C) relieve the Borrower of any of its obligations hereunder or in any way
limit the exercise by the Bank of any other or further rights it may have
hereunder, under the other Financing Documents, by law or otherwise.


               (d)    The
Borrower waives diligence, presentment, demand, protest and notice
of any kind except for any notice expressly provided for herein.


     6.2.    Default Rate. Notwithstanding the entry of any decree, order, judgment or
other judicial action, upon the occurrence of a Default hereunder, the unpaid
principal amount of the Promissory Notes and all other monetary Obligations
outstanding or becoming outstanding while such Default exists shall bear
interest from the date on which the Bank notifies the Borrower of such Default
(unless the Bank is legally precluded from providing such notice to the
Borrower, then from the date of such Default) until such Default has been cured
to the satisfaction of the Bank, at a rate of interest equal at all times to
the Interest Rate plus two (2) percent per annum (the “Default Rate”),
irrespective of whether or not as a result thereof, the Promissory Notes or any
of the Obligations has been declared due and payable or the maturity thereof
accelerated. The Bank shall provide to Borrower written notice that the
Default Rate became applicable. The Borrower shall on demand from time to time
pay such interest to the Bank and the same shall be a part of the Obligations
hereunder.


     6.3.    Liens, Set-Off. As security for the payment of the Obligations and the
performance of the Financing Documents, the Borrower hereby grants to the Bank
a continuing security interest and lien on, in and upon all indebtedness owing
to, and all deposits (general or special),


20






 


credits, balances, monies, securities and other property of, the Borrower and
all proceeds thereof, both now and hereafter held or received by, in transit
to, or due by, the Bank. In addition to, and without limitation of, any rights
of the Bank under applicable laws, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, the Bank may at any time and from time to
time thereafter, without notice to the Borrower, set-off, hold, segregate,
appropriate and apply at any time and from time to time thereafter all such
indebtedness, deposits, credits, balances (whether provisional or final and
whether or not collected or available), monies, securities and other property
toward the payment of all or any part of the Obligations in such order and
manner as the Bank in its sole discretion may determine and whether or not the
Obligations or any part thereof shall then be due or demand for payment thereof
made by the Bank.


     6.4.    Enforcement Costs. The Borrower agrees to pay to the Bank on demand (a)
all reasonable enforcement costs paid, incurred or advanced by or on behalf of
the Bank and (b) interest on such enforcement costs from the date paid,
incurred or advanced until paid in full at a per annum rate of interest equal
at all times to the Default Rate. As used herein, the term “enforcement costs”
shall mean and include collectively all expenses, charges, recordation or other
taxes, costs and fees (including attorneys’ fees and expenses) of any nature
whatsoever advanced, paid or incurred by or on behalf of the Bank in connection
with (1) the collection or enforcement of this Agreement or any of the other
Financing Documents, (2) the creation, perfection, maintenance, preservation,
defense, protection, realization upon, disposition, collection, sale or
enforcement of all or any part of the Collateral, and (3) the exercise by the
Bank of any rights or remedies available to it under the provisions of this
Agreement, or any of the other Financing Documents. All enforcement costs,
with interest as above provided, shall be a part of the Obligations hereunder.


     6.5.    Application of Proceeds. Any proceeds of the collection of the
Obligations and/or the sale or other disposition of the Collateral will be
applied by the Bank to the payment of enforcement costs, and any balance of
such proceeds (if any) will be applied by the Bank to the payment of the
remaining Obligations (whether then due or not), at such time or times and in
such order and manner of application as the Bank may from time to time in its
sole discretion determine. If the sale or other disposition of the Collateral
fails to satisfy all of the Obligations, the Borrower shall remain liable to
the Bank for any deficiency.


     6.6.    Remedies, etc. Cumulative. Each right, power and remedy of the Bank as
provided for in this Agreement or in the other Financing Documents or now or
hereafter existing under applicable laws or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this Agreement or in the other Financing Documents or now or
hereafter existing under applicable laws or otherwise, and the exercise or
beginning of the exercise by the Bank of any one or more of such rights, powers
or remedies shall not preclude the simultaneous or later exercise by the Bank
of any or all such other rights, powers or remedies.


     6.7.    No Waiver, Etc. No failure or delay by the Bank to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement or
of the other Financing Documents, or to exercise any right, power or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach, or preclude the Bank
from exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Agreement
or under


21






 


any of the other Financing Documents, the Bank shall not be deemed to waive the
right either to require prompt payment when due of all other amounts payable
under this Agreement or under any of the other Financing Documents, or to
declare a Default for failure to effect such prompt payment of any such other
amount. The payment by the Borrower or any other person and the acceptance by
the Bank of any amount due and payable under the provisions of this Agreement
or the other Financing Documents at any time during which a Default exists
shall not in any way or manner be construed as a waiver of such Default by the
Bank or preclude the Bank from exercising any right, power or remedy consequent
upon such Default.


SECTION 7.    MISCELLANEOUS.


     7.1.    Course of Dealing; Amendment. No course of dealing between the Bank and
the Borrower shall be effective to amend, modify or change any provision of
this Agreement or the other Financing Documents. The Bank shall have the right
at all times to enforce the provisions of this Agreement and the other
Financing Documents in strict accordance with the provisions hereof and
thereof, notwithstanding any conduct or custom on the part of the Bank in
refraining from so doing at any time or times. The failure of the Bank at any
time or times to enforce its rights under such provisions, strictly in
accordance with the same, shall not be construed as having created a custom in
any way or manner contrary to specific provisions of this Agreement or the
other Financing Documents or as having in any way or manner modified or waived
the same. This Agreement and the other Financing Documents to which the
Borrower is a party may not be amended, modified, or changed in any respect
except by an agreement in writing signed by the Bank and the Borrower.


     7.2.    Waiver of Default. The Bank may, at any time and from time to time,
execute and deliver to the Borrower a written instrument waiving, on such terms
and conditions as the Bank may specify in such written instrument, any of the
requirements of this Agreement or of the other Financing Documents or any Event
of Default or Default and its consequences, provided, that any such waiver
shall be for such period and subject to such conditions as shall be specified
in any such instrument. In the case of any such waiver, the Borrower and the
Bank shall be restored to their former positions prior to such Event of Default
or Default and shall have the same rights as they had hereunder. No such
waiver shall extend to any subsequent or other Event of Default or Default, or
impair any right consequent thereto and shall be effective only in the specific
instance and for the specific purpose for which given.


     7.3.    Notices. All notices, requests and demands to or upon the parties to this
Agreement shall be deemed to have been given or made when delivered by hand, or
when deposited in the mail, postage prepaid by certified mail, return receipt
requested, or, in the case of notice by facsimile transmission, when properly
transmitted, addressed as follows or to such other address as may be hereafter
designated in writing by one party to the other:



	 	 	 
	Borrower:	 	
Oxford Finance Corporation
	 	 	
133 North Fairfax Street
	 	 	
Alexandria, Virginia 22314
	 	 	
Attention: Mr. Mike Altenburger
	 	 	
Facsimile: 703-519-4910



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	Bank:	 	
Farmers & Mechanics Bank
	 	 	
110 Thomas Johnson Drive
	 	 	
P. O. Box 518
	 	 	
Frederick Maryland 21705
	 	 	
Attention: Mr. Robert Linthicum
	 	 	
Facsimile: 301-698-4623



except in cases where it is expressly herein provided that such notice, request
or demand is not effective until received by the party to whom it is addressed.


     7.4.    Right to Perform. If the Borrower shall fail to make any payment or to
otherwise perform, observe or comply with the provisions of this Agreement or
any of the other Financing Documents, then and in each such case, the Bank may
(but shall be under no obligation whatsoever to) without notice to or demand
upon the Borrower remedy any such failure by advancing funds or taking such
action as it deems appropriate for the account and at the expense of the
Borrower. The advance of any such funds or the taking of any such action by
the Bank shall not be deemed or construed to cure a Default or waive
performance by the Borrower of any provisions of this Agreement. The Borrower
shall pay to the Bank on demand, together with interest thereon from the date
advanced or incurred until paid in full at a per annum rate of interest equal
at all times to the Default Rate, any such funds so advanced by the Bank and
any costs and expenses advanced or incurred by or on behalf of the Bank in
taking any such action, all of which shall be a part of the Obligations
hereunder.


     7.5.    Fee; Costs and Expenses. (a) Concurrently with execution of this
Agreement, the Borrower shall pay to the Bank a loan facility fee in the amount
of $37,500.00.


               (b)    The
Borrower agrees to pay to the Bank on demand all fees,
recordation and other taxes, costs and expenses of whatever kind and nature,
including attorney’s fees and disbursements, which the Bank may incur or which
are payable in connection with the closing and the administration of the Loan,
including, without limitation, the preparation of this Agreement and the other
Financing Documents, the recording or filing of any and all of the Financing
Documents and obtaining lien searches, the expense of any inspection made by
the Bank with respect to the Borrower and/or the Collateral, and the expense of
the annual field audit to be performed by the Bank. All such fees, costs,
recordation and other taxes shall be a part of the Obligations hereunder.


     7.6.    Consent to Jurisdiction. The Borrower irrevocably (a) consents and
submits to the jurisdiction and venue of any state or Federal court sitting in
the State of Maryland over any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Financing Documents, (b) waives,
to the fullest extent permitted by law, any objection that the Borrower may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum, and (c) consents to the service of process in any such suit, action or
proceeding in any such court by the mailing of copies of such process to the
Borrower by certified mail at the Borrower’s address set forth herein for the
purpose of giving notice.


23






 


     7.7.    Assignment and Participations. (a) The Bank may, subject to the consent
of the Borrower, which consent shall not be unreasonably withheld, conditioned
or delayed, sell, assign or transfer to any person or persons, all or any part
of the Obligations or all or any part of the Financing Documents and each such
person or persons shall have the right to enforce the provisions of the
Financing Documents and any of the Obligations as fully as the Bank, provided
that the Bank shall continue to have the unimpaired right to enforce the
provisions of the Financing Documents and any of the Obligations as to so much
of the Financing Documents and/or the Obligations that it has not sold,
assigned or transferred. Additionally, the Bank may sell or grant to any other
person or persons participations in all or any part of the Obligations or all
or any part of the Financing Documents (provided that such person is not a
direct competitor of the Borrower).


               (b)    In
connection with and prior to and after any such sale, transfer,
assignment or participation, the Bank may disclose and furnish to any
prospective or actual purchaser, transferee, assignee or participant, any and
all reports, financial statements and other information obtained by the Bank at
any time and from time to time in connection with the Obligations, any of the
Financing Documents or otherwise. Each of the Bank and the Borrower hereby
agrees (for itself and its affiliates) that unless otherwise required by
applicable laws, it will maintain the confidentiality of the transaction
contemplated hereby and will not disclose, or cause to be disclosed, the same
to any person, except (1) to prospective purchasers, transferees, assignees or
participants, (2) to its affiliates and its affiliates’ agents, directors,
officers, employees, accountants, counsel or other professional advisors that
have, in each such case, been instructed or otherwise bound by professional
rules of conduct to keep such information confidential, (3) as may be requested
pursuant to applicable laws by any governmental authority (including Internal
Revenue Service auditors or state taxing and regulatory authorities), (4) to
the extent required in connection with the performance by it of its obligations
and the exercise by it of its rights under this Agreement and the other
Financing Documents, (5) to any nationally recognized rating agency that
requires access to information about such person’s investment portfolio, (6) in
response to any subpoena or other legal process or in connection with any
litigation to which such person is a party (provided that prior notice shall
have been provided to the non-disclosing party), (7) to the extent, but only to
the extent, that prior to such disclosure, such information is in the public
domain or has been provided to such party by a person not a party to this
Agreement and the other Financing Documents (other than by reason of a breach
by such person of the confidentiality provisions hereof or as expressly
contemplated hereby), or (8) with the prior written consent of the other party
hereto (which consent shall not be unreasonably withheld).


               (c)    The
Borrower will fully cooperate with the Bank in connection with
any such assignment and will execute and deliver such consents and acceptances
to any such assignment, amendments to this Agreement in order to effect any
such assignment (including, without limitation, the appointment of the Bank as
agent for itself and all assignees) and new or replacement promissory notes for
the Promissory Notes in conjunction with any such assignment; provided, that
the Borrower’s indebtedness, obligations and liabilities under this Agreement
and the other Financing Documents will not be increased by reason of any such
assignment.


24






 


     7.8.    Definitions; Certain Definitional Provisions.


               (a)    As
used herein, the following terms shall have the following meanings:


                           (i)    “Base
Rate” as used herein means the floating and fluctuating highest
per annum rate of interest published in The Wall Street Journal as the prime
rate of interest from time to time. Each time the Base Rate shall change, the
Interest Rate on the unpaid balance of the Principal Amount of the Promissory
Notes shall change immediately and contemporaneously with each such change of
the Base Rate.


                       (ii)    “Business
Day” as used herein means any day other than Saturday,
Sunday or other day on which commercial banks in the State of Maryland are
authorized to close.


                       (iii)    “Debt”
means the total liabilities of the Borrower which, in
accordance with GAAP, would be included on the liability side of a balance
sheet.


                       (iv)    “Eligible
Loans” means those documents or instruments satisfying the
following criteria: (1) such document or instrument is evidenced by a written
contract pursuant to which the Borrower agrees to lend amounts to a third party
which is organized under the laws of the United States or any state thereof and
which is not an agency or instrumentality of the United States of America or of
any state, county, municipality or any department, agency or instrumentality
thereof, (2) the then remaining term of the document or instrument is not more
than sixty (60) months, (3) the amount of the Advance to be made with respect
to such document or instrument is not less than $500,000, (4) the then
outstanding balance due with respect to all Advances made with respect to
documents or instruments to any individual third party (or affiliated entities)
is not more than $1,500,000, (5) the amount of periodic installments required
to be paid under the remaining term of the documents or instruments shall be
sufficient fully to amortize the Advance made with respect to such documents or
instruments, (6) not more than three (3) installments under such document or
instrument shall be past due at any time or, at the Bank’s option, such
document or instrument shall be replaced by a document or instrument otherwise
satisfying the criteria set forth herein with respect to Eligible Loans
specified as collateral on the written request by Borrower for the Advance or
the amount of the Advance made with respect to such document or instrument
shall be reduced pursuant to Section 1.6 hereof, (7) such document or
instrument shall be specified on Borrower’s written request for the Loan
submitted to the Bank, and (8) such document or instrument meets all other
criteria now or hereafter established (provided that any change in such
criteria shall be applied prospectively only and shall not be applicable to
those documents or instruments which have previously qualified as Eligible
Loans specified as collateral on the written request by Borrower for the Loan)
by the Bank in order for a document or instrument to be an Eligible Loan;
provided, that any document or instrument which is at any time an Eligible
Loan, but which subsequently fails to meet the criteria for an Eligible Loan
specified as collateral on the written request by Borrower for the Loan shall
immediately cease to be an Eligible Loan.


                       (v)    “Financing
Documents” means collectively and includes this Agreement,
each Promissory Note issued pursuant hereto, and any other instrument, document
or agreement both now and hereafter executed, delivered or furnished by the
Borrower or any other


25






 


person (as hereinafter defined) evidencing, securing or in connection with
this Agreement or all or any part of the Obligations.


                       (vi)    “Interest
Coverage Ratio” means the ratio of Borrower’s earnings
before interest and tax to interest expense.


                       (vii)    “Loan
Receivables” means the Borrower’s present and future general
intangibles, chattel paper, documents and instruments (as such terms are
defined in the UCC) solely to the extent relating to Eligible Loans, including,
without limitation, all present and future rights of the Borrower to payment of
monetary obligations owed to the Borrower on account of Eligible Loans, whether
due or to become due.


                       (viii)    “Obligations”
means collectively and includes all present and
future indebtedness, liabilities and obligations of any kind and nature
whatsoever of the Borrower to the Bank both now existing and hereafter arising
under, as a result of, on account of, or in connection with, this Agreement and
any and all amendments thereto, restatements thereof, supplements thereto and
modifications thereof made at any time and from time to time hereafter, or the
other Financing Documents, including, without limitation, future advances,
principal, interest, indemnities, fees, late charges, enforcement costs (as
hereinafter defined) and other costs and expenses whether direct, contingent,
joint, several, matured or unmatured.


                       (ix)    “Tangible
Net Worth” means the net worth (defined and calculated in
accordance with GAAP consistently applied) of the Borrower less the book amount
of all assets of the Borrower classified as intangible assets.


                       (x)    “UCC”
shall mean the Uniform Commercial Code as in effect in any
applicable jurisdiction from time to time.


               (b)    The
term “person” as used in this Agreement means and includes any
natural person, individual, company, corporation, partnership, limited
liability entity, joint venture, unincorporated association, government or
political subdivision or agency thereof, or any other entity of whatever
nature. All terms defined in this Agreement shall have such defined meanings
when used in any of the other Financing Documents. Accounting terms used in
this Agreement shall have the respective meanings given to them under generally
accepted accounting principles in effect from time to time in the United States
of America. The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. As used herein, the
singular number shall include the plural, the plural, the singular and the use
of the masculine, feminine or neuter gender shall include all genders, as the
context may require. Unless otherwise defined herein, all terms used herein
which are defined by the UCC shall have the same meanings as assigned to them
by the UCC unless and to the extent varied by this Agreement.


     7.9.    Entire Agreement; Severability. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior understandings with respect thereto. This Agreement shall
not be amended except by an instrument in writing signed by each of the
parties. The invalidity, illegality or unenforceability


26






 


of any provision of this Agreement shall not affect the validity, legality or
enforceability of any of the other provisions of this Agreement which shall
remain effective.


     7.10.    Survival. All representations, warranties and covenants contained among
the provisions of this Agreement shall survive the execution and delivery of
this Agreement and all other Financing Documents.


     7.11.    Successors and Assigns. The rights and obligations of the Borrower under
this Agreement may not be assigned or delegated. This Agreement and all other
Financing Documents shall be binding upon and inure to the benefit of the
Borrower and the Bank and their respective successors and permitted assigns.


     7.12.    Applicable Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MARYLAND (WITHOUT REGARD TO
THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE).


     7.13.    Time of Essence. Time is of the essence in connection with all
obligations of the Borrower hereunder and under any of the other Financing
Documents.


     7.14.    Duplicate Originals and Counterparts. This Agreement may be executed in
any number of duplicate originals or counterparts, each of such duplicate
originals or counterparts shall be deemed to be an original and all taken
together shall constitute but one and the same instrument.


     7.15.    Headings. Section and subsection headings in this Agreement are included
herein for convenience of reference only, shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.


[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]



27






 






     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Master Loan and Security Agreement, under seal, as of the day and year first
written above.





	 	 	 	 
	 	OXFORD FINANCE CORPORATION	 
	 
	 	By:	/s/ Michael J. Altenburger        
           
              
    (SEAL)
	 
	 	 	
	 
	 	Name:	Michael J. Altenburger	 
	 	 	

	 	Title:	
Chief Financial Officer

	 
	 	 	
	 
	 
	 	FARMERS & MECHANICS BANK	 
	 	By:	/s/ Robert Linthicum        
           
              
    (SEAL)

	 	 	
	 
	 	Name:	Robert Linthicum	 
	 	 	
	 
	 	Title:	 

	 
	 	 	
	 






28