exv10w26



 







Exhibit 10.26




LOAN AND SECURITY AGREEMENT




     THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated this 14th day of October, 2004, by
and among ADVANCED BIOSOLUTIONS, INC., a Maryland corporation, which maintains its chief executive
office at c/o Antex Biologics Inc., 300 Professional Drive, Suite 100, Gaithersburg, Maryland 20879
(the “Borrower” which term shall mean the “Debtor” as defined under the Maryland Uniform Commercial
Code), ANTEX BIOLOGICS INC., a Delaware corporation, BIOPORT CORPORATION, a Michigan corporation
and EMERGENT BIOSOLUTIONS INC., a Delaware corporation (individually or collectively, the
“Guarantor”) and MERCANTILE POTOMAC BANK (the “Bank” which term shall mean the “Secured Party” as
defined in the Maryland Uniform Commercial Code).



     WHEREAS, the Borrower has applied to the Bank for a term loan of SEVEN MILLION and No/100
Dollars ($7,000,000.00) (the “Term Loan”) and the issuance of a letter of credit not exceeding ONE
MILLION TWO HUNDRED FIFTY THOUSAND and No/100 Dollars ($1,250,000.00) (the “Letter of Credit”) (the
Term Loan and the Letter of Credit are collectively referred to herein as the “Facilities”); and



     WHEREAS, the Facilities will be of benefit to the Guarantor and the Guarantor desires to
induce the Bank to make the Term Loan and issue the Letter of Credit by guaranteeing the payment of
the Term Loan and the reimbursement of the payment under the Letter of Credit; and



     WHEREAS, the Bank is willing to make the Term Loan to the Borrower and issue the Letter of
Credit upon the terms and subject to the conditions hereinafter set forth.



     NOW, THEREFORE, in consideration of the foregoing and of the agreements, covenants and
conditions contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as follows:



SECTION 1. DEFINITIONS




     As used herein, the following terms, when initial capital letters are used, shall have the
respective meanings set forth below. In addition, all terms defined in the Maryland Uniform
Commercial Code (including revised Article 9 thereof) shall have the meanings given therein unless
otherwise defined herein.



     1.01 Defined Terms. As used in this Agreement, the following terms shall have the
following meanings, unless the context otherwise requires:



     “Affiliate” shall mean (a) any entity in which the Borrower legally or beneficially
owns or holds, directly or indirectly, any capital stock, membership interest or other equity
interest; (b) any person or entity that is a partner in or member of the Borrower or a partnership
or limited liability company in which the Borrower is a partner; (c) any person that is a director,
officer, employee, member, stockholder (legally or beneficially) or other affiliate of any of the
foregoing or of the



 









 







Borrower; and (d) any person or entity that directly or indirectly controls, is under the control
of, or is under common control with, the Borrower, including, without limitation, any person or
entity that directly or indirectly has the right or power to direct the management or policies of
the Borrower and any person or entity whose management or policies the Borrower directly or
indirectly has the right or power to direct.



     “Certificate of Deposit” shall mean that certain certificate of deposit number 5018577
dated October 14, 2004 issued in the name of the Borrower by the Bank, and all replacements,
modifications, rollovers, renewals and restatements thereof.



     “Collateral” shall mean the Property and the Certificate of Deposit.



     “DBED Loan” shall mean that certain loan in the amount of Two Million Five Hundred
Thousand and No/100 Dollars ($2,500,000.00) from the Maryland Department of Business and Economic
Development to the Borrower, and any refinancing, replacement, or amendment thereof.



     “DBED Loan Documents” shall mean any and all loan documents evidencing and securing
the DBED Loan executed and delivered by the Borrower and the Guarantor to the Maryland Department
of Business and Economic Development.



     “Deed of Trust” shall mean the Purchase Money Deed of Trust, Assignment of Rents and
Leases and Security Agreement, in form and content satisfactory to the Bank, made and executed by
the Borrower for the benefit of the Bank, as amended, supplemented, restated or modified from time
to time, to secure the Term Note, which Deed of Trust, when recorded, shall create a first lien on
the Property.



     “Environmental Laws” shall mean all federal, State and local laws, whether now or
hereafter enacted, and as amended from time to time, relating to pollution or protection of the
environment and the handling of Hazardous Materials, including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of Hazardous Materials into the
environment (including, without limitation, ambient air, surface water, ground water or land), or
otherwise relating to the manufacture, generation, production, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices or demand letters
issued, entered, promulgated or approved thereunder.



     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor legislation, and all regulations, codes, orders, decrees,
judgments, injunctions, notices or demand letters issued, entered, promulgated or approved
thereunder.



     “Event of Default” shall mean any of the events specified in Section 10 hereof,
provided that any requirement for the giving of notice, the lapse of time, or both have been
satisfied.



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     “Fifth Third Loan” shall mean that certain (1) Ten Million and No/100 Dollars
($10,000,000.00) loan to BioPort Corporation from Fifth Third Bank dated October 8, 2004 and any
refinancing replacement, amendment or enlargement thereof, and (2) Two Million Four Hundred
Thousand No/100 Dollars ($2,400,000.00) term loan to BioPort Corporation from Fifth Third Bank
dated August 10, 2004 and any refinancing replacement, amendment or enlargement thereof.



     “Fifth Third Loan Documents” shall mean any and all loan documents evidencing and
securing the Fifth Third Loan.



     “GAAP” shall mean generally accepted accounting principles.



     “Guaranty” shall mean the Guaranty, in form and content satisfactory to the Bank, made
and executed by each Guarantor for the benefit of the Bank, as amended, supplemented, restated or
modified from time to time.



     “Hazardous Materials” shall mean any (i) hazardous, regulated and/or toxic chemicals,
materials, substances or wastes occurring in the air, water, soil or ground water or noise in, on,
over or under the Property or the improvements thereon, as defined by the Comprehensive
Environmental Response, Compensation, and Liability Act (Superfund or CERCLA), and the Superfund
Amendments and the Reauthorization Act of 1986 (SARA), 42 U.S.C. § 9601 et seq., the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq., the Resource Conservation and
Recovery Act (the Solid Waste Disposal Act or RCRA), 42 U.S.C. § 6901 et seq., the Federal Water
Pollution Control Act, (CWA), 33 U.S.C. § 1251 et seq., the Clean Air Act (CAA), 42 U.S.C. § 7401
et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. § 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et
seq. and the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.A. §136 et seq.
., the Uranium Mill Tailings Radiation Control Act, 42 U.S.C. § 7901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. § 655 et seq., the National Environmental Policy Act,
42 U.S.C. § 4321 et seq., and the Noise Control Act, 42 U.S.C. § 4901 et seq., or comparable state
statutes, as each such statute may be amended from time to time, and/or as defined in regulations
promulgated thereunder; (ii) oil, petroleum products, and their by-products; (iii) any substance,
the presence of which is prohibited or controlled by any other applicable federal or state or local
laws, regulations, statutes or ordinances now in force or hereafter enacted relating to waste
disposal or environmental protection with respect to hazardous, toxic or other substances
generated, produced, leaked, released, spilled or disposed of at or from the Property, (iv) any
other substance which by law requires special handling in its collection, storage, treatment or
disposal including, but not limited to, asbestos or asbestos-containing material in any form that
could be friable, polychlorinated biphenyls (PCBs), urea formaldehyde foam insulation and
lead-based paints, but not including small quantities of such materials present on the Property in
retail containers, (v) microbial matter or infectious substances; (vi) underground or above-ground
storage tanks, whether empty or containing any substance, the presence of which on the Property is
prohibited by any federal, state or local authority; (vii) any substance that requires special
handling; and (viii) any other material or substance now or in the future defined as a “hazardous
substance,”



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“hazardous material,” hazardous waste,” “toxic substance.” “toxic pollutant,” “contaminant,” or
“pollutant” within the meaning of any Environmental Laws. “Microbial Matter” shall mean the
presence of fungi or bacterial matter which reproduces through the release of spores or the
splitting of cells, including, but not limited to, mold, mildew and viruses, whether or not such
Microbial Matter is living.




     “Letter of Credit” shall mean the letter of credit in form and substance satisfactory
to the Bank, issued by the Bank for the benefit of the Maryland Department of Business and Economic
Development at the request of the Borrower in the amount of One Million Two Hundred Fifty Thousand
and No/100 Dollars ($1,250,000.00).



     “Lien” shall mean any mortgage, pledge, deed of trust, assignment, security interest,
encumbrance, hypothecation, lien, or charge of any kind (including any conditional sale or other
title retention agreement, any financing lease having substantially the same economic effect as any
of the foregoing, and the filing of, or agreement to give, any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).



     “Loan Documents” shall mean the Note, this Agreement, the Guaranty, the Deed of Trust,
the LOC Deed of Trust, the Pledge Agreement, or any other agreement or document referred to herein
or now or hereafter delivered in connection with the transactions contemplated hereby, together
with any and all revisions, amendments, restatements and modifications to, replacements of and
substitutions for, any of the foregoing.



     “LOC Deed of Trust” shall mean the Deed of Trust, Assignment of Rents of Leases and
Security Agreement in form and content satisfactory to the Bank, made and executed by the Borrower
or to be executed by the Borrower subsequent to the date hereto, for the benefit of the Bank, as
amended, supplemented, restated or modified from time to time, which Deed of Trust secures the LOC
Note.



     “LOC Note” shall mean the promissory note of even date herewith executed by the
Borrower and consented to by the Guarantor to evidence the obligation of the Borrower to reimburse
the Bank for the payment under the Letter of Credit, as amended, supplemented, restated, replaced
or modified from time to time.



     “Note” shall mean the Term Note and the LOC Note, as amended, supplemented, restated,
replaced or modified from time to time.



     “Park” shall mean the Dudrow Business Park, Frederick, Maryland.



     “Permitted Liens” shall mean: (a) Liens, if any, for taxes, front foot benefit
charges, assessments and other charges enumerated in Section 1.03(a) of the Deed of Trust, not yet
due or payable; (b) applicable building and zoning laws and regulations; (c) any mechanic’s,
artisan’s, materialman’s, landlord’s, carrier’s or other like Lien arising in the ordinary course
of business with respect to obligations which are not due; (d) any and all municipal and public
utility easements of record; (e) any Lien arising out of a judgment, order or award with respect to
which the Borrower



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shall in good faith be prosecuting diligently an appeal or proceeding for review and with respect
to which there shall be in effect a subsisting stay of execution pending such appeal or proceeding
for review, provided appropriate reserves therefor are established by the Borrower in accordance
with GAAP and provided such Lien is subordinate to any security interest of the Bank in the
property encumbered by such Lien; (f) the DBED Loan; (g) any deposit of funds made in the ordinary
course of business to secure obligations of the Borrower under worker’s compensation laws,
unemployment insurance laws or similar legislation, to secure public or statutory obligations of
the Borrower, to secure surety, appeal or customs bonds in proceedings to which the Borrower is a
party, or to secure the Borrower’s performance in connection with bids, tenders, contracts (other
than contracts for the payment of money), leases or subleases made by the Borrower in the ordinary
course of business; (h) any Lien set forth in the Commitment for Title Insurance No. CTCI-04107
issued by Chicago Title Insurance Company, as updated to the date of this Agreement; (i) any lease,
sublease or agreement for occupancy or use for any part of the Property, so long as those leases,
subleases or agreements are subordinate to the Deed of Trust and the LOC Deed of Trust and have
been approved by the Bank pursuant to Section 1.19(g) of the Deed of Trust and LOC Deed of Trust;
(j) any routine utility, access or similar easements granted in connection with the use of the
Property; (k) any easement granted to Frederick County, Maryland; (l) a Lien in favor of the Bank;
and (m) a Lien, (i) which is subordinate to the lien of this Deed of Trust and the LOC Deed of
Trust, (ii) is required in connection with the purchase, improvement, renovation, conversion or
maintenance of the Property and the entire proceeds of the refinancing are used for such purposes,
(iii) provides for notice to the Bank of an event of default under such financing, and (iv) is
approved in writing by the Bank, which approval shall not be unreasonably withheld, delayed or
conditioned.



     “Pledge Agreement” shall mean the Pledge Agreement, in form and content satisfactory
to the Bank, made and executed by the Borrower for the benefit of the Bank, as amended,
supplemented, restated or modified from time to time, pursuant to which the Borrower grants to the
Bank a first lien security interest in the Certificate of Deposit.



     “Property” shall mean that certain real property and improvements thereof owned by the
Borrower and located at 7114 Geoffrey Way, Frederick, Building 1, Unit 1, Maryland 21703, as more
particularly described in the Deed of Trust.



     “Term Note” shall mean the promissory note of even date herewith executed by the
Borrower and consented to by the Guarantor to evidence the Term Loan, as amended, supplemented,
restated, replaced or modified from time to time.



     “Secured Obligations” shall have the meaning ascribed to such term in Section 4
hereof.



     “Subsidiary” shall mean any corporation at least a majority of the outstanding voting
stock of which, now or in the future, is owned or controlled by the Borrower, directly or
indirectly, or through one or more intermediaries.



     1.02 Accounting Terms. As used in this Agreement and any of the other Loan Documents,
as well as in any certificate, report or other document made or delivered pursuant to or



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in connection with this Agreement, accounting terms not defined herein and accounting terms only
partly defined herein shall have the respective meanings given to them under GAAP.



     1.03 Use of Defined Terms. All terms defined in this Agreement shall have the defined
meanings when used in any of the other Loan Documents or in any certificate, report or other
document made or delivered pursuant to or in connection with this Agreement, unless the context
shall require otherwise.



SECTION 2. LOAN AND REPAYMENT




     2.01 Term Loan. Subject to the terms and conditions set forth herein, the Bank agrees
to lend to the Borrower, in a single advance to be made on or about the date hereof, the sum of
Seven Million and No/100 Dollars ($7,000,000.00).



     2.03 Note. The Borrower’s indebtedness to the Bank for the Term Loan together with
interest accrued thereon, shall be evidenced by the Term Note and the Borrower’s obligation to
reimburse the Bank for the payment under the Letter of Credit, together with interest accrued
thereon, shall be evidenced by the LOC Note.



     2.04 Repayment of Term Loan; Letter of Credit. The Borrower shall repay the Term Loan
and reimburse the Bank for the payment of the Letter of Credit, along with interest accrued
thereon, in accordance with the terms of the Note.



     2.05 Issuance of Letter of Credit. Subject to the terms and conditions of this
Agreement, the Bank will issue a Letter of Credit to the Maryland Department of Business and
Economic Development in the amount of One Million Two Hundred Fifty Thousand and No/100 Dollars
($1,250,000.00) as requested by the Borrower upon the execution by the Borrower and delivery of an
application for Letter of Credit, indemnity agreement and promissory note in the form acceptable to
the Bank.



     2.06 Fees. The Borrower shall pay to the Bank a fee equal to one percent (1.0%) of
the face amount of the Letter of Credit upon the issuance of the Letter of Credit, and pay to the
Bank annual fees equal to one percent (1.0%) of the face amount of the Letter of Credit (the
“Annual Fee”) which fee shall be due and payable on the date on which the Letter of Credit is
reissued or renewed. In the event the Letter of Credit is terminated before its expiration date,
the Annual Fee shall be prorated based upon such portion of the time from the termination date
until the expiration date. As of the date hereof, the Borrower has paid the commitment fee of
Seventy Thousand and No/100 Dollars ($70,000.00) for the Term Loan.



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SECTION 3. CONDITIONS PRECEDENT.



     The Bank’s obligations under the Loan Documents are subject (a) to the accuracy, as of the
date hereof and as of the date that any future advance of money is made to or requested by the
Borrower under the Loan Documents, of the representations and warranties contained herein and in
the Loan Documents and is further subject to (b) the satisfaction of the Bank, on or before the
date of each advance of money under the Loan Documents, of the following conditions precedent,
except to the extent that they may be waived or deemed satisfied by the Bank:



     3.01 Advance. The advance under the Term Note and the issuance of the Letter of
Credit shall be conditioned upon:



     3.01 (a) Delivery of Documents. The Borrower shall have delivered to the Bank the
following:



          (i) a certificate of good standing for the Borrower certified by the Secretary of State, or
other appropriate governmental authority, of the state of incorporation of the Borrower;




          (ii) a copy, certified as of the date hereof by the Secretary or an Assistant Secretary of the
Borrower, of the resolutions of its Board of Directors authorizing (a) the execution, delivery and
performance of the Loan Documents to which the Borrower is a party, (b) the borrowings by the
Borrower hereunder, and (c) the granting of the liens contemplated by the Loan Documents to which
the Borrower is a party;




          (iii) a certificate from the Borrower, signed by a duly authorized officer of the Borrower,
dated as of the date hereof, as to the incumbency, authority and signatures of the officers of the
Borrower authorized to sign on behalf of the Borrower the Loan Documents to which the Borrower is a
party;




          (iv) a certificate of good standing for each Guarantor certified by the Secretary of State, or
other appropriate governmental authority, of the state of incorporation of each Guarantor and such
Guarantor’s principal place of business;




          (v) a copy, certified as of the date hereof by the Secretary or an Assistant Secretary of each
Guarantor, of the resolutions of its Board of Directors authorizing (a) the execution, delivery and
performance of the Loan Documents to which each Guarantor is a party, and (b) the guaranties by the
Guarantor hereunder;




          (vi) a certificate from each Guarantor, signed by a duly authorized officer of each Guarantor,
dated as of the date hereof, as to the incumbency, authority and signatures of the officers of the
Guarantor authorized to sign on behalf of the Guarantor the Loan Documents to which the Guarantor
is a party;




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          (vii) the original Agreement executed by the Borrower and the Guarantor;




          (viii) the original Note executed by the Borrower and consented to by the Guarantor;




          (ix) the original Guaranty executed by each Guarantor;




          (x) the original Pledge Agreement executed by the Borrower;




          (xi) the original Deed of Trust executed by the Borrower;




          (xii) a written opinion of counsel to the Borrower and the Guarantor dated as of the date of
this Agreement and addressed to the Bank, which opinion must be, in form and content, satisfactory
to the Bank;




          (xiii) such financing statements or other documents which the Bank may request in connection
with the Collateral; evidence satisfactory to the Bank that all filings under the Uniform
Commercial Code or with any federal or state agency or department that the Bank or its counsel
deems necessary or desirable in connection with the creation and perfection of the security
interest granted hereunder have been effected; and such other evidence as the Bank may require that
confirms that, as a result of such filings, the Bank’s security interest in the Collateral is
consistent with the representation contained in this Agreement relating thereto;




          (xiv) the insurance policies evidencing the insurance coverages required by the Deed of Trust
and this Agreement, together with proof of payment of the premiums for such insurance;




          (xv) all fees payable to the Bank, including legal fees, commitment fees, administration fees,
etc.;




          (xvi) such executed agreements, notices or other documents in form and substance satisfactory
to the Bank in connection with the Bank’s control of any rights in any deposit accounts, electronic
chattel paper, investment property or letter of credit.




          (xvii) such other loan documents, agreements, consents, approvals, certificates, resolutions,
instruments, opinions and other documents and materials as listed on any closing checklist or as
the Bank may reasonably request.




     3.01 (b) Compliance. The Borrower and the Guarantor shall have complied and shall
then be in compliance in all material respects with all material terms, covenants and conditions of
this Agreement.



     3.01 (c) No Default. There shall exist no Event of Default (as hereinafter defined)
and no event which, upon notice or lapse of time or both, would constitute an Event of Default.



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     3.01 (d) Representations True. The representations and warranties contained in this
Agreement shall be true and correct in all material respects.



     3.01 (e) No Material Adverse Change. There shall be no materially adverse change in
the total financial condition of the Borrower or the Guarantor, taken as a whole, from the
financial condition of the Borrower or the Guarantor, as the case may be, as set forth in the
financial statements furnished to the Bank pursuant to this Agreement or from the financial
condition of the Borrower or any Guarantor previously disclosed to the Bank in any other manner.



     3.02 (f) Closing of DBED Loan. The Borrower shall have executed and delivered the
DBED Loan Documents and funding under the DBED Loan has occurred.



SECTION 4. SECURITY INTEREST




     In order to secure the payment of the Note, the performance of all of the Borrower’s
obligations under the Note, this Agreement, and the other Loan Documents, as such Loan Documents
may be amended, restated, substituted, renewed, extended, supplemented or modified from time to
time, the payment of all other existing and future non-consumer liabilities, of whatever type
whether or not contemplated by the parties hereto, payable by the Borrower to the Bank, and
liability for overdrafts of the Borrower and advances by the Bank to the Borrower in excess of the
amount of the Loan (“administrative overlines”) and as indorser, guarantor or surety plus all
reasonable costs, expenses, advances and reasonable attorneys’ fees which may be made or incurred
by the Bank in the collection or the enforcement of any of the Bank’s rights and remedies hereunder
(collectively, the “Secured Obligations”), the Borrower hereby assigns to the Bank, and grants to
the Bank a first lien security interest in the Collateral.



SECTION 5. REPRESENTATIONS AND WARRANTIES




     To induce the Bank to enter into this Agreement, the Borrower, as to itself, and each
Guarantor, as to itself, represent, warrant and agree as of the date hereof, and continuing so long
as any obligation of the Borrower and/or the Guarantor exists to the Bank under the Loan Documents
as follows:



     5.01 Corporate Status; Subsidiaries. The Borrower is a corporation, duly organized
and validly existing in the jurisdiction in which it is organized, has the power and authority to
own its properties and to carry on its business as currently conducted, and is duly qualified to do
business and is in good standing in each jurisdiction in which the transaction of its business
makes such qualification necessary. The Borrower has no subsidiaries other than those previously
disclosed to the Bank in writing.



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     5.02 Mergers and Consolidations. Except as previously disclosed to the Bank in
writing, no entity has merged into the Borrower or been consolidated with the Borrower, and the
business of the Borrower has not ever been conducted as a partnership or proprietorship in the
past.



     5.03 Purchase of Assets. Except as previously disclosed to the Bank in writing, no
entity has sold substantially all of its assets to the Borrower or sold assets to the Borrower
outside the ordinary course of such seller’s business or in a transaction subject to the bulk
transfer laws at any time in the past.



     5.04 Borrower’s and Guarantor’s Authority and Capacity. The Borrower and the
Guarantor have the full legal right, authority and capacity to execute, deliver and perform the
Loan Documents and to incur the obligations provided for therein. The execution, delivery and
performance of the Loan Documents and the obligations provided for therein have been duly and
validly authorized by all necessary corporate actions on the part of the Borrower (all of which
actions are in full force and effect), and do not and will not require any consent or approval of
the stockholders of the Borrower which has not been obtained.



     5.05 Binding Agreement of Borrower and the Guarantor. The Loan Documents are the
valid and legally binding obligations and agreements of the Borrower and of the Guarantor,
enforceable in accordance with their respective terms.



     5.06 No Conflicting Law and Agreements. The execution, delivery and performance by
the Borrower of the Loan Documents will not violate any provision of law, any order of any court or
government instrumentality or agency, any indenture, any loan or credit agreement or any other
material agreement, commitment, lease, contract, deed of trust, mortgage, note or other instrument
binding on the Borrower or affecting its property, or be in conflict with, result in a breach of,
in any material respect, or constitute (with due notice, lapse of time, or both) a default (as
defined therein) under any such indenture, agreement, commitment, lease, contract, deed of trust,
mortgage, note or other instrument, or result in the creation or imposition of any Lien of any
nature whatsoever upon any of the property or assets of the Borrower, or result in or require the
acceleration of any indebtedness of the Borrower.



     5.07 Compliance with Laws. The Borrower is in compliance in all material respects
with any federal, State and local laws, rules and regulations including, but not limited to
Environmental Laws and the Fair Labor Standards Act. The Borrower and the Guarantor maintain all
of the necessary permits, licenses and certifications necessary for the operation of the their
businesses. All of the foregoing are in full force and effect and not in known conflict with the
rights of others. The Borrower is not in breach of or default (as defined therein) under the
provisions of any of the foregoing, nor is there any event, fact, condition or circumstance which,
with notice or passage of time or both, would constitute or result in a conflict, breach, default
or event of default (as defined therein) under, any of the foregoing which, if not remedied within
any applicable grace or cure period could reasonably be expected to have a material adverse effect
on the Borrower.



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     5.08 Taxes. The Borrower has filed or caused to be filed all Federal, state and local
income, excise, property and other tax returns which are required to be filed. All such returns
are true and correct in all material respects and the Borrower has paid or caused to be paid all
taxes, assessments, interest and penalties as shown on such returns or on any assessment received
by them, to the extent that such taxes have become due, including, but not limited to, all F.I.C.A.
payments and withholding taxes. The amounts reserved as a liability for income and other taxes
payable in the most recent financial statements of the Borrower provided to the Bank pursuant to
this Agreement are sufficient for the payment of all unpaid Federal, state, county and local
income, excise, property and other taxes, whether or not disputed, of the Borrower and the
Guarantor accrued for or applicable to the period and on the dates of such financial statements and
all years and periods prior thereto and for which the Borrower, any existing Subsidiary or the
Guarantor may be liable in its or their own right or as a transferee of the assets of, or as
successor to, any other person or entity.



     5.09 Financial Condition. The financial statements of the Borrower and the Guarantor
and other related information previously submitted to the Bank are true, complete and correct in
all material respects, fairly represent the financial condition of the Borrower and the Guarantor
and the result of their respective operations and transactions as of the dates and for the periods
of such statements and have been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved. There are no liabilities, direct or indirect, fixed or contingent,
matured or unmatured, known to the Borrower or the Guarantor which are not reflected therein.
There has been no material adverse change in the business, operations, prospects, assets,
properties or condition (financial or otherwise) of the Borrower or the Guarantor, taken as a whole
since the date of said financial statements.



     5.10 Title To Properties. The Borrower has good, valid, insurable (in the case of
real property) and marketable title to all of their properties and assets including the Collateral
(whether real or personal, tangible or intangible) reflected on the financial statements referred
to in this Agreement, except for such properties and assets as have been disposed of since the date
of such financial statements as no longer used or useful in the conduct of their business or as
have been disposed of in the ordinary course of business, and all such properties and assets are
free and clear of all Liens except for Permitted Liens . None of the real property included in
such properties of the Borrower is subject to any covenant or other restriction preventing or
limiting the right of the record owner to convey or use it, all such real property has adequate
rights of ingress and egress, and all such real property has direct and unobstructed access to
electric, gas, water, sewer and telephone lines, all of which are adequate for the uses to which
such property is currently devoted.



     5.11 Litigation. Except as previously disclosed to the Bank in writing, there are no
actions, claims, suits or proceedings pending, or, to the knowledge of the Borrower, threatened or
reasonably anticipated against or affecting the Borrower at law or in equity including, without
limitation, under ERISA or any Environmental Laws or before or by any governmental instrumentality
or agency (domestic or foreign), commission, board, bureau, arbitrator or arbitration panel, and
there is no probable judgment, liability or award which may reasonably be expected to result in any
material adverse change in the business, operations, prospects, properties or assets or condition,
financial or otherwise, of the Borrower or the Guarantor. The Borrower is



11









 







not in default with respect to any judgment, order, writ, injunction, decree, rule, award or
regulation of any court, governmental instrumentality or agency, commission, board, bureau, or
arbitrator or arbitration panel.



     5.12 No Other Defaults. Except as previously disclosed to the Bank in writing, the
Borrower is not in default under any contract, agreement, commitment or other instrument which
default would have a material adverse effect on the business, properties or condition, financial or
otherwise, of the Borrower, or in the performance of any covenants or conditions respecting any of
their indebtedness. No holder of any indebtedness of the Borrower has given notice of any asserted
default thereunder. No liquidation or dissolution of the Borrower or the Guarantor and no
receivership, insolvency, bankruptcy, reorganization or other similar proceeding relative to the
Borrower or the Guarantor or their properties is pending or, to the knowledge of the Borrower or
the Guarantor, is threatened against them or any of them.



     5.13 ERISA. (a) The pension, profit sharing, savings, stock bonus and other deferred
compensation plans established and maintained by the Borrower, the Guarantor and any Commonly
Controlled Entity (as defined below) which are subject to the requirements of ERISA, if any, were
stated in their inception or have, since ERISA became effective with respect to such plans, been
amended and restated in a manner designed to qualify under the applicable requirements of ERISA and
the Internal Revenue Service Code of 1986, as amended (the “Code”); and subsequent to such
statement, or restatement, those plans and their related trusts have received favorable
determinations from the Internal Revenue Service holding that such plans and trusts so qualify; (b)
to the knowledge of the Borrower and the Guarantor, there is no current matter which would
materially adversely affect the qualified tax-exempt status of any pension, profit-sharing,
savings, stock bonus or other deferred compensation plan and their related trusts of either of the
Borrower or any Commonly Controlled Entity under the Code; (c) neither the Borrower, the Guarantor,
nor any Commonly Controlled Entity has incurred in connection with any such plan any “accumulated
funding deficiency” (as defined in Section 302 of ERISA or Section 412(a) of the Code) whether or
not waived; (d) there has been no “prohibited transaction” (within the meaning of Section 4975 of
the Code or Section 406 of ERISA) involving any such plan of the Borrower, the Guarantor, or any
Commonly Controlled Entity; (e) no “reportable event,” as defined by Title IV of ERISA, has
occurred with respect to any plan subject to the minimum funding requirements of Section 412 of the
Code maintained for employees of the Borrower or any Commonly Controlled Entity; (f) no
“multi-employer plan” (as defined in ERISA) to which either of the Borrower, the Guarantor or any
Commonly Controlled Entity has an obligation to contribute, has “terminated,” as that term is
defined in ERISA; (g) neither the Borrower, the Guarantor, nor any Commonly Controlled Entity has
withdrawn, in a “complete withdrawal” (as defined in ERISA), from any “multi-employer plan” to
which either the Borrower or such Commonly Controlled Entity had an obligation to contribute; (h)
neither the Borrower, the Guarantor nor any Commonly Controlled Entity has withdrawn, in a “partial
withdrawal” (as defined in ERISA), from any “multi-employer plan” to which either the Borrower, the
Guarantor or such Commonly Controlled Entity had an obligation to contribute; and (i) no
“multi-employer plan” to which either the Borrower, the Guarantor or any Commonly Controlled Entity
had an obligation to contribute is in “reorganization” (as defined in ERISA and the Code) nor has
notice been received from the administrator of any “multi-employer plan” to which either the
Borrower,



12









 







the Guarantor, or any Commonly Controlled Entity has an obligation to contribute that any such plan
will be placed in “reorganization.” For purposes of this Section, the term “Commonly Controlled
Entity” means any corporation which is a member of a controlled group of corporations (as defined
for purposes of Section 414(b) of the Code) of which the Borrower is a member and any trade or
business (whether or not incorporated) which is under “common control” (as defined for purposes of
Section 414(c) of the Code) with the Borrower.



     5.14 Other Security Interests. The Borrower is the owner of the Collateral, free from
any Lien except a Permitted Lien.



     5.15 Franchises, Patents, Etc. Except as previously disclosed to the Bank in writing,
no franchises, licenses, trademarks, trade names, copyrights or patents are owned or licensed by,
or registered in the name of, or have been applied for by, the Borrower, and no such rights or
agreements are necessary to the conduct of the present business of the Borrower. The Borrower has
no knowledge of and has not received any notice to the effect that any product it manufactures or
sells, or any service it renders, or any process, method, know-how, trade secret, part or material
it employs in the manufacture of any product it makes or sells or any service it renders, or the
marketing or use by it or another of any such product or service, may infringe any trademark, trade
name, copyright, patent, trade secret or legally protectable right of any other person or entity.



     5.16 Approvals. No approval, consent or other action by any governmental
instrumentality or agency or any other person or entity, which approval, consent, or other action
has not been obtained or taken or which does not remain in effect as of the date hereof, is or will
be necessary to permit the valid execution, delivery and performance by the Borrower and the
Guarantor of the Loan Documents.



     5.17 Tradenames; Name Changes. The Borrower utilizes no tradenames in the conduct of
its business, except as stated above or previously disclosed to the Bank in writing and has not
changed its name.



     5.18 Labor Relations. There are no strikes, work stoppages, material grievance
proceedings or other material controversies pending or, to the best of Borrower’s knowledge,
threatened between the Borrower and any employees engaged in the business of the Borrower or any
union or other collective bargaining unit representing such employees. The Borrower has complied
and is in compliance with all laws relating to the employment of labor, including, without
limitation, provisions relating to wages, hours, collective bargaining, occupational safety and
health, equal employment opportunities and the withholding of income taxes and social security
contributions, the non-compliance with which might materially adversely affect its business,
operations, prospects, assets, properties or condition (financial or otherwise).



13









 





SECTION 6. AFFIRMATIVE COVENANTS




     The Borrower, as to itself and each Guarantor, as to itself, covenant and agree that, so long
as any of the Loan Documents shall remain in effect, or unless the Bank shall otherwise consent in
writing, they will:



     6.01 Payment of Loan. Comply with the terms and conditions for repayment of the Loan
in accordance with the terms of the Note and Guaranty.



     6.02 Financial Statements. Furnish to the Bank:



          (a) as soon as available but in no event more than one hundred twenty (120) days after the
last day of each fiscal year of the Borrower and the Guarantor, consolidated financial statements
of the Borrower and the Guarantor containing a balance sheet, a statement of income and expenses
and a statement of changes in financial condition as of the close of such period, prepared in
accordance with GAAP applied on a basis consistent with prior periods, showing the financial
condition of the Borrower and the Guarantor at the close of such year in form reasonably
satisfactory to the Bank and prepared and audited by Ernst & Young, or another independent
certified public accountant reasonably satisfactory to the Bank.




          (b) as soon as available but in no event more than thirty (30) days after the last day of each
quarter of each fiscal year of the Borrower and the Guarantor, consolidated financial statements of
the Borrower and the Guarantor containing a balance sheet, a statement of income and expenses and a
statement of changes in financial condition as of the close of such period, prepared in accordance
with GAAP applied on a basis consistent with prior periods, showing the financial condition of the
Borrower and the Guarantor at the close of such period, in form reasonably satisfactory to the
Bank.




          (c) promptly, and from time to time, such other information regarding the operation, business,
affairs and financial condition of the Borrower and the Guarantor as the Bank may request,
including, but not limited to interim financial statements including an income statement, balance
sheet, aging of accounts receivable and/or accounts payable.




          (d) within thirty (30) days after the last day of each of the quarters of each fiscal year of
the Borrower, a certificate of the chief financial officer of the Borrower (a) certifying that to
the best of his knowledge no Event of Default has occurred and is continuing or, if an Event of
Default has occurred and is continuing, a statement as to the nature thereof and the action which
is proposed to be taken with respect thereto and (b) with computation demonstrating compliance with
the covenants contained in Sections 6.18 and 6.19.




          (e) Borrower and Guarantor will use commercially reasonable efforts to cause its independent
certified public accountant who audited its financial statements to provide simultaneously with the
delivery of the annual financial statements a certificate acceptable to the Bank in its reasonable
discretion to the effect that, in making the examination necessary for the




14









 




audit of such statements, they have obtained no knowledge of any condition or event which
constitutes a failure to comply with the covenants contained in Sections 6.18 and 6.19 of this
Agreement, or if such accountants shall have obtained knowledge of any such condition or event,
specify in such certificate each such condition or event of which they have knowledge and the
nature and status thereof.




     The financial statements of the Borrower and the Guarantor delivered to the Bank pursuant to
this Section shall each be certified by the president or chief financial officer of the Borrower
and the Guarantor as to the authenticity, accuracy of integrity of the representation contained
therein and as having been prepared in accordance with GAAP applied on a basis consistent with
prior periods. Any such financial information provided to the Bank shall be maintained by the Bank
as confidential proprietary records.



     6.03 Maintaining Records; Access to Properties and Inspections. Maintain financial
records in accordance with GAAP consistently applied and permit any authorized representative
designated by the Bank to visit and inspect any of the properties of the Borrower or the Guarantor
(including, without limitation, their books of account, records, correspondence and other papers
and to make extracts therefrom) and to discuss their affairs, finances and accounts (in the case of
the Borrower) with their respective officers and their respective independent certified public
accountants or other parties preparing statements for or on behalf of the Borrower or the
Guarantor, subject to advance notice and subject to safety limitations and legal limits of general
applicability.



     6.04 Place of Business; Location of Records; Notices. Maintain their executive
offices and their records at their current locations. The Bank shall be entitled to rely upon the
foregoing unless it receives fourteen (14) days advance written notice of a change in such
executive offices or in such office where such records are kept.



     6.05 Maintenance of Business. (a) Maintain the corporate existence of the Borrower
and the Guarantor in good standing and in existence in the State of its original formation; and (b)
maintain and keep in full force and effect all licenses and permits necessary to the proper conduct
of the Borrower’s and the Guarantor’s business.



     6.06 Insurance. The Borrower shall maintain and pay for insurance covering such risks
and in such amounts and with such insurance companies as shall be satisfactory to the Bank, and
deliver the policies or certificates of all such insurance to the Bank with satisfactory lender’s
loss payable endorsements naming the Bank as loss payee; and maintain, with financially sound and
reputable insurers, insurance with respect to their properties and business against such casualties
and contingencies of such types (including personal injury and property damage liability insurance,
automobile liability insurance, product liability insurance, biomedical insurance, worker’s
compensation insurance, business interruption insurance, employee dishonesty insurance, and
directors’ and officers’ liability insurance) and in such amounts as is customary in the case of
persons or entities in the same or similar business. Each policy or insurance required hereunder
shall require the insurer to give not less than thirty (30) days prior written notice to the Bank
in the event of cancellation of such policy for any reason whatsoever, and shall provide that the
interest



15









 







of the Bank thereunder shall not be impaired or invalidated by any act or neglect of the Borrower
or the owner of any of the insured property or by the occupation of the premises wherein such
property is located for purposes more hazardous than are permitted by such policy. If the Borrower
fails to provide and pay for such insurance, the Bank may, at the Borrower’s expense, procure the
same, but shall not be required to do so. The Borrower agrees to deliver to the Bank, promptly as
rendered, true copies of any reports made to any insurance company.



     6.07 Execution of Documents. At the request of the Bank, execute and deliver such
financing statements, documents and instruments including, but not limited to, written
acknowledgments from any third party holding all or any portion of the Collateral that it does so
for the Bank’s benefit and any control agreements with respect to any investment property,
letter-of-credit rights, deposit accounts or electronic chattel paper, and perform all other acts
as the Bank deems necessary or desirable, and pay, upon demand, all reasonable costs and expenses
(including reasonable attorneys’ fees and disbursements) incurred by the Bank in connection
therewith.



     6.08 Obligations and Taxes. Pay all indebtedness and obligations promptly and in
accordance with their terms, and pay and discharge promptly all taxes, assessments and governmental
charges or levies imposed upon them or in respect of their property and the Collateral, including,
but not limited to, all F.I.C.A. payments and withholding taxes, before the same shall become in
default, as well as all claims for labor, materials, and supplies or otherwise which, if unpaid,
might become a Lien upon such properties or any part thereof; provided, however,
that the Borrower and the Guarantor are not required hereby to pay and discharge or to cause to be
paid and discharged any such indebtedness, obligation, tax, assessment, charge, levy or claim so
long as the validity thereof shall be contested in good faith by appropriate proceedings and the
Borrower and the Guarantor shall set aside on their books reserves which are in conformity with
generally accepted accounting principles and which the Bank deems adequate with respect to any such
tax, assessment, charge, levy or claim so contested.



     6.09 Litigation Notice. Give the Bank prompt notice of any action, suit or proceeding
at law or in equity or by or before any governmental instrumentality or agency (domestic or
foreign), commission, board, bureau, arbitrator or arbitration panel which, if adversely
determined, could materially impair or affect the right of the Borrower to carry on its business
substantially as now conducted or could materially affect its respective business, operations,
prospects, properties, assets (including the Collateral) or condition, financial or otherwise, in
each case if in excess of $500,000.00.



     6.10 Notification Relating to Hazardous Materials. Immediately advise the Bank in
writing of (a) any and all enforcement, cleanup, remediation or removal, pursuant to any
governmental or regulatory actions instituted, completed or threatened pursuant to any applicable
federal, state, or local laws, ordinances or regulations relating to any Hazardous Materials
affecting the Property or the business operations of the Borrower; and (b) all claims made or
threatened by any third party against the Borrower relating to damages, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials. The Borrower shall
immediately notify the Bank of any remedial action taken by the Borrower with respect to the
Property or the business operations of the Borrower.



16









 





     6.11 Access Onto Property. Grant hereby an easement to enter and to authorize
appropriate agents and contractors of the Bank to enter upon the Property for the purposes of
conducting environmental investigations and audits (including taking physical samples) and such
other action deemed necessary by the Bank to insure compliance by the Borrower with all
Environmental Laws, subject to advance notice and subject to safety limitations and legal limits of
general applicability. The Borrower acknowledges that no adequate remedy at law exists for a
violation of the easement granted herein and agrees that the Bank is entitled to specific
performance of its rights under this easement, subject to advance notice and subject to safety
limitations and legal limits of general applicability. The easement granted herein shall continue
until this Agreement is terminated.



     6.12 Notice of Default; Adverse Change. Promptly notify the Bank of any condition or
event that constitutes, or with the running of time, the giving of notice, or both, would
constitute, an Event of Default, and promptly inform the Bank of any material adverse change in the
financial condition of the Borrower or of the Guarantor.



     6.13 Borrower’s Claims. Promptly notify the Bank in writing of any action or omission
of the Bank which the Borrower claims caused or may cause injury, loss or damage to the Borrower.
Failure of the Borrower to so notify the Bank of such claim within one hundred eighty (180) days
after the Borrower determines that it has such claim shall constitute a waiver of such claim.



     6.14 Defense of Collateral. Defend the Collateral, and the Bank’s first and prior
security interest therein, against all claims and demands of all persons at any time claiming the
same or any interest therein and pay, upon demand, all reasonable costs and expenses (including
reasonable attorneys’ fees and disbursements) incurred by the Bank in connection therewith.



     6.15 Use of Proceeds. Use the proceeds of the Term Loan solely for the purchase of
the Property or for any commercial purpose not violative of or inconsistent with any provision of
this Agreement or the Loan Documents.



     6.16 Compliance with Laws. Comply, in all material respects, with all federal, State
and local laws, rules and regulations including, but not limited to Environmental Laws and the Fair
Labor Standards Act applicable to its business, whether now in effect or hereafter enacted, and
upon request of the Bank, the Borrower will provide the Bank with such evidence of compliance as
the Bank may reasonably request.



     6.17 Hazardous Materials. With respect to all property owned, subleased, operated or
occupied by the Borrower, maintain and cause all operators, tenants, subtenants, licensees and
occupants of all such property to maintain such property free of all Hazardous Materials, other
than those Hazardous Materials used in compliance with all Environmental Laws and prevent all such
property from being used for the manufacture, generation, production, processing, distribution,
use, treatment, storage, disposal, transport or handling of any Hazardous Materials other than
those Hazardous Materials used in compliance with all Environmental Laws; and deliver to the Bank



17









 







copies of all reports prepared by any governmental authority, any environmental auditor or
engineer, or any other person, relating to or in connection with the Borrower’s compliance with any
Environmental Laws, unless the Borrower cannot obtain such reports or copies thereof.



     6.18 Minimum Tangible Net Worth. Collectively, on a consolidated basis, maintain at
all times, a minimum tangible net worth of not less than Five Million and No/100 Dollars
($5,000,000.00).



     6.19 Debt Coverage Ratio. Collectively, on a consolidated basis, maintain at all
times a debt coverage ratio of no less than 1.1 to 1. For purposes of this Agreement, the debt
coverage ratio shall be calculated as follows: earnings before interest, taxes, depreciation and
amortization divided by the sum of current obligations under capital leases and principal
obligations and interest expenses for borrowed monies, in each case due and payable within the
following twelve (12) months.



SECTION 7. INTENTIONALLY OMITTED




SECTION 8. RELEASE OF COLLATERAL




     8.01 Certificate of Deposit. Upon the request of the Borrower, the Bank will release
and terminate any security interest in the Certificate of Deposit granted hereby, provided: (a) no
Event of Default or any matter with which the passage of time would constitute an Event of Default
has occurred and remains outstanding; (b) (i) in the event the LOC Deed of Trust is in a second
lien priority position, subject only to a first deed of trust in favor of the Bank, and the
outstanding principal balance due and owing under the Term Loan plus the face amount of the Letter
of Credit totals less than seventy percent (70%) of the fair market value of the Property; or (ii)
in the event the LOC Deed of Trust is in a third lien priority position, subject only to a first
deed of trust in favor of the Bank and the second deed of trust in favor of DBED, and the
outstanding principal balance due and owing under the Term Loan and the DBED Loan totals less than
seventy percent (70%) of the fair market value of the Property; and (c) the Bank is provided with a
current title insurance policy or endorsement to an existing title insurance policy insuring that
the priority of the LOC Deed of Trust is as required in clause (b)(i) or (b)(ii) above. For
purposes hereof, the fair market value will be determined by an appraisal satisfactory to the Bank,
paid for by the Borrower, and prepared by an appraiser approved in advance by the Bank in writing
(which approval shall not be unreasonable withheld or delayed).



SECTION 9. EVENTS OF DEFAULT




     The occurrence of any one or more of the following events shall constitute an Event of Default
hereunder:



18









 





     9.01 Payments. Default shall be made in the payment of the principal of, or any
installment of principal of, or interest on, the Note, whether at the due date thereof, at a date
fixed for prepayment thereof, upon acceleration thereof or otherwise.



     9.02 Representations. Any representation or warranty made in or in connection with
any of the Loan Documents shall prove to have been false or misleading in any material respect when
made or deemed to have been made.



     9.03 Covenants. Default shall be made in the due observance or performance of any
covenant, condition or agreement on the part of the Borrower or any Guarantor pursuant to the terms
of any of the Loan Documents, and not already subject to a grace or cure period, and such default
shall continue unremedied for fifteen (15) business days after notice to the Borrower and the
Guarantor thereof.



     9.04 (a) Voluntary Bankruptcy, Etc. The Borrower: (i) voluntarily is adjudicated as
bankrupt or insolvent, (ii) seeks or consents to the appointment of a receiver or trustee for
itself or for all or any part of its property, (iii) files a petition seeking relief under the
bankruptcy or similar laws of the United States or any state or any other competent jurisdiction,
(iv) makes a general assignment for the benefit of creditors, or (v) admits in writing its
inability to pay its debts as they mature.



            (b) Involuntary Bankruptcy, Etc. A court of competent jurisdiction enters an order,
judgment or decree appointing, without the consent of Borrower, a receiver or trustee for Borrower,
for all or any part of its property or approving a petition filed against it or him seeking relief
under the bankruptcy or other similar laws of the United States or any state or other competent
jurisdiction, and such order, judgment or decree shall remain in force undischarged or unstayed for
a period of 60 calendar days.




     9.05 Attachment. The issuance of any attachment or garnishment against the Borrower,
if the Borrower is the debtor.



     9.06 Cross Default. The occurrence of an event of default (as defined therein) under
any of the Loan Documents, any default (as defined therein) under the terms of any other mortgage,
deed of trust or other lien or encumbrance on the Collateral, including, without limitation, the
DBED Loan, or under any promissory note payable to the Bank under which the Borrower is an obligor,
and the expiration of any applicable cure period, or the occurrence of an event of default (as
defined therein) under any other indebtedness or liability for borrowed money of the Borrower in an
amount in excess of $500,000.00, including, without limitation, the Fifth Third Loan, if the effect
of such default is to accelerate the maturity of such evidence of indebtedness or liability or to
permit the holder thereof to cause any indebtedness to become due prior to its stated maturity and
the Bank determines, in its discretion, that such default impairs or prevents the Borrower from
performing its obligations under the Loan Documents.



19









 





     9.07 Judgment. Unless in the opinion of the Bank, adequately covered by insurance,
the entry of one or more final judgments, decrees or orders for the payment of money involving more
than $500,000.00 in the aggregate against the Borrower and all applicable periods for appeal have
terminated and such judgment or decree is not satisfied within forty-five (45) days thereafter and
the Bank determines in its discretion, that such judgment or decree impairs or prevents the
Borrower from performing its obligations under the Loan Documents.



     9.08 Loss, Damage to Collateral. Loss, theft, damage, or destruction of any material
portion of the Collateral for which there is either no insurance coverage or for which, in the
opinion of the Bank, there is insufficient insurance coverage.



     9.09 Guaranty. The Guaranty shall, at any time after its execution and delivery and
for any reason, cease to be in full force and effect or shall be declared null and void, or the
validity or enforceability thereof shall be contested by any Guarantor or any Guarantor shall deny
it has any further liability or obligation under the Guaranty.



     9.10 Payments to Subordinated Creditors. The Borrower makes any payment on account of
indebtedness that has been subordinated to any of the Secured Obligations, other than payments
specifically permitted by the terms of such subordination.



     9.11 Adverse Change. There shall be no materially adverse change in the total
financial condition of the Borrower or the Guarantor, taken as a whole.



SECTION 10. RIGHTS AND REMEDIES




     10.01 Remedies. If any one or more Events of Default shall occur, then in each and
every such case, the Bank may at any time thereafter exercise and/or enforce any of the following
rights and remedies:



          (a) No Further Advances. Make no further advances under the Facilities.




          (b) Acceleration. Declare the Note to be immediately due and payable, together with
accrued interest thereon, without presentment, demand, protest or notice of dishonor, all of which
the Borrower and the Guarantor hereby waive.




          (c) Possession and Collection. (i) Take possession or control of, sell or otherwise
dispose of all of any part of the Collateral; (ii) endorse as the agent of the Borrower any chattel
paper, documents, or instruments forming all or any part of the Collateral; (iii) pay, purchase,
contest, or compromise any encumbrance, charge, or lien that, in the opinion of the Bank, appears
to be prior or superior to its Lien and pay all reasonable expenses incurred in connection
therewith; (iv) take any other action which the Bank deems necessary or desirable to protect and
realize upon its security interest in the Collateral; and (v) in addition to the foregoing, and not
in substitution therefor, exercise any one or more of the rights and remedies exercisable by the
Bank under other provisions of this Agreement, under the Note, under any of the other Loan

20









 








Documents, or provided by applicable law (including, without limitation, the Uniform Commercial
Code as in effect in Maryland) and may specifically disclaim any warranties of title or the like.
In taking possession of the Collateral the Bank may proceed without legal process, if this can be
done without breach of the peace. The Borrower waives any right it may have to require the Bank to
pursue any third person for payment of the Secured Obligations.




          (d) Receiver. Obtain appointment of a receiver for all or any of the Collateral, the
Borrower and the Guarantor hereby consenting to the appointment of such a receiver and each
agreeing not to oppose any such appointment. Any receiver so appointed shall have such powers as
may be conferred by the appointing authority including any or all of the powers, rights and
remedies which the Bank is authorized to exercise by the Loan Documents, and shall have the right
to incur such obligations and to issue such certificates therefor as the appointing authority shall
authorize.




          (e) Performance by Bank. Make such payment or perform any of the conditions,
covenants, terms, stipulations or agreements contained in this Agreement or any of the other Loan
Documents for the account and at the expense of the Borrower.




     10.02 Sales on Credit. If the Bank sells any of the Collateral upon credit, the
Borrower will be credited only with payments actually made by the purchaser, received by the Bank
and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, the Bank may resell the Collateral and the Borrower shall be credited with the proceeds
of the sale.



     10.03 Proceeds. Any proceeds of the collection of the Secured Obligations or of the
sale or other disposition of the Collateral will be applied by the Bank to the payment of fees and
costs, and any balance of such proceeds (if any) will be applied by the Bank to the payment of the
remaining Secured 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 Secured Obligations,
the Borrower and the Guarantor shall remain jointly and severally liable to the Bank for any
deficiency.



     10.04 Notices. Any notices required under the Maryland Uniform Commercial Code with
respect to the sale or other disposition of the Collateral shall be deemed reasonable if mailed by
the Bank to the persons entitled thereto at their last known address at least ten (10) days prior
to disposition of the Collateral.



     10.05 Waiver of Jury Trial. THE BORROWER, THE GUARANTOR AND THE BANK HEREBY
VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST THE OTHER ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN. THE BORROWER AND THE



21









 







GUARANTOR ACKNOWLEDGE THAT THEY HAVE BEEN INFORMED BY THE BANK THAT THE PROVISIONS OF THIS
PARAGRAPH CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE BANK HAS RELIED, IS RELYING AND WILL RELY
IN MAKING THE TERM LOANN AND ISSUING THE LETTER OF CREDIT. THE BORROWER AND THE GUARANTOR HEREBY
CERTIFY THAT NO REPRESENTATIVE OR AGENT OF THE BANK (INCLUDING ITS COUNSEL) HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF LITIGATION, ENFORCE THIS WAIVER OF
RIGHT TO JURY TRIAL. THE BORROWER AND THE GUARANTOR ACKNOWLEDGE THAT THEY HAVE CONSULTED WITH AN
ATTORNEY AND FULLY UNDERSTANDS THE LEGAL EFFECT OF THE PROVISIONS OF THIS PARAGRAPH.



     10.06 Cumulative Remedies. Each right, power and remedy of the Bank as provided for
in the Loan Documents, or now or hereafter existing at law or in equity or by statute or otherwise
shall be cumulative and concurrent and shall be in addition to every other such right, power or
remedy, 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 other such rights, powers or remedies. The Bank may comply with any applicable state or
federal law requirements in connection with a disposition of the Collateral and compliance will not
be considered to adversely affect the commercial reasonableness of any sale of the Collateral.



     10.07 No Waiver. No failure or delay by the Bank in insisting upon the strict
performance of any term, condition, or covenant of the Loan Documents or in exercising any right,
power or remedy consequent upon an Event of Default shall constitute a waiver of any such term,
condition or covenant 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 the Loan Documents, the Bank shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under the Loan Documents, or to declare a
default for failure to effect such prompt payment of any such other amount.



SECTION 11. MISCELLANEOUS




     11.01 Survival. All covenants, agreements, representations and warranties made in
this Agreement and the Loan Documents shall survive the execution and delivery of the Note and
shall continue in full force and effect so long as the Note, or any of the other Secured
Obligations, or any renewal or extensions of the Note, is outstanding and unpaid.



     11.02 Notices. All notices, demands, instructions and other communications required
or permitted to be given to or made upon any party hereto shall be in writing, personally delivered
or sent by postage prepaid first class certified mail, return receipt requested, overnight courier
or by facsimile machine, and shall be deemed to be given on the day that such writing is delivered
or sent by facsimile machine or one (1) business day after such notice is sent by overnight courier
or three (3) business days after said notice is sent by certified mail. Unless otherwise specified
in a notice



22









 







sent or delivered in accordance with the foregoing provisions of this paragraph, notices, demands,
instructions and other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses indicated for such party below:



	 	 	 	 	 
	 

	 	Bank:
	 	Mercantile Potomac Bank
	 

	 	 	 	702 Russell Avenue, Suite 200
	 

	 	 	 	Gaithersburg, Maryland 20877
	 

	 	 	 	Attention: Brett W. Kaplowitz, Senior Vice President
	 

	 	 	 	Facsimile Number: (301) 963-7683
	 
	 	 	 	 
	 

	 	With Copy to:
	 	Lerch, Early & Brewer, Chartered
	 

	 	 	 	3 Bethesda Metro Center, Suite 460
	 

	 	 	 	Bethesda, Maryland 20814
	 

	 	 	 	Attn: Lawrence G. Lerman, Esquire
	 

	 	 	 	Facsimile Number: (301) 347-1776
	 
	 	 	 	 
	 

	 	Borrower	 	 
	 

	 	and Guarantor:
	 	Advanced BioSolutions, Inc.
	 

	 	 	 	Emergent BioSolutions Inc.
	 

	 	 	 	Bioport Corporation
	 

	 	 	 	Antex Biologics Inc.
	 

	 	 	 	c/o Antex Biologics Inc.
	 

	 	 	 	300 Professional Drive, Suite 100
	 

	 	 	 	Gaithersburg, MD 20879
	 

	 	 	 	Attn: President
	 

	 	 	 	Facsimile Number: (301) 529-1252
	 
	 	 	 	 
	 

	 	With Copy to:
	 	Thelen Reid & Priest LLP
	 

	 	 	 	701 Pennsylvania Avenue, NW, Ste 800
	 

	 	 	 	Washington, DC 20004
	 

	 	 	 	Attn: Carl A. Valenstein, Esq.
	 

	 	 	 	Facsimile Number: (202) 654-1836





or at such other address as the parties may have furnished to each other in writing, and shall be
deemed to be given on delivery or upon mailing.




     11.03 Costs and Expenses. The Borrower and the Guarantor shall bear any and all
reasonable fees, costs and expenses, of whatever kind and nature, including any taxes of any kind
and reasonable attorneys’ fees and disbursements, which the Bank may incur: (a) in connection with
the closing of the Loan, including, without limitation, the filing of public notices, the
preparation of the Loan Documents, the recording of the UCC financing statements, and the making of
title examinations; (b) in maintaining, preserving, enforcing or foreclosing any pledge, lien,
encumbrance or security interest granted hereunder or in connection herewith, whether through
judicial proceedings or otherwise; (c) in conducting audits of the Borrower’s business and with
respect to the Collateral; and (d) in successfully defending or prosecuting any actions or



23









 







proceedings arising out of or relating to transactions with any one or more of the Borrower and the
Guarantor. All such fees, costs and expenses until paid shall be included in the Secured
Obligations or deducted from any amount due the Borrower or the Guarantor. The Borrower and the
Guarantor agree that the attorneys retained by the Bank shall represent only the interests of the
Bank.



     11.04 Indemnification of Bank. The Borrower shall protect and indemnify the Bank from
and against any and all demands, suits, losses, assessments, fines, claims, damages, penalties
causes of action, costs or other expenses (including, without limitation, reasonable attorneys’
fees and disbursements), imposed upon or incurred by or asserted against the Bank or the directors,
officers, agents or employees of the Bank, except those arising out of the willful misconduct or
gross negligence of the Bank, by reason of and including but not limited to liability or damage
resulting from: (a) any failure on the part of the Borrower to perform or comply with any of the
terms of this Agreement; (b) any action brought against the Bank attacking the validity of this
Agreement or any other Loan Document; and/or (c) actual or threatened damage to the environment,
agency costs of investigation, personal injury or death, or property damage, due to a release or
alleged release or Hazardous Materials, on or under the Property or arising from the Borrower’s
business operations or in the surface or ground water located on or under the Property arising from
the Borrower’s business operations, or gaseous emissions from the Property or arising from the
Borrower’s business operations resulting from the use or existence of Hazardous Materials, whether
such claim proves to be true or false. The term “property damage” as used in this Section
includes, but is not limited to, damage of any real or personal property of the Borrower, the Bank,
and of any third parties. Any amounts payable to the Bank under this Section which are not paid
within twenty (20) days after written demand therefor by the Bank shall bear interest at the rate
of interest in effect under the Note from the date of such demand. In the event any action, suit
or proceeding is brought against the Bank or the directors, officers, agents or employees of the
Bank by reason of any such occurrence, the Borrower, upon the request of the Bank and at the
Borrower’s expense, shall resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by the Borrower and approved by the Bank. Such
obligations under this Section as shall have accrued at the time of any termination of this
Agreement shall survive any such termination.



     11.05 Reinstatement of Liens. If, at any time after payment in full by the Borrower
of all Secured Obligations and termination of the Bank’s Liens, any payments on the Secured
Obligations previously made by the Borrower or any other person must be disgorged by the Bank for
any reason whatsoever (including, without limitation, the insolvency, bankruptcy, or reorganization
of the Borrower or such other person), this Agreement and the Bank’s Liens granted hereunder shall
be reinstated as to all disgorged payments as though such payments had not been made, and the
Borrower shall sign and deliver to the Bank all documents and things necessary to reperfect all
terminated Liens.



     11.06 Bank Disclosures. Upon the prior written consent of the Borrower (such consent
not to be unreasonable withheld or delayed), the Bank may issue press releases concerning, and
otherwise publicly announce or publicize, financings provided by the Bank to the Borrower or
Subsidiaries. The Borrower hereby authorizes the Bank to disclose to any subsidiary or affiliate
of



24









 







the Bank, to any fiduciary institution (as “fiduciary institution” is defined in Subtitle 3 of
Title 1 of the Financial Institutions Article of the Annotated Code of Maryland, or any successor
legislation) or to any banking institution, credit union or savings and loan association organized
under the laws of any State, and hereby authorizes all subsidiaries and affiliates of the Bank, to
disclose to the Bank, the financial record of the Borrower (as “financial record” is defined in
Subtitle 3 of Title 1 of the Financial Institutions Article of the Annotated Code of Maryland, or
any successor legislation).



     11.07 Participations. The Bank shall have the right to grant participations in the
Loan held by it to others at any time and from time to time, and the Bank may divulge to any such
participant or potential participant all information, reports, financial statements and documents
obtained in connection with this Agreement, the Note and any of the other Loan Documents or
otherwise.



     11.08 Change, etc. Neither this Agreement nor any term, condition, representation,
warranty, covenant or agreement contained herein may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against whom such change, waiver,
discharge or termination is sought.



     11.09 Governing Law. This Agreement and the Note shall be governed and construed in
accordance with the laws of the State of Maryland (but not including the choice of law rules
thereof).



     11.10 Terms Binding. All of the terms, conditions, stipulations, warranties,
representations and covenants of this Agreement shall apply to and be binding upon and shall inure
to the benefit of the Borrower, the Guarantor and the Bank and each of their respective heirs,
executors, personal representatives, successors and assigns and all persons or entities who become
bound as a debtor under this Agreement, but neither the Borrower nor the Guarantor shall have the
right to assign this Agreement to any person or entity without the prior written consent of the
Bank. The Guarantor hereby acknowledges and agrees that all of its obligations under this
Agreement, the Guaranty and the other Loan Documents shall be joint and several.



     11.11 Invalidity of Certain Provisions. If any term or provision of this Agreement or
the application thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of such term or provision or the application thereof to persons or
circumstances other than those as to which it is held invalid or unenforceable shall not be
affected thereby and shall be valid and enforceable to the fullest extent permitted by law.



     11.12 Merger, Integration and Interpretation. The Loan Documents contain the entire
agreement of the parties with respect to the matters covered and the transactions contemplated
hereby and thereby, and no other agreement, statement or promise made by any such party, or by any
employee, officer, agent or attorney of any such party, which is not contained herein or therein,
shall be valid or binding. Neither this Agreement nor any uncertainty or ambiguity herein shall
be construed or resolved against the Bank or the Borrower, whether under any rule of construction
or otherwise. On the contrary, this Agreement has been reviewed by each of the parties and its



25









 







counsel and shall be construed and interpreted according to the ordinary meaning of the words used
so as to accomplish the purposes and intentions of all parties hereto fairly.



     11.13 No Partnership — Control — Third Parties. This Agreement contemplates the
extension of credit by the Bank, in its capacity as a lender, to the Borrower, in its capacity as a
borrower, and for the payment of interest and repayment of principal by the Borrower to the Bank.
The relationship between the Bank and the Borrower is limited to that of creditor/secured party,
and debtor. The provisions herein for compliance with financial covenants, delivery of financial
statements, and other covenants are intended solely for the benefit of the Bank to protect its
interests as lender in assuring payments of interest and repayment of principal, and nothing
contained in this Agreement shall be construed as permitting or obligating the Bank to act as
financial or business advisor or consultant to the Borrower, as permitting or obligating the Bank
to control the Borrower, or to conduct the Borrower’s operations, as creating any fiduciary
obligation on the part of the Bank to the Borrower, as creating any joint venture, agency, or other
relationship between the parties other than as explicitly and specifically stated in this
Agreement. The Borrower acknowledges that it has had the opportunity to obtain the advice of
experienced counsel of its own choosing in connection with the negotiation and execution of this
Agreement and to obtain the advice of such counsel with respect to all matters contained herein,
including, without limitation, the provision herein relative to the waiver of trial by jury. The
Borrower further acknowledges that it is experienced with respect to financial and credit matters
and has made its own independent decision to apply to the Bank for credit and to execute and
deliver this Agreement. The terms and provisions of the Note and the Loan Documents are for the
benefit of the Borrower and the Bank, their respective successors, assigns, endorsees and
transferees and all persons claiming under or through them and no other person shall have any right
or cause of action or account thereof.



     11.14 Electronic Transmission of Data. The Bank, the Borrower and the Guarantor agree
that certain data related to the Loan (including confidential information documents, applications
and reports) may be transmitted electronically, including transmission over the Internet. This
data may be transmitted to, received from or circulated among agents and representatives of the
Borrower, the Guarantor and/or the Bank and their affiliates and other persons involved with the
subject matter of this Agreement. The Borrower and the Guarantor acknowledge and agree that (a)
there are risks associated with the use of electronic transmission and that the Bank does not
control the method of transmittal or service providers, (b) the Bank has no obligation or
responsibility whatsoever and assumes no duty or obligation for the security, receipt or third
party interception of any such transmission, and (c) the Borrower and the Guarantor will release,
hold harmless and indemnify the Bank from any claim, damage or loss, including that



26









 







arising in whole or part from the Bank’s strict liability or sole, comparative or contributory
negligence, which is related to the electronic transmission of data.



     11.15 Gender, etc. Whenever used herein, the singular shall include the plural, the
plural shall include the singular, and the use of the masculine, feminine or neuter gender shall
include all genders.



     11.16 Authority to File Financing Statements and Amendments. The Borrower hereby
authorizes the Bank to file a Financing Statement describing the Collateral without the Borrower’s
signature thereon. After notice to the Borrower, the Bank is authorized to file amendments without
the Borrower’s signature thereon to any financing statements naming the Bank as a secured party in
order to add collateral or a debtor. The Borrower is not authorized to file correction statements
to financing statements.



     11.17 Headings. The section and subsection headings of this Agreement are for
convenience only, and shall not limit or otherwise affect any of the terms hereof.



     11.18 Counterparts. To facilitate execution, this Agreement may be executed in any
number of counterparts as may be required; and it shall not be necessary that the signatures of, or
on behalf of, each party, or that the signatures of all persons required to bind any party, appear
on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party,
or that the signatures of the persons required to bind any party, appear on one or more
counterparts. All counterparts shall collectively constitute a single agreement. It shall not be
necessary in making proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of, or on behalf of, all of the parties hereto.



     IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be executed,
sealed and attested the day and year first above mentioned.



	 	 	 	 	 	 	 
	ATTEST:	 	ADVANCED BIOSOLUTIONS, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Jose Ochoa

	 	By:
	 	/s/ Fuad El-Hibri
	 	(SEAL)
	 

	 	 	 	 	 	 
	 	 	Name: Fuad El-Hibri	 	 
	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	MERCANTILE POTOMAC BANK	 	 
	 
	 	 	 	 	 	 
	/s/ [Illegible]

	 	By:
	 	/s/ Brett W. Kaplowitz
	 	(SEAL)
	 

	 	 	 	 	 	 
	 	 	Name: Brett W. Kaplowitz	 	 
	 	 	Title: Senior Vice President	 	 





[signature page continues]




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	ATTEST:	 	ANTEX BIOLOGICS INC.	 	 
	 
	 	 	 	 	 	 
	/s/ [Illegible]

	 	By:
	 	/s/ Robert G. Kramer
	 	(SEAL)
	 

	 	 	 	 	 	 
	 	 	Name: Robert G. Kramer	 	 
	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	 	 	BIOPORT CORPORATION	 	 
	 
	 	 	 	 	 	 
	/s/ Jose Ochoa

	 	By:
	 	/s/ Fuad El-Hibri
	 	(SEAL)
	 

	 	 	 	 	 	 
	 	 	Name:	 	 
	 	 	Title: CEO	 	 
	 
	 	 	 	 	 	 
	 	 	EMERGENT BIOSOLUTIONS INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Jose Ochoa

	 	By:
	 	/s/ Fuad El-Hibri
	 	(SEAL)
	 

	 	 	 	 	 	 
	 	 	Name:	 	 
	 	 	Title: CEO	 	 







28