Document:

exv10w32

 

Exhibit 10.32

LEASE

FOR

AVALON PHARMACEUTICALS, INC.

20358, 20360, 20362, 20382, 20384 AND 20386 GOLDENROD
LANE
GERMANTOWN, MARYLAND 20876

LANDLORD:

WESTPHALIA CENTER II LIMITED PARTNERSHIP

06/11/02

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	SECTION	 	 	SECTION TITLE	 	 	PAGE
	 	 	 	 	LEASE ABSTRACT
	 	 	i	 
	 	1.	 	 	DEMISED PREMISES; TERM OF LEASE; RENTAL;
SECURITY DEPOSIT; HOLDOVER; ADDITIONAL RENT; LATE CHARGE
	 	 	1	 
	 	2.	 	 	TENDER OF POSSESSION; LANDLORD’S WORK; TENANT’S WORK
TENANT IMPROVEMENT ALLOWANCE
	 	 	5	 
	 	3.	 	 	USE OF PREMISES; TENANT RESPONSIBILITIES; REPAIRS
AND MAINTENANCE; INTERIOR ALTERATIONS; EXTERIOR
MODIFICATIONS; SURRENDER OF POSSESSION;
MECHANICS LIENS
	 	 	7	 
	 	4.	 	 	UTILITY CHARGES; PRO RATA SHARE; COMMON AREAS; OPERATING EXPENSES;
STATEMENT OF OPERATING EXPENSES -
	 	 	10	 
	 	5.	 	 	BANKRUPTCY
	 	 	13	 
	 	6.	 	 	INSURANCE INDEMNITIES
	 	 	14	 
	 	7.	 	 	SUBLETTING AND ASSIGNMENT
	 	 	16	 
	 	8.	 	 	PAYMENT OF REAL ESTATE TAXES AND INSURANCE COSTS
	 	 	18	 
	 	9.	 	 	DAMAGE BY FIRE OR OTHER CASUALTY
	 	 	19	 
	 	10.	 	 	COMPLIANCE WITH LAWS, ETC.
	 	 	21	 
	 	11.	 	 	NON-WAIVER OF BREACH
	 	 	21	 
	 	12.	 	 	EVENT OF DEFAULT; REMEDIES; RELETTINGS; LEGAL COSTS;
INTEREST; ACCORD AND SATISFACTION; CONCESSIONS;
DEFAULT UNDER OTHER LEASES
	 	 	21	 
	 	13.	 	 	LANDLORD’S LIABILITY
	 	 	24	 
	 	14.	 	 	TENANT’S SIGNS
	 	 	24	 
	 	15.	 	 	LANDLORD’S SIGNS
	 	 	25	 
	 	16.	 	 	ENTRY AND ACCESS
	 	 	25	 
	 	17.	 	 	EMINENT DOMAIN
	 	 	25	 
	 	18.	 	 	CONSENT
	 	 	26	 
	 	19.	 	 	TENANT’S PROPERTY
	 	 	26	 
	 	20.	 	 	SUBORDINATION
	 	 	26	 
	 	21.	 	 	FIRE INSURANCE
	 	 	27	 
	 	22.	 	 	PARKING AREAS
	 	 	28	 
	 	23.	 	 	PURPOSELY DELETED
	 	 	28	 
	 	24.	 	 	NOTICES
	 	 	28	 
	 	25.	 	 	TENANT ESTOPPEL CERTIFICATES; LANDLORD CURE RIGHTS
	 	 	29	 
	 	26.	 	 	MORTGAGEE REVISIONS
	 	 	30	 
	 	27.	 	 	QUIET POSSESSION
	 	 	30	 
	 	28.	 	 	MISCELLANEOUS GENERAL PROVISIONS
	 	 	30	 
	 	29.	 	 	RENEWAL OPTIONS
	 	 	32	 
	 	30.	 	 	REMOVAL BY TENANT
	 	 	33	 
	 	31.	 	 	LIEN ON TENANT’S PROPERTY
	 	 	33	 
	 	32.	 	 	BROKERAGE
	 	 	34	 
	 	33.	 	 	RULES AND REGULATIONS
	 	 	34	 
	 	34.	 	 	ENVIRONMENTAL HAZARDS; HAZARDOUS SUBSTANCES
	 	 	34	 
	 	35.	 	 	ROOF & SITE RIGHTS
	 	 	36	 
	 	36.	 	 	OPTION TO LEASE ADDITIONAL SPACE IN THE BUILDING
	 	 	37	 
	 	37.	 	 	OPTION TO LEASE ADDITIONAL SPACE IN BUILDING #2
	 	 	38	 
	 	38.	 	 	ADDITIONAL PROVISIONS
	 	 	39	 
	 	 	 	 	SIGNATURE PAGE
	 	 	40	 
	 	 	 	 	EXHIBIT “A” - Site Plan
	 	 	41	 
	 	 	 	 	EXHIBIT “B” - Rules & Regulations
	 	 	42	 
	 	 	 	 	EXHIBIT “C” - Landlord’s Work
	 	 	46	 
	 	 	 	 	EXHIBIT “D” - Certificate of Acceptance of Delivery of Possession;
Commencement Date of Lease
	 	 	51	 
	 	 	 	 	EXHIBIT “E” - Specimen Letter of Credit
	 	 	54	 
	 	 	 	 	EXHIBIT “F” - Landlord’s Consent and Waiver
	 	 	55	 
	 	 	 	 	EXHIBIT “G” - Estimate of Operating Expenses
	 	 	60	 

 

 

LEASE ABSTRACT

	 	 	 	 	 
	LANDLORD:
	 	 	 	Westphalia Center II Limited Partnership

	 
	 	 	 	 

	TENANT:
	 	 	 	Avalon Pharmaceuticals, Inc.

	 
	 	 	 	 

	DEMISED PREMISES:

[Section 1(A)]
	 	 	 	Building
#1, Seneca Meadows Corporate Center

20358, 20360, 20362, 20382, 20384 and 20386

Goldenrod Lane, Germantown, Maryland 20876

Rentable Area: Approximately 55,897 sf

	 
	 	 	 	 

	TERM OF LEASE:

[Section 1(B)]
	 	 	 	Ten (10) Years and Six (6) Months

	 
	 	 	 	 

	COMMENCEMENT DATE:

[Section 1(B)]
	 	 	 	July 1, 2002, or Premises Delivery Date

	 
	 	 	 	 

	INITIAL RENTAL:

[Section 1(C)]
	 	 	 	1st
Lease Year: $53,567.96/month; $642,815.52/year

Initial Basic Rental Rate: $11.50/sf NNN

	 
	 	 	 	 

	RENTAL ESCALATION:

[Section 1(C)]
	 	 	 	Three percent (3%) fixed annual escalation

	 
	 	 	 	 

	SECURITY DEPOSIT:

[Section 1(D)]
	 	 	 	$500,000.00, to be reduced by 20% per year provided

no prior Tenant Event of Default

	 
	 	 	 	 

	PRO RATA SHARE:

[Section 4(B)]
	 	 	 	44.78%

	 
	 	 	 	 

	NOTICES:
	 	 	 	Landlord:

	[Section 24]
	 	 	 	Westphalia Center II Limited Partnership

9108 Gaither Road,
Gaithersburg, Maryland 20877
Attn: Mr. Paul N. Chod

	 
	 	 	 	 

	 	 	 	 	Tenant:

	 	 	 	 	Avalon Pharmaceuticals, Inc.

20358 Goldenrod Lane, Germantown, Maryland 20876

Attn: Mr. John Walker

	 
	 	 	 	 

	RENEWAL OPTION:

[Section 29]
	 	 	 	Two (2) periods of Five (5) consecutive years,

exercisable in writing not less than 270 days prior

to expiration of the then current term.

i

 

LEASE

     THIS
LEASE AGREEMENT, made this 15th day of July, 2002, by and between
WESTPHALIA CENTER II LIMITED PARTNERSHIP, a Maryland limited partnership (hereinafter referred to
as “Landlord”); and, AVALON PHARMACEUTICALS, INC., a
Delaware corporation, qualified to transact business and in good standing under the laws of the
State of Maryland (hereinafter referred to as “Tenant”).

     WITNESSETH:

	 	1.  	DEMISED PREMISES; TERM OF LEASE; RENTAL; SECURITY
DEPOSIT; HOLDOVER; ADDITIONAL RENT; LATE CHARGE.

              (A) DEMISED PREMISES. The Landlord, for and in consideration of the rents,
agreements and covenants herein agreed to be paid, observed and performed by the Tenant, has
let and demised, and by these presents does lease unto the Tenant, and the Tenant does hereby
take and rent from Landlord, that certain portion of commercial space in Building 1 in Seneca
Meadows Corporate Center (the “Building”) located on Lot 14, Block A in the subdivision
known as “Seneca Meadows Corporate Center” and recorded among the Land Records of
Montgomery County, Maryland in Plat Book 196 at Plat No. 21259 (the “Land”), said demised
premises being known and described as 20358, 20360, 20362, 20382, 20384 and 20386
Goldenrod Lane, Germantown, Maryland 20876 (hereinafter referred to as the “Demised
Premises” or the “Premises”) having an approximate area of 55,897 square feet, all as more
particularly shown and outlined on the drawing of said Demised Premises attached hereto as
Exhibit “A” and made a part hereof. The area of the Demised Premises is measured from the
outside face of the exterior walls to the centerline of any demising walls, and includes a
proportional share of the core areas, which include common meter rooms and stairwells.

          (B) TERM OF LEASE. The term of this Lease shall commence on the date
(herein referred to as the “Commencement Date”) which shall be the later to occur of (i) JULY
1, 2002, or (ii) the date of the first day of the month after Landlord terminates the
leasehold
interest of the current tenant in the Demised Premises and tenders to Tenant possession of the
Demised Premises with Landlord’s Work Substantially Complete, or such earlier date when
Landlord’s Work could have been Substantially Complete absent Tenant Delays (as those
phrases are subsequently defined). The term of the Lease shall expire without notice of any
kind
at midnight on the day that is ten (10) years and six (6) months after the Commencement Date.
Tenant agrees to execute and return to Landlord within ten (10) days of receipt a statement as
furnished by Landlord acknowledging Tenant’s acceptance of Landlord’s delivery of possession
of the Demises Premises and setting forth the actual Lease Commencement Date, the expiration
date of the term of the Lease, the date upon which the Tenant’s obligation to pay Rent and
other
charges payable under the Lease shall begin, and any changes in the Rental from the schedule
set

1

 

forth in Section 1(C) below. Said statement shall be similar to the form attached hereto as
Exhibit “D” and shall be made a part of the Lease. The initial term of this Lease is
herein referred to as the “Stated Term”, “Term” or “Initial Term”. The term “Lease Year” shall
mean each period of twelve (12) full consecutive months during the Initial Term hereof or any
renewal term commencing on the Rent Commencement Date (as defined below).

          (C) RENTAL. The date on which Rent shall become due and payable (hereinafter the
“Rent Commencement Date”) shall be the earlier to occur of (i) issuance of a Certificate of Use
and Occupancy for the Demised Premises, or (ii) six (6) months after the Commencement Date.
During each respective Lease Year of the Stated Term of this Lease, the Tenant agrees to pay to
Landlord as basic annual rental for the Demised Premises, the amount specified for that Lease
Year in the following table, such amount (the “Basic Annual Rental”) to be due and payable in
equal monthly installments (the “Basic Monthly Rental”) during such Lease Year in advance and
without deduction, set off, or demand, except as may otherwise be provided herein, on the 1st
day of each calendar month in such Lease Year, namely:

	 	 	 	 	 	 	 	 	 
	Lease Year	 	Basic Monthly Rental	 	 	Basic Annual Rental	 
	  1st
	 	$	53,567.96	 	 	$	642,815.52	 
	  2nd
	 	 	55,175.00	 	 	 	662,100.00	 
	  3rd
	 	 	56,830.25	 	 	 	681,963.00	 
	  4th
	 	 	58,535.15	 	 	 	702,421.80	 
	  5th
	 	 	60,291.21	 	 	 	723,494.52	 
	  6th
	 	 	62,099.95	 	 	 	745,199.40	 
	  7th
	 	 	63,962.94	 	 	 	767,555.28	 
	  8th
	 	 	65,881.83	 	 	 	790,581.96	 
	  9th
	 	 	67,858.29	 	 	 	814,299.48	 
	10th
	 	 	69,894.04	 	 	 	838,728.48	 

In addition to said Basic Monthly Rental, Tenant shall pay to Landlord, at the times and
in the manners hereinafter indicated, the additional items and amounts specified in Section 4
hereof for utility charges and Operating Expenses, and in Section 8 hereof for Impositions and
Insurance Premiums, plus such other sums as are required to be paid by Tenant pursuant to the
terms of this Lease. All rentals and other sums payable by Tenant hereunder shall be paid to
Landlord at 9108 Gaither Road, Gaithersburg, Maryland 20877, or to such other party and address
as Landlord may from time to time designate to Tenant in writing. Prior to the Commencement
Date, Tenant will pay to Landlord the sum of FIFTY-THREE THOUSAND FIVE HUNDRED SIXTY-SEVEN and
96/100 DOLLARS ($53,567.96), which shall be applied to the 1st installment of Basic Monthly
Rental due under the Lease. Regarding all of Landlord’s and Tenant’s covenants, obligations and
duties to make Rental and other payments and to perform its other agreements contained in this
Lease, time is agreed to be of the essence.

          (D) SECURITY DEPOSIT. The amount of the Security Deposit to be placed by
Tenant with Landlord (the “Secured Amount”) shall be FIVE HUNDRED THOUSAND and 00/100 DOLLARS
($500,000.00). Upon execution of the Lease, Tenant shall deliver to Landlord either (i) an
irrevocable commercial bank letter of credit, payable upon sight in the

2

 

amount of the Secured Amount (the “Letter of Credit”) in substantially the form attached
hereto as Exhibit “E”, or such other form as may be reasonably acceptable to Landlord,
issued by a federally-insured national bank having offices in the Metropolitan Area of Washington,
D.C. or (ii) the cash sum in the amount of the Secured Amount. The Letter of Credit or cash sum
are hereinafter referred to as the “Security Deposit”. Any cash sum held by Landlord as the
Security Deposit for the performance of Tenant’s obligations under this Lease shall be placed in
an interest bearing account at a federally-insured national bank with offices in the Metropolitan
Area of Washington, D.C., and all interest accruing thereon shall be attributable to EIN Number
________ for the benefit of Tenant. Beginning at the end of the first Lease Year, the
Security Deposit shall be reduced by ONE HUNDRED THOUSAND and 00/100 DOLLARS ($100,000.00) together
with any pro-rata interest accrued thereon (the “Reduction Amount ”)for each twelve (12) month
period during the Initial Term that Tenant has not been in an Event of Default. Landlord shall
return the Reduction Amount to Tenant within thirty (30) days after the applicable anniversary of
the Rent Commencement Date. However, if an Event of Default of Tenant occurs at any time during the
Initial Term, Landlord, at its option and sole discretion, shall have the right to require Tenant
to restore the Security Deposit to the original full amount of the Secured Amount, which Security
Deposit shall be retained by Landlord for the balance of the Stated Term of this Lease. The Letter
of Credit shall be for an initial period of at least one (1) year from the Commencement Date of the
Initial Term hereof; and Tenant will deliver to Landlord at least thirty (30) days before
expiration of each Letter of Credit a new Letter of Credit or renewal of the original one, renewing
the Letter of Credit in the sum required above for successive periods of at least one (1) year each
(or such shorter period which will be identical to the then remaining term of this Lease plus an
additional thirty (30) days thereafter), so that, at all times that Tenant is required to maintain
the Security Deposit, Landlord shall have in its possession a good Security Deposit in the amount
specified above. In the event Tenant delivers a Letter of Credit as the Security Deposit, the
Letter of Credit shall include a provision for assignment thereof to any mortgagee with a
collateral assignment of this Lease. Failure of Tenant to timely comply with any requirements of
this Section 1(D) shall constitute an Event of Default of Tenant under this Lease. If an Event of
Default of Tenant occurs under this Lease (as defined in Section 12 hereof), said Security Deposit,
together with any interest accrued thereon, may, at Landlord’s option and discretion (and without
waiving any other rights or remedies of Landlord), be converted to the amount of cash necessary to
cure the Event of Default. Such application shall, however, in no way affect Landlord’s rights to
recover from Tenant further damages or loss of Rent which may accrue by reason of Tenant’s defaults
under this Lease. Provided an Event of Default of Tenant does not exist under this Lease, the
balance (if any) of said Security Deposit not applied to curing the Tenant’s defaults shall be
refunded and released to Tenant, together with any interest accrued thereon, within thirty (30)
days after the expiration of this Lease, provided that Tenant has surrendered to Landlord
possession of the Demised Premises in accordance with the terms of this Lease. The Security Deposit
shall not be construed as advance payment of Rent hereunder, but shall be considered only as
representing a fund made available to Landlord to secure the prompt and faithful performance by
Tenant of its covenants
 under this Lease. Tenant shall, within ten (10) days after demand by
Landlord, restore said Security Deposit to the full amount specified above and/or as required
during the Term of this Lease, in the event any portion or all thereof is applied by Landlord to
cure an Event of Default of Tenant hereunder.

3

 

          (E) HOLDOVER. If Tenant fails to quit and vacate the Demised Premises at the
expiration of the Initial Term (or at the expiration of the final duly exercised Renewal Term
hereof, if any, as the case may be), and if Landlord accepts payment of rental from Tenant
thereafter and thus indicates that Landlord does not require the Tenant’s immediate surrender
of
possession of the Demised Premises at such expiration date, then in such event any such
holding
over of possession of the Demised Premises by Tenant shall be deemed to create only a tenancy
from month-to-month, beginning for same on the day immediately following the expiration of
the then expired term hereof, such monthly hold-over tenancy to be upon all of the terms,
covenants and conditions contained in this Lease, except that either party by giving to the
other
at least ninety (90) days prior written notice may terminate such monthly holdover tenancy
(except that Tenant shall not be entitled to such notice of termination, and hereby waives
same,
in the event that Tenant is in an Event of Default under this Lease in any respect beyond any
applicable grace periods). Landlord and Tenant agree that any mutually agreed upon hold-over
tenancy shall not be considered an Event of Default. Notwithstanding the foregoing provisions
of this paragraph, if Landlord desires possession of the Demised Premises at the end of the
term
hereof, then Landlord may so notify Tenant at any time prior to accepting monthly holdover
rent,
in which event Tenant covenants and agrees to surrender to Landlord possession of the Demised
Premises at the end of the term hereof free of subleases and occupants, and if Tenant fails to
do
so it shall be deemed an Event of Default under this Lease and Tenant shall be liable to
Landlord
for all reasonable, actual losses, costs, damages and expenses Landlord incurs from Tenant’s
failure to vacate the Demised Premises as prescribed above. If the provisions of the
preceding
sentence become applicable, Tenant shall pay Landlord use and occupancy payments for each
month or portion thereof Tenant wrongfully holds over possession of the Demised Premises in
whole or part, in an amount equal to one hundred fifty percent (150%) of the Basic Monthly
Rental payable in the last month of the term hereof (in addition to Landlord being entitled to
exercise all available legal and equitable remedies). Landlord hereby notifies Tenant that
Landlord desires and intends that Tenant remove from, quit and vacate the Demised Premises at
the expiration of the term of this Lease, and Tenant hereby agrees to do so and hereby
irrevocably waives any and all rights to notice from Landlord of such intent as provided in
Title
8, Section 8-402(b) of the Real Property Volume of the Annotated Code of Maryland, as
amended, or under any similar statute now or hereafter enacted.

          (F) ADDITIONAL RENT. Whenever it is provided by the terms of this Lease
that Tenant is required to make any payment to Landlord other than a payment of Basic Monthly
Rental (such as the additional items and amounts specified in Section 4 hereof for utility
charges
and Operating Expenses and in Section 8 hereof for Impositions and Insurance Premiums, or
amounts to reimburse Landlord for legal costs and attorneys’ fees, or for any other such
sums),
such payment shall be deemed to be a payment of “Additional Rent”. Unless otherwise expressly
specified herein, Additional Rent shall be paid by Tenant by the later of (i) the next
installment
of Basic Monthly Rental thereafter falling due or (ii) within thirty (30) days after request
therefor. For all purposes of this Lease, the term “Rent” shall be deemed to be a reference
to
both Basic Monthly Rental and Additional Rent. Landlord shall have the same remedies for
default in the payment of Additional Rent as are available to Landlord in the case of default
in
the payment of Basic Annual Rental or Basic Monthly Rental.

4

 

          (G) LATE CHARGE. In the event Tenant does not pay any installment of Rent or
Additional Rent or any other sums when and as the same become due and payable under this Lease,
and if such payment is not made within ten (10) days after the due date thereof, Tenant shall pay
to Landlord, as Additional Rent hereunder, in addition to the unpaid amount, a “Late Charge” equal
to five percent (5%) of the unpaid amount to compensate Landlord for the additional expense
resulting from Tenant’s failure to make payment in accordance with the terms of the Lease. If
Tenant fails to make any payment due under this Lease within the aforesaid ten (10) day grace
period more than twice in any Lease Year, then the Late Charge shall increase thereafter for the
balance of that Lease Year, for all late payments, to be ten percent (10%) of the unpaid amount,
and such increased Late Charge shall be payable as aforesaid.

	 	2.  	TENDER OF POSSESSION; LANDLORD’S WORK; TENANT’S WORK.

          (A) TENDER OF POSSESSION. If Landlord shall be unable to deliver to Tenant possession
of the Demised Premises (subject to the conditions as called for in Section 2(B) hereof) on the
Commencement Date of the Stated Term hereof by reason of the holding over or retention of
possession by any tenant or occupant, or for any other reason, Landlord shall not be subject to
any liability for the failure to give possession on said date. Under such circumstances, the Rent
herein reserved and covenanted to be paid by Tenant shall abate and not commence to be due and
payable until Landlord delivers to Tenant possession of the Demised Premises as called for in
Section 2(B) hereof; and no such failure of Landlord to deliver possession on the Commencement
Date of the Stated Term shall affect the validity of this Lease or otherwise affect the
obligations of Tenant hereunder, except that in such event the date of expiration of the Stated
Term hereof shall be extended by the same number of days that shall elapse from the Commencement
Date specified in Section 1(B) until the end of the calendar month in which possession of the
Demised Premises is delivered to Tenant as called for in Section 2(B), such delivery date to be
established by written notice from Landlord to Tenant. If permission is given by Landlord to
Tenant to enter into the possession of all or a portion of the Demised Premises, or to occupy
space other than the Demised Premises, prior to the Commencement Date of this Lease, Tenant
covenants and agrees that such occupancy shall be deemed to be under all the terms, covenants,
conditions and provisions of this Lease except as may be otherwise agreed in writing by Landlord
and Tenant. If Landlord is prevented from or delayed in delivering possession of the Demised
Premises to Tenant in the condition called for in Section 2(B) hereunder due to any Tenant Delays
(as hereinafter defined), then the Commencement Date of the Lease shall be the date, as reasonably
determined by Landlord, that the Demised Premises could have been delivered to Tenant absent the
Tenant Delays.

          (B) LANDLORD’S WORK. The Tenant agrees to accept possession of the Demised Premises,
when delivered by Landlord as provided in this Section 2(B), for the term herein created, upon the
agreements and covenants herein expressed, and does hereby covenant and agree that Tenant shall pay
unto Landlord the rents, taxes, insurance, expenses, repairs and other costs and charges called for
or reserved in this Lease, at the time or times the same are due and payable as herein specified.
The Demised Premises shall be delivered by Landlord to Tenant, and shall be accepted by Tenant,
“AS-IS”, with the “Landlord’s Work”,
as described on Exhibit “C” attached hereto and made a
part hereof, Substantially Complete (as defined herein), as established by the notice from Landlord
to Tenant mentioned in Section 2(A) above. Such notice

5

 

from Landlord shall indicate the commencement and expiration dates of the Stated Term of
this Lease.

          (C) TENANT’S WORK. After the Commencement Date, Tenant at its sole cost and expense
intends to construct leasehold improvements in the Demised Premises (“Tenant’s Work”) as detailed
in the plans and specifications to be prepared by Tenant’s
architect (“TI Architect”). Tenant shall
be allowed to select a general contractor to perform the Tenant’s Work, provided said general
contractor shall be properly licensed, bonded and of a reputation reasonably acceptable to
Landlord. An affiliate of Landlord, Minkoff Development Corporation
(“MDC”), shall act as
Landlord’s construction manager to review plans and oversee construction of the Tenant’s Work by
the general contractor. MDC shall receive a fee equal to one percent (1%) of the cost of the
Tenant’s Work, which fee shall not exceed $50,000. Tenant shall have the right to submit plans for
the Tenant’s Work in stages for portions of the Demised Premises. Tenant shall cause the TI
Architect to prepare and deliver to Landlord for Landlord’s or MDC’s review preliminary plans
(architectural, mechanical, electrical, plumbing and structural, if necessary) and specifications
for the proposed leasehold improvements (the “Preliminary Plans”). Landlord shall have five (5)
business days after its receipt thereof (or such additional time as may reasonably be necessary) to
review the Preliminary Plans, request any changes it deems reasonably appropriate, and indicate on
the Preliminary Plans which portions of the leasehold improvements are to be removed by Tenant
prior to the expiration or termination of the Lease. The TI Architect shall modify the Preliminary
Plans to accommodate Landlord’s changes, and resubmit the revised plans (the “Revised Preliminary
Plans”) to Landlord for approval. If Tenant or the TI Architect elect not to make said changes to
the Preliminary Plans, then Landlord shall have the right to require Tenant to perform
corresponding restoration work to effect said changes prior to the expiration or termination of the
Lease. Upon receipt of Landlord’s approval of the Revised Preliminary Plans, the TI Architect shall
prepare a complete set of construction drawings and specifications for the construction of the
proposed leasehold improvements (the “Working Drawings”). The Working Drawings shall be in
sufficient detail for (i) Tenant’s general contractor to obtain bids from all trades for and to
perform the work described on the Working Drawings; (ii) Tenant’s general contractor to secure
building permits from the requisite governmental authorities having jurisdiction over same; and
(iii) Landlord or MDC to indicate the portion of Tenant’s Work, if any, which Tenant is to remove
by expiration or termination of the Lease. The Working Drawings shall conform to and be consistent
with the Revised Preliminary Plans and comply with all applicable Laws and Insurance Requirements,
as those terms are defined in the Lease. The Working Drawings shall be submitted to MDC for
review and approval, which approval (or a request for changes to be made) shall be given within ten
(10) days after receipt thereof. Within five (5) business days after MDC’s approval of the Working
Drawings, as modified by any revisions requested by MDC, Landlord and Tenant shall initial same to
confirm their mutual approval thereof (the “Approved Working Drawings ”). The Approved Working
Drawings will indicate which portions of the Tenant’s Work, if any, will have to be removed by
Tenant prior to the expiration or termination of the Lease, and Tenant will timely comply with such
requirement and repair any damage to the Land or the Building caused thereby at its own expense.
Tenant will have no obligation to remove any other portion of the
Tenant’s Work.

6

 

	 	3.  	USE OF PREMISES; TENANT RESPONSIBILITIES; REPAIRS AND MAINTENANCE;
INTERIOR ALTERATIONS; EXTERIOR MODIFICATIONS; SURRENDER OF POSSESSION; MECHANICS
LIENS.

          (A) USE OF PREMISES. Tenant covenants and agrees to use the Demised
Premises only as and for general office and laboratory purposes for Tenant’s pharmaceutical
business (“Tenant’s Use”), such Tenant’s Use (permitted 24 hours/day, 7 days/week, 365
days/year) to be conducted by Tenant at its own expense in compliance with all applicable Laws
and Insurance Requirements as defined in Section 10 and all provisions of this Lease, and for
no
other purpose without the express written consent of the Landlord, which consent shall be in
Landlord’s exclusive discretion. Landlord agrees that Tenant’s Use shall allow research on
and/or storage of mice and rats (and no other animals without the express written consent of
Landlord, which consent shall be in Landlord’s exclusive discretion) only at the portion of
the
Premises known as 20386 Goldenrod Lane on the first floor of the Demised Premises. The Land
is currently zoned I-3, and such zoning permits Tenant’s Use.

          (B) TENANT RESPONSIBILITIES. Tenant agrees at its own expense to
maintain the Demised Premises in a clean, neat and orderly manner and to keep the Demised
Premises free of rodents (excluding research mice and rats) and insects and to furnish regular
pest exterminating services. Tenant shall be solely responsible, at its own cost and expense,
and
will provide when and as necessary, all services typically required within the Demised
Premises
(except as may be specified in Section 4 hereof) including but not limited to janitorial
service,
restroom and break room supplies, interior window cleaning, light bulb and ballast
replacement,
flooring maintenance, and any other services customarily required by the Tenant’s use of the
Demised Premises. In no event shall Landlord be obligated to provide, pay for or contribute
to
the cost of any of these services in or for the Demised Premises. Tenant further agrees that
it
will not, under any circumstances, display or permit to accumulate for an extended period of
time any merchandise, boxes or other articles on the driveways, parking areas, streets or
sidewalks in front of or adjacent to the Demised Premises. Tenant shall not maintain a
nuisance
in or about the Demised Premises, and will conduct its business at the Demised Premises, and
have its Permittees conduct themselves, in such a manner so as not to interfere with nor
disturb
other tenants’ quiet possession of, or conduct of normal business at, their leased premises.
Tenant shall not burn any trash in or outside the Demised Premises, nor install an incinerator
or
trash destructor in or outside of said Demised Premises.

          (C) REPAIRS AND MAINTENANCE. Except for the specific repairs,
maintenance and replacements to be made by Landlord pursuant to this Lease, in all other
respects the Tenant will, during the full term of this Lease, at its own expense, promptly
make all
repairs and perform all acts of maintenance necessary to keep the Demised Premises and all
improvements, equipment and utility lines therein and all other elements thereof in good
condition and repair, including also without limitation all maintenance, repairs and
replacements,
excepting only for repairs to the structure and to any utility lines located outside of the
“Structure” (as defined below) of the Demised Premises (such lines hereinafter called
“Exterior
Utility Lines”);. unless such repairs of the Structure or of the Exterior Utility Lines are
necessitated by any acts, omissions or negligence of Tenant or its assignees or subtenants or
its

7

 

or their agents, servants, employees, contractors, invitees, licensees, customers or
subtenants (“Permittees”), in any of which events, Tenant shall reimburse Landlord for the costs
of such repairs and replacements of the Structure and Exterior Utility Lines within thirty (30)
days of demand therefor. Said repairs to the Structure and Exterior Utility Lines shall be made by
Landlord as promptly as commercially practicable after receipt of written notice from Tenant of
the necessity therefor. Tenant shall give Landlord prompt notice of any fire, accident, defects,
damage or injury occurring at, in or to the Demised Premises and of any death, damage or injury to
persons therein, but nothing herein contained shall be construed to require Landlord to make any
repairs to said Demised Premises or to provide compensation for any such damage or injury, except
as otherwise expressly herein provided. For purposes of this Paragraph 3(C) and of all other
provisions of this Lease, the term “Structure” shall refer to the foundations, structural frame,
exterior walls and glazing, demising walls, ground floor slab, second floor slab and exterior roof
and roofing system of the Building, and the term “Exterior Utility Lines” shall refer to all
electrical, plumbing, and sewage systems and lines located outside of the Structure of the Demised
Premises. Tenant, at its own expense, will make all repairs, maintenance and replacements promptly
when and as necessary for the heating, ventilating and air-conditioning systems and equipment
which serve only the Demised Premises (“HVAC”). Tenant at its own expense will keep in force
throughout the term of this Lease a contract for maintenance of the HVAC serving the Demised
Premises with a competent, licensed mechanical contractor reasonably acceptable to Landlord.
Tenant shall cause the HVAC to be maintained in good condition by such mechanical contractor.

          (D) INTERIOR ALTERATIONS. Except for ordinary office decorations (that are not
leasehold improvements), any partitioning, painting, installation, removal or alteration of utility
lines, flooring (excluding carpet), paneling, mechanical equipment (heating, ventilating or air
conditioning), plumbing, electrical, gas, water, sewer, interior, exterior, roof or other
alterations, changes or additions to the Demised Premises which Tenant may desire to perform or
make (the “Alterations”) shall be subject to the following conditions, namely: (i) no such
Alterations shall be done without Landlord’s express prior written consent in each instance; (ii)
complete plans and specifications and a cost estimate for any such Alterations (if reasonably
required due to the nature of the work contemplated) shall be submitted to Landlord and Landlord’s
written approval thereof obtained prior to commencement of such Alterations (which Alterations
shall be done in strict compliance with such plans and specifications if and as so approved); (iii)
the Alterations are to be done in compliance with all applicable governmental laws, codes, orders
and regulations, without any damage to the Demised Premises or the Building of which same are a
part or to any property of Landlord or other tenants, free of liens and claims and all at Tenant’s
sole cost and expense; (iv) Tenant is to promptly discharge and to indemnify and save Landlord
harmless from all liens and claims arising from such Alterations; and (v) if so requested by
Landlord at the time of approval, the Tenant will remove such Alterations and restore the Demised
Premises to their condition prior thereto by not later than the expiration or termination of this
Lease. Landlord’s consent for the Alterations shall be deemed to have been granted if Landlord
fails to respond to Tenant’s written request to make the Alterations, when submitted as required
above, within three (3) business days for Alterations estimated to cost less than $10,000.00 or
within seven (7) business days for Alterations estimated to cost more than $10,000.00.
Notwithstanding the foregoing, Tenant shall have the right to make cosmetic alterations such as
painting (other than black or similarly dark colors), and

8

 

carpeting throughout the Stated Term of this Lease. Landlord shall incur no liability by
approving or not approving Tenant’s plans, specifications or work (such actions by Landlord and
approvals and conditions imposed for Tenant’s approval being solely for its own benefit and not
being any assurance by Landlord as to the legality or technical sufficiency or safety of Tenant’s
plans, specifications or work). It is agreed that all work, materials, machinery, apparatus,
leasehold improvements and other installations and alterations to the Demised Premises including,
without limitation, partitions, interior and exterior doors and door opening machinery, lighting
and plumbing fixtures, flooring, wall and window coverings, mechanical equipment for the Building,
utility lines and equipment, loading facilities, elevators, and other items of any kind (except
only Tenant’s merchandise, laboratory, computer and office equipment, trade fixtures, furniture
and movable personal property), whether installed by Landlord or Tenant, shall at all times belong
solely to Landlord and shall not be removed by Tenant; except for such alterations and
installations made by Tenant which the Landlord requests Tenant to remove at the expiration or
termination hereof, and except for the personal property of Tenant to be removed by the expiration
or termination of this Lease, as reflected by a schedule of personal property provided by Tenant
to Landlord prior to the Rent Commencement Date, which schedule may be periodically updated from
time to time. It is also agreed that all intellectual property, biological samples, scientific
instrumentation, computers, routers, storage devices, servers, software, data, databases, and such
other things pertaining to Tenant’s business, research, design and development activities (or
those of Tenant’s collaborators, clients or affiliates) shall at all times belong solely to Tenant
(or to Tenant’s collaborators, clients or affiliates, as the case may be). At least ninety (90)
days prior to the expiration of the Lease, or upon request by the Mortgagee, Tenant shall provide
Landlord with a current, updated “as built” plan of the Demised Premises.

          (E) EXTERIOR MODIFICATIONS. Tenant will not make any alterations,
modifications, changes or additions to any part of the exterior of the Building or to the
exterior of
the Demised Premises nor to the Structure, without in each case having obtained Landlord’s
express prior written approval thereof (which consent shall be in Landlord’s exclusive
discretion). Tenant will not paint, nor permit to be painted, any stone work, cornice work,
iron
work, or brick work on the front or exterior of the Demised Premises or other exterior
elements
of the Demised Premises or Building, without the prior written consent of the Landlord.

          (F) SURRENDER OF POSSESSION. At the expiration or any termination of
this Lease, or of any hold-over term, Tenant shall surrender and deliver to Landlord
possession
of the Demised Premises in the same good condition in which they were delivered at the
commencement of the term hereof (with such Alterations as may have been approved by
Landlord in writing and which Landlord does not require to be removed when Landlord grants
its approval), reasonable wear and tear excepted, broom clean with all of Tenant’s merchandise
and personal property removed therefrom, and free of subleases and occupants. Tenant shall
deliver to Landlord keys to all doors at the Demised Premises. Also by the expiration of the
Lease, Tenant shall deliver to Landlord a copy of an inspection report, prepared by Tenant’s
mechanical contractor within thirty (30) days of the expiration of the Lease, stating that the
HVAC is in good operating condition, reasonable wear and tear excepted. In the event Tenant
fails to maintain the Demised Premises and HVAC as provided in Paragraph 3(C) above, or if
Tenant fails to restore the Demised Premises by the expiration of the Lease as required
hereunder, then Tenant shall be liable for all costs and expenses incurred by Landlord
therefor,

9

 

and Tenant shall pay Landlord the actual costs incurred by Landlord to repair the Demised
Premises and HVAC and/or restore the Demised Premises plus ten percent (10%) for Landlord’s
overhead costs and administrative expenses.

          (G) MECHANICS LIENS. Except as may be otherwise agreed to in writing by the Landlord,
Tenant shall have no right to (and agrees not to) subject the Demised Premises or the Building to
any mechanic’s or materialmen’s liens of any kind for any labor, work, materials or services
ordered by, contracted for or furnished or obtained by Tenant or any Tenant Permittees
(collectively, “Tenant Liens”), nor to pledge the credit of or incur any indebtedness or
obligations on behalf of Landlord. The Tenant agrees to indemnify, defend and hold Landlord and
the Demised Premises and Building harmless from, and to remove of record (or bond off) within
thirty (30) days after filing thereof, all Tenant Liens and suits to enforce same and all
litigation resulting from any breach by Tenant or any Tenant Permittees of the provisions of this
paragraph; and Tenant shall pay all court costs, reasonable attorneys’ fees and other reasonable
expenses incurred by Landlord in connection with any such matters.

	 	4.  	UTILITY CHARGES; PRO RATA SHARE; COMMON AREAS;
OPERATING EXPENSES.

          (A) UTILITY CHARGES. Utility services will be brought to the Demised
Premises or to the appropriate meter room in the Building, as the case may be, and will be
separately metered or submetered (in the case of water usage) to each tenant in the Building,
at
Landlord’s sole cost and expense. During the entire term hereof, Tenant shall pay, either to
the
supplying utility company or to the Landlord (in the case of sub-metered utilities), all
utility
charges and costs of utility services of any and every kind and nature, including, but not
limited
to gas, oil, water, sewer service, heat, power, fuel, telephone service and electricity,
arising out
of or connected with the use and/or occupancy of the Demised Premises or consumed thereat,
promptly as same shall become due and payable, and Tenant shall promptly make any meter
deposits required by the utility companies therefor.

          (B) PRO RATA SHARE. It is expressly stipulated and agreed that the term “Pro
Rata Share” shall be defined and is agreed to mean FORTY-FOUR and 78/100 PERCENT
(44.78%), which percentage is agreed to represent the ratio that the approximate rentable
floor
area of the Demised Premises bears to the total approximate rentable floor area of the entire
Building (124,815 square feet) of which the Demised Premises forms a part.

          (C) COMMON AREAS. Landlord shall make available “Common Areas”, in the
Building and on the Land on which the Demised Premises are situated. The Common Areas
shall include (if applicable), but not be limited to, common entrance foyers, lobbies,
elevators,
stairwells, corridors, restrooms, chases, meter rooms and utility rooms in the Building and
parking areas, loading areas, driveways, sidewalks, landscaped areas, green areas, grounds,
plazas and picnic areas on the Land. Landlord grants to Tenant and to Tenant’s Permittees,
during the term of this Lease, the non-exclusive right to use the Common Areas, in common with
Landlord and with others designated by Landlord as being entitled to use the Common Areas,
subject to Landlord’s reasonable rules and regulations established from time to time
applicable to
all tenants concerning the use and operation of the Common Areas. Tenant shall comply with

10

 

and cause its Permittees to comply with said rules and regulations. Landlord shall operate,
manage, control, repair, replace and maintain in good condition the Common Areas for their
intended purposes, all in the same manner as owners of similar property and in accordance with
custom and practice in the industry. Landlord shall have the sole right and exclusive authority
to employ and discharge all personnel with respect thereto; to close temporarily all or any
portion of the Common Areas for the purpose of making repairs, changes or alterations thereto; to
perform necessary maintenance in connection with any emergency; and to maintain security for the
Common Areas if deemed necessary by Landlord. Landlord shall have the right (but not the
obligation), in its sole discretion, to reserve the parking area immediately in front of, at the
rear of and/or adjacent to a particular premises for the exclusive use of that tenant who leases
such premises, provided that such reservations of parking spaces do not give one tenant a
disproportionate share of the parking provided for the Building.

          (D) OPERATING EXPENSES. During the term of this Lease, and any extensions and
renewals thereof, Landlord shall operate, manage, repair and maintain, in a first class manner
consistent with other similar buildings in the Gaithersburg and Germantown, Maryland areas, the
Building, the Land and the Common Areas. Tenant shall, during the entire term of this Lease, pay
to Landlord as Additional Rent, the Tenant’s Pro Rata Share of the costs and expenses incurred by
Landlord in operating, managing, repairing and maintaining the Building, the Land and the Common
Areas, collectively referred to as “Operating Expenses”. Said Operating Expenses shall include,
but not be limited to, costs and expenses for: (i) removal of snow, ice, trash, rubbish and debris
from the Common Areas; (ii) furnishing and maintaining electric service (and elevator service, if
any) to the Building and the lighting of the Common Areas; (iii) charges for furnishing and
maintaining water and sewer service or other utility services to the Building, the Land and the
Common Areas; (iv) trimming and grass cutting and all other maintenance and upkeep of the grounds,
green areas and landscaping in the Common Areas; (v) maintaining, monitoring and testing the
sprinkler system and sprinkler alarm system in the Building; (vi) maintaining, striping, cleaning
and repairing the parking areas, driveways and sidewalks; (vii) trash pick-up and removal by a
licensed contractor from containers located in a common enclosure(s) for the mutual use of all
tenants in the Building, as well as the cost of maintaining and repairing said trash container
enclosure(s); (viii) reasonable property management fees (not to exceed three percent (3%) of
grossed-up rentals in the Building, where “grossed up rentals” refers to the average basic annual
rental in the Building plus Operating Expenses calculated without including the management fee);
(ix) maintenance and repairs to the exterior of Building, including, without limitation, exterior
windows, doors, hardware, locks, lighting and lighting fixtures; (x) premiums incurred by
Landlord, if any, for hazard, liability, workmen’s compensation or similar insurance on
contractors providing services to the Building, Land or Common Areas; (xi) Impositions (as defined
in Section 8); (xii) Insurance Premiums (as defined in Section (8); and (xiii) any other costs and
maintenance expenses for the Building, Land, Common Areas and all appurtenances thereto as may be
deemed reasonably necessary by Landlord which under generally accepted accounting principles
(“GAAP”) properly constitute operating or maintenance costs and expenses attributable thereto.

               Operating Expenses shall not include any of the following: (i) the cost of the original
construction of the Building or any additions or expansions to the Building, Common Areas or other
items which under GAAP are properly classified as capital

11

 

expenditures; (ii) any repairs or work performed to any portion of the Building intended to be
occupied by individual tenants including tenant allowances and/or concessions; (iii) the cost of
correcting any defects in the original construction of the Building, Common Areas and/or Demised
Premises (as tendered to Tenant); (iv) any reserves for future expenditures not yet incurred; (v)
ground lease rental; (vi) costs incurred by Landlord for repair or restoration to the extent that
Landlord is reimbursed by insurance or condemnation proceeds or that the same is covered by
warranty; (vii) attorneys’ fees, leasing commissions and other costs and expenses incurred in
connection with negotiations or disputes with present or prospective tenants or other occupants of,
or persons, firms or entities with respect to, the Building; (viii) costs incurred by Landlord due
to the negligence or misconduct of Landlord or its agents, contractors, licensees and employees, or
the violation by Landlord of the terms and conditions of this Lease; (ix) interest, principal
points and fees on debts or amortization on any mortgage or mortgages or any other debt instrument
encumbering all or any portion of the Building or the Land on which the Building is located; (x)
advertising and promotional expenditures in connection with leasing the Building, and costs of the
installation of signs identifying the owner and/or manager of the Building; (xi) any costs relating
to hazardous materials, asbestos and the like not resulting from actions of Tenant; (xii) any
charges for depreciation of the Building, or equipment (except costs of and depreciation of
equipment installed or improvements made to reduce Operating Expenses); (xiii) any charge for
Landlord’s income taxes, excess profit taxes, or franchise taxes; (xiv) any costs in connection
with change of ownership; (xv) any costs, fines etc. incurred due to late payment of Operating
Expenses; (xvi) Landlord’s general overhead and administrative expenses; (xvii) increased Insurance
Premiums caused by Landlord’s or any other tenant’s acts; (xviii) costs, fines and penalties
incurred to correct violations by Landlord of any law, rule, order or regulation which was in
effect as of the Commencement Date; (xix) wages, bonuses and other compensation of executive
employees; (xx) increased Insurance Premiums or Impositions assessed specifically to any tenant in
the Building; (xxi) cost of any work or services performed for any facility other than the
Building; (xxii) any cost paid to a person, firm, corporation or other entity related to Landlord,
which is in excess of the amount which would have been paid in the absence of such relationship;
(xxiii) any cost of painting or decorating of any interior parts of the Building other than Common
Areas; (xxiv) cost of acquiring sculptures, paintings and other objects of art; (xxv) expenses
incurred by Landlord solely in its capacity as a partnership or other business entity; (xxvi) costs
and expenses (other than management fees) paid to entities under common control with Landlord for
services on or to the Building, but only to the extent that the cost of such services exceeds
normal rates being paid for such services to unaffiliated providers of such services by owners of
other similar buildings in the area; and (xxvii) cost of repairs, alterations and replacements
caused by the exercise of the rights of eminent domain. There shall not be duplication in
charges to Tenant by reason of the provision setting forth Tenant’s obligation to reimburse
Landlord for Operating Expenses and any other provision in this Lease.

          (E) STATEMENT OF OPERATING EXPENSES.

               (1) Prior to December 1st of a particular calendar year, Landlord shall make a reasonable
estimate of the Operating Expenses for the next calendar year (the
“Expense Estimate”), and will
furnish Tenant a written statement setting forth in reasonable detail the estimate of those
Operating Expenses (the “Expense Notice”). As of the execution date of this Lease, Landlord’s
estimate of Operating Expenses are as set forth in Exhibit
“G”, _____ attached

12

 

hereto and made a part hereof. For each calendar month of that next calendar year (beginning with
January 1st after the date of the Expense Notice), Tenant shall pay to Landlord, as
Additional Rent hereunder, one-twelfth (l/12th) of Tenant’s Pro Rata Share of the Expense Estimate
(the “Tenant’s Monthly Share”) in advance, without deduction, set off or demand on the
1st day of each calendar month with Tenant’s payment of Basic Monthly Rental.

               (2) Within sixty (60) days after the end of the calendar year for which the
Expense Estimate was made, Landlord shall furnish Tenant a statement setting forth in
reasonable detail the actual Operating Expenses incurred by Landlord for the previous calendar
year (the “Actual Expenses”). If the Actual Expenses are greater than the Expense Estimate,
Landlord may increase Tenant’s Monthly Share for the ensuing calendar year to reflect the
Actual Expenses, and Tenant will pay to Landlord, as Additional Rent within thirty (30) days
after written demand therefor, Tenant’s pro Rata Share of the difference between the Actual
Expenses and the Expense Estimate. If the Actual Expenses are less than the Expense Estimate,
Landlord may reduce Tenant’s Monthly Share for the ensuing calendar year, or Landlord will
credit Tenant’s overpayment for Operating Expenses against the next due payment(s) of Tenant’s
Monthly Share. Landlord shall not be allowed to modify the Actual Expenses after one (1) year
after the date Landlord furnishes the statement referenced above to Tenant.

               (3) Tenant or its agent shall have the right, for a period of one (1) year after
Tenant’s receipt of the statement of Actual Expenses for the respective calendar year and upon
giving reasonable notice to Landlord and during normal business hours, to review and inspect
all
of Landlord’s bills, invoices and records applicable to the Actual Expenses or to the Expense
Estimate for that particular calendar year in order to verify the Operating Expenses. If the
Landlord and Tenant determine after said review that an error has been made and the Tenant has
been overcharged for Operating Expenses, then Landlord will refund the amount of the
overcharge to Tenant within thirty (30) days after such determination. If the amount of the
overcharge exceeds five percent (5%) of the Operating Expenses, Landlord will refund the
amount of the overcharge with interest. Under no circumstances will Landlord be responsible to
Tenant for Tenant’s cost of said review of the Operating Expenses.

               (4) Tenant’s obligation to pay Landlord its Pro Rata Share of the Operating
Expenses hereunder shall survive any expiration or termination of the Lease, and shall be
adjusted and pro-rated for any portion of a calendar year occurring during the first or last
Lease
Year of the term hereof.

	 	5.  	BANKRUPTCY.

          (A) For purposes hereof, the following shall be deemed “Events of Bankruptcy” of Tenant: (i)
if Tenant becomes “insolvent”, as defined in Title 11 of the United States Code, entitled
“Bankruptcy”, 11 U.S.C. Section 101 et seq. (hereinafter called the “Bankruptcy Code”), or under
the insolvency laws of any state, district, commonwealth or territory of the United States of
America (“Insolvency Laws”); or (ii) if a receiver or custodian is appointed for any or all of
Tenant’s property or assets, or if there is instituted a foreclosure action on any of Tenant’s
property; or (iii) if Tenant files a voluntary petition under the Bankruptcy Code or Insolvency
Laws; or (iv) if there is filed an involuntary petition against Tenant as the subject debtor under

13

 

the Bankruptcy Code or Insolvency Laws, which is not dismissed within thirty (30) days of
filing, or results in issuance of an order for relief against the debtor; or (v) if Tenant makes
or consents to an assignment of its assets, in whole or in part, for the benefit of creditors, or
a common law composition of creditors.

          (B) Upon the occurrence of an Event of Bankruptcy, or if Tenant takes advantage
of any Insolvency Laws, then in any such event Landlord at its option and sole discretion may
terminate this Lease by written notice to Tenant (subject, however, to applicable provisions
of
the Bankruptcy Code or Insolvency Laws during the pendency of any action thereunder
involving Tenant as the subject debtor). If this Lease is terminated under this paragraph,
Tenant
shall immediately surrender and vacate the Demised Premises, waives all statutory or other
notice to quit, and agrees that Landlord’s obligations under this Lease shall cease from such
termination date, and Landlord may recover possession by process of law or in any other lawful
manner. Furthermore, if this Lease terminates under this paragraph, Landlord shall have all
rights and remedies against Tenant provided in case of defaults of Tenant in payment of rent.

          (C) If Tenant becomes the subject debtor in a case pending under the Bankruptcy
Code, Landlord’s right to terminate this Lease under this paragraph shall be subject to the
applicable rights (if any) of the Trustee in Bankruptcy to assume or assign this Lease as then
provided for in the Bankruptcy Code. However, the Trustee in Bankruptcy must give to
Landlord and Landlord must receive proper written notice of the Trustee’s assumption or
rejection of this Lease within thirty (30) days after the date of the Trustee’s appointment;
it being
agreed that failure of the Trustee to give notice of such assumption hereof within said thirty
(30)
days period shall conclusively and irrevocably constitute the Trustee’s rejection of this
Lease and
waiver of any rights of the Trustee to assume or assign this Lease. The Trustee shall not have
the
right to assume or assign this Lease unless said Trustee (i) promptly and fully cures all
defaults
under this Lease, and (ii) promptly and fully compensates Landlord for all monetary damages
incurred as a result of such default.

          (D) It is further stipulated and agreed that, in the event of the termination of the
term of this Lease by the happening of any such event described in this Section 5, Landlord
shall
forthwith, upon such termination, and any other provision of this Lease to the contrary
notwithstanding, become entitled to recover as and for damages caused by such termination all
amounts permitted by applicable law.

          (E) In the event that this Lease is terminated by notice and the Tenant shall
thereafter seek protection under the Bankruptcy Code or any equivalent state Insolvency Laws
or
regulations, then the Tenant (if a debtor-in-possession) agrees to consent to any application
by
the Landlord to terminate the automatic stay provisions of the Bankruptcy Code or any
Insolvency Laws on the grounds that there is no equity in the Lease as a result of the
pre-petition
termination notice.

	 	6.  	INSURANCE; INDEMNITIES.

          (A) TENANT’S INSURANCE AND INDEMNITY. It is further understood, agreed and
covenanted by and between the parties hereto that the Tenant will be responsible for

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any claim for damages arising from injury or any claim of death or injury to persons or
damage to property, or any incident that occurs, at or upon said Demised Premises caused or
occasioned directly or indirectly by Tenant’s or any Permittees’ use or occupancy of said Demised
Premises, and that the Tenant will and does hereby defend, indemnify and hold harmless the
Landlord, its partners and agents and its and their successors and assigns from and against any
and all liability, damages, expenses, claims, suits, actions or causes or rights of action arising
from or caused by any such damages or injury or claim for damages or injury (including death) to
persons or property at or upon said Demised Premises during the Initial Term and any renewal or
extension thereof. In confirmation thereof, the Tenant covenants and agrees that it will at all
times during the term of this Lease, at its own expense, carry and maintain in full force and
effect, in companies satisfactory to Landlord, Commercial General Liability insurance satisfactory
to Landlord, with limits of at least a $2,000,000.00 combined single limit, for bodily injury,
including death, to any one or more person(s) in any single occurrence and for property damage or
in such greater amounts of coverage as Landlord may from time to time reasonably require, naming
the Landlord as additional insured. Each policy shall contain the Broad Form General Liability
(with General Aggregate Amount & Per Occurrence Limit) Endorsement. Each policy or a Certificate
of Insurance showing the same to be in effect for a one (1) year period, shall be delivered to
Landlord within thirty (30) days of the Commencement Date, and renewal certificates shall be
delivered to Landlord at least fifteen (15) days prior to expiration of any such policy, and each
such policy shall contain an endorsement requiring at least thirty (30) days prior written notice
to all named insureds as to any cancellation, non-renewal or modification of any such policy. It
is specifically covenanted and agreed by the Tenant that there shall be no abatement of Rent
because of any damage caused by fire or other peril, except as provided in Section 9. The amount
of such insurance shall not limit Tenant’s indemnity obligations under this Section 6 or under any
other provision of this Lease. Tenant’s indemnity obligations under this section contained in this
Lease shall survive expiration or termination of this Lease.

          (B) LANDLORD’S
INSURANCE AND INDEMNITY. During the Term, Landlord shall obtain,
maintain and keep in full force and effect not less than the following insurance: (i) commercial
general liability insurance with combined limits of not less than $1,000,000 per occurrence,
$2,000,000 in the aggregate, and with excess umbrella coverage of not less than $5,000,000 in all
respects; and (ii) “fire and extended coverage covering all risks” insurance covering the Demised
Premises (including all betterments and improvements provided by Landlord under the terms of the
Lease at the full insurable value thereof on a replacement cost basis. All proceeds of such
insurance shall be used to repair or replace the betterments and improvements in the Demised
Premises provided by Landlord under the terms of the Lease. It is further understood, agreed and
covenanted by and between the parties hereto that the Landlord will be responsible for any claim
for damages arising from injury or any claim of death or injury to persons or damage to property at
or upon the Demised Premises or Common Areas caused or occasioned directly or indirectly by
Landlord or Landlord’s management of said Common Areas, as the case may be, and that the Landlord
will and does hereby defend, indemnify and hold harmless the Tenant, its agents and its and their
successors and assigns from and against any and all liability, damages, expenses, claims, suits,
actions or causes or rights of action arising from or caused by any such damages or injury or claim
for damages or injury (including death) to persons or property at or upon said Common Areas.
Landlord’s indemnity obligations under this section contained in this Lease shall survive
expiration or termination of this Lease.

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          (C) WAIVER
OF RIGHT OF RECOVERY. Notwithstanding anything in this Lease to the
contrary, Landlord and Tenant hereby release each other and waive any claims against each other
for loss or damage to the Demised Premises, tenant improvements, fixtures, equipment and/or any
other personal property arising from a risk which is required to be insured against, as
applicable, or which is actually paid under “fire and extended/ all risks” coverage insurance
policies carried by Landlord and Tenant, even though such loss or damage was caused by the
negligence of Landlord or Tenant or their respective invitees or guests. Landlord and Tenant agree
to obtain and maintain throughout the Term of this Lease endorsements to their respective “fire
and extended coverage covering all risks” coverage policies waiving the right of recovery or
subrogation of their insurance companies against the other party and its agents and employees.
Except to the extent expressly provided herein, nothing contained in this Lease shall relieve
Landlord or Tenant of any liability to each other or to their insurance carriers which Landlord or
Tenant may have under law or the provisions of this Lease in connection with any damage to the
Demised Premises, tenant improvements, fixtures, equipment, furniture, inventory and all other
personal property by fire or other casualty. The provisions of this Section 6(C) shall apply only
while waiver of subrogation is available, without additional cost, from insurance companies
licensed in the State of Maryland.

     7. SUBLETTING AND ASSIGNMENT.

          (A) It is further understood, agreed and covenanted by and between the parties
hereto that the Tenant shall have no right to, and will not, transfer or assign this Lease, or
sublet or transfer possession of said Demised Premises, or any part thereof, voluntarily,
or involuntarily, whether by operation of law, in bankruptcy or otherwise, without the prior
written consent of the Landlord. If Tenant desires to assign this Lease, then in any such event, the
Landlord shall have the right (and such right is hereby expressly reserved unto Landlord) in
its
sole discretion, but not the obligation, by written notice given to Tenant within twenty (20)
days
from Landlord’s receipt of a written proposal for such assignment, to cancel and terminate
this
Lease and recover possession of the Demised Premises. Any assignment or subletting and any
consent of Landlord thereto shall not release Tenant of any liability under this Lease, and
shall
not waive the obligation to obtain Landlord’s consent to any further assignment or subletting.
Any assignment or subletting, including the use of the Demised Premises by the assignee or
subtenant, shall be subject to all of the terms and provisions of this Lease. Tenant shall
pay to
Landlord, as Additional Rent within thirty (30) days of demand by Landlord therefor, all
reasonable third party administrative review and processing fees, costs or expenses including,
without limitation, attorneys’ fees and other professional fees and expenses incurred by
Landlord (or Landlord’s mortgagee) with respect to the review and consent or denial of consent
of the foregoing, provided, however, that said review and processing fees shall not exceed
$2,500.00 per request for subletting or assignment under the Lease.

          (B) Notwithstanding the provisions of Paragraph 7(A) hereof, Landlord agrees
that it will not delay or condition or withhold unreasonably its consent to a proposed
assignment
of this Lease or subletting of the Demised Premises by Tenant provided that all of the
following
conditions and all such other conditions as Landlord reasonably may impose (collectively, the
“Transfer Conditions”) are met: (a) Tenant is not in an Event of Default under this Lease or

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under any other lease from Landlord or from Related Owners (defined below); (b) Tenant is
not subject to any Events of Bankruptcy; (c) Tenant is in possession and occupancy of the Demised
Premises; (d) the Initial Term of the Lease and Tenant’s payment of Rent hereunder have commenced;
(e) the proposed assignee or sublessee (i) has a net worth sufficient enough for Tenant to meet its
obligations under the Lease as well as all of its other obligations
(the “Minimum Net Worth”), (ii)
has a good business reputation and adequate experience in operating its business, (iii) operates a
quality and type of business which is compatible with the business and type of other tenants of
space in the Building and in Seneca Meadows Corporate Center, (iv) shall not be a party which has
been in default under any other leases of space owned by nor under any other agreements of any kind
with Landlord or any entities in which Landlord’s partners or any of them have or had ownership
interests (“Related Owners”), and (v) is not a party with whom Landlord or any Related Owners is or
are negotiating a lease of space in the Building or in any other property; (f) the use of the
Demised Premises shall not be changed from the use permitted in Paragraph 3(A) of this Lease as a
result of any such assignment or subletting; (g) Tenant shall have delivered to Landlord evidence
reasonably satisfactory to Landlord that all Transfer Conditions are met (the “Transfer Evidence”);
(h) the prior written consent (if required) of Landlord’s mortgagees to the proposed assignment or
subletting (if required under the loan documents) shall have been obtained at Tenant’s expense and
at no cost to Landlord nor change in provisions of the loan documents (the “Lender’s Consent”); and
(i) Tenant shall have delivered to Landlord an instrument of assignment or sublease (as the case
may be) in form and content acceptable to Landlord’s mortgagees and reasonably acceptable to
Landlord, executed by the assignee or sublessee, by which the assignee or sublessee assumes all
obligations of Tenant under and agrees to be bound by and comply with this Lease. Nevertheless,
if Tenant proposes to assign this Lease (except to an Affiliate of Tenant or to a Tenant Successor,
as defined below), then Landlord shall continue to have the right, pursuant to Paragraph 7(A)
hereof, to cancel this Lease and recover possession of the Demised Premises. Any such assignment or
subletting consented to by Landlord shall be subject to all terms and provisions of this Lease,
shall not waive the necessity of obtaining Landlord’s prior written consent for any further
assignment and subletting, shall not relieve or reduce Tenant’s primary liability to Landlord under
this Lease, and shall not result in any change in the permitted use of the Demised Premises. If
the amount of rent or other sums received by Tenant under any such permitted assignment or
subletting is more than the Rent due from Tenant under this Lease, then Tenant shall pay fifty
percent (50%) of the excess amount to Landlord on a monthly basis and promptly upon Tenant’s
receipt of such excess amounts after reimbursing Tenant for (i) any marketing costs advanced to
third parties, (ii) leasing commissions directly related to the permitted assignment or
subletting, and/or (iii) the annualized cost of the leasehold improvements and such of
Tenant’s furniture, fixtures, equipment and any other personal property leased to the subtenant,
calculated by dividing the cost of said leasehold improvements and personal property by the number
of years in the Initial Term (10). Notwithstanding anything to the contrary herein, if Tenant
proposes to sublet the entire Demised Premises, said sublet shall neither be deemed an “assignment”
nor shall Landlord have the right to cancel this Lease and recover possession of the Demised
Premises.

          (C) It is further agreed that Landlord will consent to Tenant’s sublease of the Demised
Premises to an Affiliate of Tenant (as defined below) or to assignment of this Lease to a Tenant
Successor (as defined below) subject however to all of the terms and provisions of this

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Lease. The phrase “Affiliate” of Tenant, as used herein, means a corporation or other legal
entity which is under common ownership, management and control with Tenant. For purposes of this
Paragraph 7(C), the phrase “Tenant Successor” shall mean a person or entity who or which acquires
and succeeds to ownership of all of Tenant’s business as a result of either (i) purchase of all or
substantially all of Tenant’s assets, or (ii) purchase of all or substantially all issued and
outstanding shares of capital stock in Tenant (the
“Acquisition”). Tenant agrees to provide
Landlord the evidence of the Acquisition when Tenant requests Landlord’s consent to an assignment
of this Lease to the Tenant Successor. It is further agreed that if Landlord consents to such
assignment of the Lease to the Tenant Successor, and provided that the Tenant Successor has a net
worth at least equal to the Minimum Net Worth aforesaid, and is not subject to any Events of
Bankruptcy, and provided Tenant has furnished evidence reasonably satisfactory to Landlord to
confirm the financial condition of such assignee Tenant Successor, and further provided that
Lender’s Consent (as defined and under the terms set forth above) to such release of liability has
been obtained, then in such event Landlord will join with Tenant and its Tenant Successor in
executing an instrument reasonably acceptable to Landlord by which (A) Tenant is released of all
liability under this Lease accruing after the effective date of the assignment hereof to the
Tenant Successor (the “Effective Transfer Date”), and (B) the Tenant Successor assumes all
obligations of Tenant under this Lease. However, no such release instrument shall relieve Tenant
of any indemnification obligations to Landlord under this Lease covering periods prior to the
Effective Transfer Date unless assumed by the Tenant Successor with the consent of Landlord.
Landlord and Tenant agree to use reasonable efforts to obtain the Lender’s Consent described above
in Paragraphs 7(B) and 7(C).

          (D) With any request for Landlord’s consent to an assignment or subletting, Tenant shall
provide Landlord a copy of the proposed instrument of assignment or sublease in form and content
reasonably acceptable to Landlord and legally binding upon and enforceable against Tenant and the
assignee or sublessee, together with such additional information as Landlord reasonably may
require.

     8. PAYMENT OF REAL ESTATE TAXES AND INSURANCE COSTS.

          (A) Tenant covenants and agrees that it will, during the entire term of this Lease, pay to
Landlord as part of the Operating Expenses and in the manner described in Section 4 above, in
addition to the Basic Annual Rental payable under Paragraph 1(C) hereof and the other sums payable
by Tenant under the Lease, the Tenant’s Pro Rata Share of any and all real estate taxes and
assessments and similar impositions, general and special, ordinary and extraordinary, which may be
levied, assessed or payable (for or allocable to periods of time within the term of this Lease and
any renewal, extended and holdover term), upon the Building in which the Demised Premises are
situated and/or the Land serving and/or on which is erected said Building, and including also all
fees and expenses of attorneys, accountants and consultants and other expenses including but not
limited to court costs and appeals, incurred by Landlord in contesting any such items
(collectively, the “Impositions”). The amount of said Impositions (of which Tenant is to pay its
Pro Rata Share, as aforesaid) as shown on the government-issued tax bills or assessment notices,
shall be deemed conclusive evidence of the amount of said Impositions.

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     Tenant, after prior notice to Landlord and at Tenant’s expense, may contest by
appropriate legal or other proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any tax or lien therefor. Landlord, upon request
by Tenant, shall join in any such contest, or, if required in order for Tenant to conduct such
contest, shall prosecute such contest, at Tenant’s direction. In addition, Landlord shall
cooperate with Tenant and execute any documents or pleadings legally required to permit Tenant to
conduct any such contest. If as a result of any such challenge by Landlord and/or Tenant, a tax
refund is made to Landlord, then the amount of such refund attributable to Impositions previously
paid by Tenant less the reasonable expenses of the challenge incurred by Landlord, if any, shall
be paid to Tenant within thirty (30) days following receipt from Landlord. Landlord’s obligation
to return to Tenant any such Impositions shall survive the expiration or termination of the Lease.
Landlord agrees to promptly provide Tenant with a copy of any tax bill or appeal notice so as to
enable Tenant to exercise its rights hereunder. Tenant shall promptly provide Landlord with a copy
of any notice relating to Impositions.

          (B) Tenant hereby further covenants and agrees that it will, during the entire term
of this Lease, pay to Landlord as part of the Operating Expenses and in the manner described
in
Section 4 above, in addition to the Basic Annual Rental payable under Paragraph 1(C) and the
other sums payable by Tenant under this Lease, the Tenant’s Pro Rata Share of any and all
premiums, costs, deductibles and other charges and expenses incurred, paid, accrued or
absorbed
by Landlord for or in connection with all policies of fire, extended coverage, hazard and
general
liability insurance and other insurance carried or maintained by Landlord on the Demised
Premises and/or the Building and Land of which they form a part (collectively, the “Insurance
Premium”). The insurance with respect to which Tenant shall make said payments shall include
without limitation rent interruption, fire and extended coverage, general liability with
umbrella
coverage, and supplemental equipment coverage (for boilers, pressure vessels, HVAC and
electrical equipment) and all such other insurance coverages and in such amounts as are
maintained by prudent owners of property similar to the Building, all as reasonably determined
by Landlord.

          (C) Landlord agrees that it will pay the Impositions and the Insurance Premiums
as same become due and payable (subject to Tenant’s reimbursements of its Pro Rata Share
thereof, as aforesaid).

          (D) Failure of Tenant to pay to Landlord any such sums due under this Section 8
when due and after notice of Monetary Default shall constitute an Event of Default of Tenant
under this Lease. The obligations of Tenant under this Section 8 shall survive any
cancellation,
expiration or termination of this Lease, as regards any such payments due from Tenant
hereunder
as of the date of such cancellation, expiration or termination or allocable to periods while
this
Lease is in force. The sums payable by Tenant under this Section 8 shall be appropriately
adjusted, apportioned and paid by Tenant for any fraction of a governmental tax year or
insurance policy year occurring at the commencement and at the expiration of the term of this
Lease.

     9. DAMAGE BY FIRE OR OTHER CASUALTY.

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          (A) In the event that the Demised Premises should be damaged by fire or other
casualty so that the same shall be rendered partially untenantable, such damage shall be
repaired
by the Landlord as promptly as is reasonably possible, and the Rent shall be abated (from the
date of such damage until the damage is repaired) in the same proportion as the area of the
Demised Premises rendered untenantable bears to the total area of the Demised Premises. The
Landlord shall not be held liable in damages or otherwise for any delay in making or
completing
said repairs, whether or not caused by time necessary to settle insurance claims, nor strikes,
acts
of God or other casualties or any circumstances.

          (B) In the event that the Demised Premises shall be substantially (i.e., 40% or
more of the Demised Premises or 30% or more of the laboratory and laboratory support space)
destroyed or rendered totally untenantable, or if Landlord’s mortgage lender does not make
adequate insurance proceeds available to Landlord to pay for the costs of repairs and
restoration,
then in any such event the Landlord shall have the option in its sole discretion of rebuilding
the
Demised Premises, or of not rebuilding the Demised Premises and instead canceling this Lease.
The Landlord, in exercise of such option, shall determine whether or not to rebuild and shall
notify Tenant of such determination in writing, within sixty (60) days after such damage or
destruction. If Landlord shall determine to rebuild or repair such damage or destruction,
Landlord agrees to make such repairs with reasonable promptness and dispatch, and the Rent
shall abate (from the date of the damage or destruction until the repairs required of Landlord
under this paragraph are Substantially Complete) in proportion to the area of said Demised
Premises rendered untenantable. If the Landlord determines to rebuild as aforesaid, this
Lease
shall not be canceled, but instead shall remain in full force and effect and Tenant shall
reoccupy
the Demised Premises (and Rent abated as aforesaid shall again accrue and be payable) when the
repairs required of Landlord under this paragraph are substantially complete. If Landlord
elects
to cancel this Lease under this paragraph, then Rent and all other sums payable by Tenant
under
this Lease shall be adjusted, pro-rated and paid by Tenant to the date of such damage. Any
repair and restoration to be performed by Landlord under this Section 9 shall be limited to
those
portions of the Demised Premises which were constructed by Landlord; it being agreed that
when Landlord completes its repairs thereof to be made pursuant to this Section 9, all Rent
(if
any) abated under this Section 9 shall again commence to be due and payable. Tenant, at its
own
expense, will repair or replace any damage to its furniture, merchandise, trade fixtures,
equipment, personal property and other items belonging to Tenant if damaged or destroyed by
fire or other casualty, and also all leasehold improvements constructed by Tenant.

          (C) In the event that (i) the Demised Premises shall be substantially destroyed as
defined above or rendered totally untenantable and if Landlord elects to rebuild same
(pursuant
to Paragraph 9(B)), and if Landlord fails to restore said premises within one hundred fifty
(150)
days after the destruction or damage rendering the Premises totally untenantable, or if the
Landlord’s insurance company determines and advises the parties that the Premises cannot be
repaired within one hundred sixty-five (165) days after the date of damage (such determination
to be made and given within fifteen (15) days after request by either party), then in either
such
event Tenant (if it is not in an Event of Default under this Lease, and if the damage was not
caused by Tenant or its Permittees) at its option may terminate this Lease by giving written
notice to Landlord within ten (10) days after the end of the one hundred fifty (150) day
period
aforesaid or within fifteen (15) days after receipt from the insurance company of its
aforesaid

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determination as the case may be. However, Tenant’s notice of termination hereof shall be
ineffective if Landlord completes the restoration of the Premises prior to Landlord’s receipt of
such termination notice.

     10. COMPLIANCE WITH LAWS, ETC.

          Tenant, at its own expense, will promptly comply with, observe and perform all of the
requirements of, and will obtain and maintain in force all licenses, permits and other
authorizations required by, all of the statutes, ordinances, rules, orders and regulations, now in
effect or hereafter promulgated, concerning the use or occupancy of the Demised Premises and/or
the conduct of Tenant’s business, and whether required by federal, state, county or town
governments and whether required of the Tenant or Landlord (collectively, “Laws”). The Tenant
agrees that it will promptly comply, at its own expense, with all rules, orders and regulations of
the Board of Fire Underwriters having jurisdiction for the prevention of fire, and other hazards,
applicable to said Demised Premises, or for the preservation of the Demised Premises, or the
correction or abatement of nuisances or grievances for which either the Landlord or the Tenant may
be responsible as a result of Tenant’s use and occupancy of the Demised Premises during the term
of this Lease, and Tenant shall at its own expense comply with all rules, regulations and
requirements of Landlord’s and Tenant’s insurance carriers concerning Tenant’s use and occupancy
of the Demised Premises and conduct of its business therein (collectively, “Insurance
Requirements”). Tenant shall not place or store in the Demised Premises, nor deposit in any
utility lines thereof, any hazardous or toxic substances or material or any items which violate
any applicable federal, state, or local environmental protection laws or the requirements of
Landlord’s insurance carriers, and Tenant will indemnify, defend and hold Landlord harmless from
all liability and expense arising from Tenant’s violation of this Section 10.

     11. NON-WAIVER OF BREACH.

          The failure of Landlord to insist, in any one or more instances, upon a strict performance of
any of the covenants of this Lease, or to exercise any option herein contained, or to serve any
notice, or to institute any action or summary proceedings, or otherwise to act as though this Lease
had expired pursuant to any of the provisions of this Lease, shall not be construed as a waiver or
relinquishment by Landlord for the future, of such covenant or option, or right thereafter to serve
notice and to have this Lease expire under any provision of this Lease, but such covenant or option
shall continue and remain in full force and effect. The receipt by Landlord of Rent, with knowledge
of the breach of any covenant hereof, shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision hereof shall be deemed to have been made, unless expressed in writing and
signed by Landlord or its duly authorized agent. The rights and remedies herein created are
cumulative, and the use of one remedy shall not be taken to exclude or waive the right to the use
of another.

     12. EVENT
OF DEFAULT; REMEDIES; RELETTINGS; LEGAL COSTS; INTEREST; ACCORD AND
SATISFACTION;
           CONCESSIONS; DEFAULT UNDER OTHER LEASES.

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          (A) EVENT OF DEFAULT. It is hereby mutually covenanted and agreed, that that
any or all of the following shall be an “Event of Default” by Tenant:

               (i) if Tenant should fail to pay promptly when and as due any payment of Basic Monthly
Rental, Additional Rent or other sums payable by Tenant hereunder (a “Monetary Default”), and if
such Monetary Default is not fully cured within five (5) business days after written notice
thereof from Landlord to Tenant (except that Landlord need not give Tenant more than two (2)
notices of non-payment of monthly rent installments in any one Lease Year, it being agreed an
Event of Default shall exist without regard to such notice as concerns more than two (2) monthly
rent defaults in a Lease Year); or if Tenant shall fail promptly and timely to keep and perform
each and every covenant, condition and agreement not involving payment of money (a “Non-Monetary
Default”) herein contained and on the part of Tenant to be kept and performed, and if such
Non-Monetary Default is not fully cured within thirty (30) days after written notice from Landlord
to Tenant (or within such additional time as reasonably needed to cure same if Tenant acts
diligently to and does cure same promptly and holds Landlord harmless from all liability and
expense arising from such default and the existence thereof is not a default under any deed of
trust on the Demised Premises and does not materially adversely affect the value, safety or
security of the Demised Premises nor cause disturbance to other tenants of the Building or
neighboring buildings); or if Tenant fails to keep in force any insurance herein required and such
default is not cured within five (5) business days after written notice, or if any act or omission
of Tenant causes unreasonable interference with the use, occupancy or quiet enjoyment of any
other tenant of the Building or of any neighboring building and is not abated within five (5) days
after written notice from Landlord; or

               (ii) if Tenant shall abandon or evidence any intention to abandon the Demised Premises
and fail to pay any Rent due under the Lease; or,

               (iii) if the Tenant’s estate hereby created shall be taken on execution or other process
or law; or

               (iv) if there shall occur any of the events described in Section 5 hereof which entitle
Landlord to terminate this Lease pursuant to said Section 5;

          (B) REMEDIES. In each and every such Event of Default, from thenceforth and at all
times thereafter, at the exclusive and absolute option and discretion of Landlord, the Tenant’s
right of possession of the Demised Premises shall thereupon cease and terminate, and Landlord, in
addition to its right to distrain for Rent, shall be entitled to the immediate possession of the
Demised Premises and to remove all persons and property therefrom and to re-enter the same without
further demand of Rent or demand of possession of said Demised Premises, with process of law and
without becoming liable to prosecution therefor, any statutory or other notice to quit or of
intention to re-enter being hereby expressly waived by Tenant; and in the event of such re-entry
or retaking by Landlord, Tenant shall nevertheless remain in all events liable and answerable for
the full Rent to the date of retaking or re-entry. Tenant shall also be and remain answerable in
damages for the deficiency or loss of Rent which Landlord may thereby sustain in respect of the
balance of the term; and in such case Landlord reserves full power, which is hereby acceded to by
Tenant, to re-let said Demised Premises or any portion(s) thereof as

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Landlord may select, upon such terms and rentals as Landlord may deem proper (which
re-lettings may be for a term lesser or longer than the term of this Lease, at Landlord’s
exclusive discretion), all at the risk and cost and for the benefit of Tenant in liquidation and
discharge, in whole or in part, as the case may be, of the liability of Tenant under the terms and
provisions of this Lease, and such damages, at the option of the Landlord, may be recovered by it
at the time of the retaking or re-entry, or in separate actions, from time to time, as Tenant’s
obligation to pay Rent would have accrued if the term had continued, or from time to time, as said
damages shall have been made more easily ascertainable by relettings of the Demised Premises, or
such action by Landlord may at the option of Landlord be deferred until the expiration of the
term, in which latter event the cause of action shall not be deemed to accrue until the date of
the termination of said term.

          (C) RELETTINGS. All rents received by Landlord in any such reletting shall be
applied first to the payment of such reasonable expenses as Landlord may have incurred in
recovering possession of the Demised Premises and in reletting the same, including also
brokerage commissions and fees and costs of renovations and alteration of the Demised
Premises, second, to the payment of any costs and expenses incurred by Landlord, including
also
making necessary repairs to the Demised Premises or in curing any default on the part of
Tenant
in any covenant or condition herein made binding upon Tenant, and, last, any remaining rent
shall be applied toward the payment of Rent due from Tenant under the terms of this Lease,
with
interest at the rate of fifteen percent (15%) per annum or at the highest lawful rate under
then
applicable Maryland laws, whichever is less, and Tenant expressly agrees to pay any deficiency
then remaining. Landlord, however, at its option, may refrain from terminating Tenant’s right
of
possession, and in such case may enforce against Tenant the provisions of this Lease for the
full
term thereof.

          (D) LEGAL
COSTS. In any action or proceeding which the Landlord or the
Tenant may be required to prosecute to enforce its respective rights hereunder, the
unsuccessful
party therein agrees to pay all costs incurred by the prevailing party therein, including
reasonable
attorneys’ fees, to be fixed by the court, and said costs and attorneys’ fees shall be made a
part of
the judgment in said action. In any situation in which a dispute is settled other than by
action or
proceeding, the parties shall pay their respective costs and attorneys’ fees relating thereto.
If
Landlord is the prevailing party in any action or proceeding against Tenant, then Tenant’s
payment of Landlord’s costs and attorneys’ fees relating thereto shall be considered a payment
of
Additional Rent.

          (E) INTEREST. If a Monetary Default by Tenant occurs under any terms of this
Lease, Tenant shall pay Landlord, in addition to the amount so in default and any Late Charges
that may be applicable, interest at the rate of fifteen percent
(15%) per annum, or the
highest
lawful rate, whichever is less (the “Default Interest Rate”), from the date the payment was
due
until the date Landlord receives said payment. If a Non-Monetary Default by Tenant occurs
under any provisions of this Lease, Landlord at its sole option and discretion may take the
action
to cure such Non-Monetary Default (without any obligation to do so) in addition to and without
waiving any other remedies, and Tenant will reimburse Landlord promptly on demand for all
reasonable costs incurred by Landlord plus interest at the Default Interest Rate from the date
Landlord pays for such incurred costs until the date Landlord receives payment from Tenant.

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          (F) ACCORD
AND SATISFACTION. No receipt and retention by Landlord of
any payment tendered by Tenant in connection with this Lease will give rise to or support or
constitute an accord and satisfaction, notwithstanding any accompanying statement, instruction
or other assertion to the contrary (whether by notation on a check or in a transmittal letter
or
otherwise), unless Landlord expressly agrees to an accord and satisfaction in a separate
writing
duly executed by the appropriate persons. Landlord may receive and retain, absolutely and for
itself, any and all payments so tendered, notwithstanding any accompanying instructions by
Tenant to the contrary. Landlord will be entitled to treat any such payments as being received
on
account of any item or items of Rent, interest, expense or damage due in connection herewith,
to
be applied in such amounts and in such order as Landlord may determine at its sole option.

          (G) CONCESSIONS. Any brokerage fees paid by Landlord in conjunction with
this Lease (the “Concessions”) are subject to the condition that during the Initial Term of
the
Lease, Tenant will faithfully comply with all of the terms and conditions of the Lease. If,
after
an Event of Default, Landlord terminates the Lease and takes possession of the Demised
Premises to mitigate its damages, then Tenant shall reimburse Landlord as Additional Rent for
the cost of the Concessions multiplied by a fraction, the numerator of which shall be the
number
of months remaining in the Initial Term after the Event of Default occurs, and the denominator
of which shall be the number of months in the Initial Term of this Lease. Notwithstanding the
above, under no circumstances shall Landlord be allowed to recover any damages for
Concessions that are included in any other damages awarded to and collected by Landlord
pursuant to the provisions of this Lease.

     13. LANDLORD’S LIABILITY.

          If Landlord shall sell, convey or otherwise transfer or dispose of the Demised
Premises and/or the Building in which same is located, and if the purchaser then assumes all
obligations of the Landlord under this Lease, then the undersigned Landlord shall be deemed to be
released of all obligations hereunder, effective from and after the date of such transfer.
Landlord’s liability under this Lease shall be limited to its ownership interest and any
applicable insurance in the Building. However, in no event shall any partners in Landlord ever
have any personal liability under this Lease, nor may this Lease be enforced against any such
partners in Landlord, nor shall Tenant have any recourse to any assets or properties of any
partners in Landlord for enforcement of any provisions of this Lease.

     14. TENANT’S SIGNS.

          Tenant shall have the right, with Landlord’s consent, to install signage on the Building, in
compliance with applicable Laws and the covenants restricting same in Seneca Meadows Corporate
Center, identifying Tenant as the occupant of the Building. Tenant shall not place any signs or
other forms or kinds of advertising in or about the Demised Premises, which may be visible from the
exterior thereof, without Landlord’s prior written consent in each instance. Any signs installed by
Tenant shall be installed at its own expense and in compliance with all applicable laws, and shall
be removed by Tenant by the expiration or termination hereof, with all damage to Landlord’s
property repaired by and at the expense of Tenant.

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     15. LANDLORD’S SIGNS.

          Tenant agrees that Landlord and its agents shall have the right to place a “For Lease” sign
in the front or exterior of the Demised Premises at all times during the last six (6) months of
the term hereof, and a “For Sale” sign at any time, provided said signs do not block the
visibility of Tenant’s signs and do not interfere with Tenant’s use of the Demised Premises.
Tenant will not disturb or obstruct visibility of any such signs.

     16. ENTRY AND ACCESS.

          (A) Tenant further agrees that the Landlord and/or its representatives, contractors
and employees shall have the right at all reasonable times, during business hours, upon prior
24
hour notice and accompanied by an escort of Tenant, if Tenant so desires, and at any time
without notice or escort in emergencies, to enter upon the Demised Premises to inspect the
same
or make engineering surveys, exploratory excavations, repairs, alterations and additions, and
to
perform any work required of Landlord under this Lease or which Landlord deems necessary for
the safety or preservation of the Demised Premises or of the Building, including also any work
required of Tenant in respect of which Tenant is in an Event of Default. Tenant also agrees
to
permit Landlord and/or its agents to show the Demised Premises to prospective tenants at all
reasonable times after prior notice and accompanied by an escort of Tenant during the last six
(6)
months of the term hereof and any time after Tenant has given Landlord notice of termination
of
this Lease under any provision hereof entitling Tenant to do so, or if Tenant is in an Event
of
Default or subject to any Events of Bankruptcy.

          (B) If Tenant shall have vacated and abandoned the Demised Premises, then the
Landlord and/or its representatives, contractors and employees shall have the right to enter
the
Demised Premises, by force or otherwise if necessary and without being liable therefor, and
without in any manner affecting Tenant’s obligations under the Lease. The exercise of such
reserved right by Landlord shall not be deemed a disturbance of Tenant’s right of Quiet
Possession under the Lease, shall not affect Tenant’s obligation to pay Rent under the terms
of
the Lease, shall not be deemed to constitute actual or constructive eviction, and shall not
subject
Landlord to any liability to Tenant therefor.

     17. EMINENT DOMAIN.

          Tenant agrees that if the said Demised Premises, or any part thereof, shall be taken,
condemned or acquired for public or quasi-public use or purpose by any competent authority, whether
by condemnation proceedings, lease or purchase, Tenant shall have no claim against Landlord and
shall not have any claim or right to any portion of the amount that may be awarded as damages or
paid as a result of any such condemnation, lease or purchase; it being agreed that the full amount
of such award, or other proceeds, if any, made or paid by the taking authority shall be paid to and
retained by Landlord free of any claim by Tenant to any portion thereof; and all right of Tenant to
damages therefor, if any, are hereby assigned by Tenant to Landlord, provided that Landlord
represents that it shall not include Tenant improvements in its claim, . Should all or a
substantial part of the Demised Premises be so taken or acquired, the

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term of this Lease shall cease and terminate from the date of the taking, and Tenant shall
have no claim against Landlord for the value of any unexpired term of this Lease or for any other
matters. All Rent and other sums payable by Tenant hereunder shall be adjusted and paid by Tenant
to the date on which Tenant is required, by said taking authority, to surrender possession of said
Demised Premises. However, if the portion of the Demised Premises so taken or acquired does not
render the Demised Premises unusable for the purposes herein permitted, then this Lease shall not
terminate, but shall continue in effect with the Rent reduced in proportion to the area of the
Demised Premises so taken or acquired. Notwithstanding the foregoing provisions of this Section
17, Tenant shall have the right at its own expense, and in a separate action from Landlord’s
condemnation proceedings, to pursue against the condemning authority claims for Tenant’s
relocation expenses and other losses (excluding loss of the leasehold) necessitated by such taking
of the Demised Premises, provided that no such claim of or award to Tenant shall reduce, delay,
interfere with or otherwise in any manner adversely affect any claims of or award to Landlord for
taking of Landlord’s interest in the Demised Premises, this Lease, the Building, the Land
appurtenant thereto or any other claims to which Landlord is entitled.

     18. CONSENT.

          Whenever the consent or approval of the Landlord or Tenant is required under this Lease, such
consent will not be unreasonably withheld, conditioned or delayed, except as otherwise herein
provided for exclusive discretion given to Landlord The party giving its consent, or the reasons
for not giving consent, shall respond in writing to the other party’s request for consent within
five (5) business days of its receipt of such request (but shall not be deemed to grant such
consent nor to waive any rights by failing to respond within said period).

     19. TENANT’S PROPERTY.

          The Tenant further covenants and agrees that all personal property in and upon the Demised
Premises shall be and remain there at Tenant’s sole risk, and the Landlord and its partners, agents
and employees (collectively, “Landlord Parties”) shall not be liable for any damage to or loss of
any personal property arising (i) from any acts or negligence of any other persons, (ii) from the
leaking of the roof, (iii) from the bursting, leaking or overflowing of water, sewer or steam
pipes, nor from heating or plumbing fixtures, (iv) from the handling of electric wires or fixtures,
or (v) from any other cause whatsoever, nor shall the Landlord or any Landlord Parties be liable
for any injury to the person of the Tenant or other persons in or about the Demised Premises,
unless and only to the extent such damage, loss or injury is caused by the negligence or willful
misconduct of the respective Landlord Parties; the Tenant expressly agreeing to save the Landlord
harmless in all such cases and to carry public liability insurance in a company as provided in
Section 6 hereof. Tenant covenants and agrees that it will not operate any machinery in the Demised
Premises which may cause unreasonable vibration or damage to the Demised Premises or unreasonably
disturb or annoy other tenants, nor to use a loud speaker or any other device nor conduct any
activity in or at the Demised Premises which can be heard outside the Demised Premises. No storage
of any kind will be allowed on the exterior of the Building, or on the Common Areas serving the
Building.

     20. SUBORDINATION.

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          Tenant further covenants and agrees that this Lease and the rights of Tenant
hereunder are subject and subordinate to the lien of any mortgage or deed of trust encumbrance
or encumbrances now or at any time hereafter placed upon said Demised Premises by Landlord,
and to any and all renewals, modifications, consolidations, recastings, refinancings and
replacements thereof (collectively or separately the “Financing”), subject, however, to the Tenant
obtaining a non-disturbance agreement from the then applicable mortgagee as hereinafter provided.
The Tenant agrees to execute and deliver to Landlord or its mortgagees within seven (7) days after
each request any and all instruments necessary to effect such subordination and non-disturbance
which the Landlord or its mortgagees may request or require. Notwithstanding the subordination of
this Lease as aforesaid, any present or future mortgagee or beneficiary under any mortgage or deed
of trust covering such Financing at its option may require that this Lease shall be senior in lien
to such mortgage or deed of trust, and that this Lease shall not terminate in the event of
foreclosure of any such mortgage or deed of trust. Tenant covenants and agrees in the event of
foreclosure of any such mortgage or deed of trust, within seven (7) days after request of the
purchaser or mortgagee, to attorn to the purchaser upon such foreclosure sale and to recognize such
purchaser as the landlord under this Lease, and Tenant agrees to execute and deliver at any time,
within seven (7) days after request of Landlord or of any such mortgagee any instrument which may
be necessary in any such foreclosure proceeding or otherwise to evidence such attornment. Tenant
further waives the provisions of any statute or rule of law, now or hereafter in effect, which may
give or purport to give Tenant any right or election to terminate or otherwise adversely affect
this Lease and the obligations of Tenant hereunder in the event of any such foreclosure. At or
within a reasonable time following execution of this Lease, or anytime thereafter, as applicable
for any Financing, and in such case, provided Tenant is not in an Event of Default hereunder nor
subject to any one (1) or more Events of Bankruptcy, Landlord agrees to arrange for Landlord’s then
current mortgagee to join with Tenant (and with Landlord if the mortgagee so requires) in executing
a customary non-disturbance, subordination and attornment agreement in form and content reasonably
satisfactory to the then current mortgagee, whereby such subordination of this Lease to Landlord’s
deeds of trust is confirmed but the mortgagee agrees that this Lease and Tenant’s rights hereunder
will not be terminated by a foreclosure by such mortgagee so long as Tenant is not in an Event of
Default under this Lease, and whereby Tenant grants the attornment pursuant to the terms and
conditions to be set forth in the non-disturbance, subordination and attornment agreement
referenced above. Any mortgagee or foreclosure purchaser or their successors in interest shall
not (a) be bound by any prepayment of Rent or other sums more than thirty (30) days in advance paid
by Tenant to any prior landlord (including Landlord), nor (b) be bound by any amendment to this
Lease or by any waiver or forbearance by any prior landlord (including Landlord) made without prior
written consent of such mortgagee, nor (c) be liable for any act, omission or default of any prior
landlord (including Landlord), nor (d) be subject to any offsets or defenses Tenant may have
against any prior landlord (including Landlord), nor (e) be accountable hereunder for a Security
Deposit posted by Tenant hereunder (except to the extent received by such mortgagee or foreclosure
purchaser, as the case may be). Any mortgagee of Landlord shall be discharged of all obligations
hereunder which may have arisen from its becoming a mortgagee in possession, and landlord, or
otherwise after such mortgagee disposes of its interest in the Demised Premises.

     21. FIRE INSURANCE.

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          Tenant will not carry on any activity in the Demised Premises, or do or permit
anything to be done therein, which is contrary to any law, ordinance, order or regulation of the
federal, state, county or municipal government, or of any board, agency or department thereof; and
Tenant shall not permit nor do anything which would increase the Basic Rate (as defined below) of
the Landlord’s fire insurance on the Building as established by the appropriate agency having
jurisdiction. For purposes of definition herein, the “Basic Rate” shall be such rate as published
by the said appropriate agency, exclusive, however, of any excess or surcharges appended thereon
by virtue of or directly attributable to so-called faults of management. If Tenant’s use or
occupancy of or business at the Demised Premises causes an increase in the final rate of
Landlord’s insurance on the Building or the Demised Premises over and above the Basic Rate for
construction of this type occupied for the purposes permitted hereunder, then Tenant, upon written
notice from Landlord, shall immediately take all necessary steps to eliminate the excess charge
attributable to such faults of management. Should Tenant refuse or fail to take such action as may
be necessary to eliminate the cause for said excess charges, Tenant shall pay to Landlord on
demand as Additional Rent, that portion of the aforesaid fire and extended coverage insurance
premium caused by such excess charge on all outstanding insurance carried on the Demised Premises
and/or the Building of which same are a part.

     22. PARKING AREAS.

          (A) Landlord shall provide free, on-site surface parking for the use in common of
all tenants in the Building at the rate of approximately three and one-half (3.5) parking
spaces
per 1,000 square feet of rentable area in the Building. Landlord agrees to mark TWELVE (12)
parking spaces in the parking lot adjacent to the main entrance to the Demised Premises as
“Reserved” for the benefit of Tenant. However, Landlord shall not be responsible for ensuring
that those spaces are used exclusively by Tenant.

          (B) Tenant further agrees to keep the parking area in front of the Demised
Premises (between the Building line and public property) clean and free of Tenant’s and its
invitees’ merchandise, property, abandoned vehicles and equipment, at its own expense. In the
event that Tenant shall fail to abide by the foregoing provisions of this Lease, and it
becomes
necessary for Landlord to perform same, Tenant agrees, after written notice from Landlord and
an opportunity to cure, to reimburse the Landlord for such reasonable expenses and costs
occasioned by the Tenant’s neglect.

     23. PURPOSELY DELETED.

     24. NOTICES.

          All notices required or desired to be given under this Lease must be in writing, and sent via
certified or registered U.S. First Class Mail, return receipt requested, postage prepaid, or by
courier service, addressed if to Landlord at 9108 Gaither Road, Gaithersburg, Maryland, 20877, and
if to Tenant at the Demised Premises, or to such other address as either party itself may from time
to time designate to the other by like notice given at least ten (10) days before the date such
address change is effective. All such notices shall be deemed properly

28

 

given if given as aforesaid and deposited in a United States post office or mail box, as
concerns, certified or registered mail. The date of giving such notices shall be deemed to be the
second business day after the date of deposit thereof as aforesaid as concerns mailed notices, or
the date of receipt by the addressee or attempted delivery to the address in the case of notices
sent by courier.

     25. TENANT ESTOPPEL CERTIFICATES; LANDLORD CURE RIGHTS.

          (A) TENANT
ESTOPPEL CERTIFICATES. Tenant shall, without charge therefor, at any
time and from time to time, within ten (10) days after request from Landlord (but in no event more
than two (2) times in any calendar year), execute, acknowledge and deliver to Landlord a written
estoppel certificate (in form and contents reasonably requested by Landlord), certifying to
Landlord and/or any mortgagee, assignee of a mortgagee, any master landlord or any purchaser of
the Building or Demised Premises, or any other party designated by Landlord, as of the date of
such estoppel certificate, as to all or such of the following matters as reasonably requested by
Landlord, to the extent such matters then are the case (and if not, then stating all details to
the contrary thereof), namely: (a) that Tenant has accepted and is occupying the Demised Premises
covered by this Lease; (b) that the Demised Premises have been completed as required by the terms
of this Lease; (c) that the Lease is in full force and effect, and that no known Events of Default
now exist thereunder; (d) that this Lease constitutes the entire agreement between Landlord and
Tenant and has not been modified; (e) that the Lease Rents are now being paid on a current basis,
and the date to which any Rent has been paid in advance; (f) that Landlord has fulfilled all of
its duties of an inducement nature, and neither Landlord nor Tenant is in an Event of Default
under the Lease; (g) that in the event the Tenant receives written notice from Landlord’s
mortgagee stating that a default has occurred under its deed of trust loan, and that the mortgagee
requires payment of rent to it, then the Tenant will thereafter remit all Rent payments as
directed and to the address set forth in such written notice; (h) that there are no off-sets or
credits against Rents, and Rents have not been prepaid more than thirty (30) days in advance; (i)
that Tenant has received no notice of a prior assignment, or pledge of Rents, under this Lease;
(j) complete details of any matters of which Tenant has knowledge or which Tenant claims, which
are contrary to the statements contained in clauses (a) through (f) inclusive, (h) and (i) of this
Paragraph; (k) the commencement and expiration dates of the then operation term hereof, and of any
then exercised renewal terms; (l) such other matters concerning this Lease, the parties hereto
and/or the Demised Premises as Landlord may reasonably request; and (m) that Tenant understands
such Estoppel Certificate is being relied on by the mortgage lender or purchaser requesting same
as an inducement to its loan or purchase.

          (B) LANDLORD
CURE RIGHTS. Landlord shall not be deemed to be in default under any of
its obligations under this Lease unless (a) Tenant has given to Landlord (and to each of
Landlord’s mortgagees of whom Tenant has been given written notice of such mortgagee’s name and
address) written notice of such Landlord default, and (b) such default of Landlord has not been
cured by Landlord or its mortgagee within thirty (30) days after their receipt of such notice or
within such additional time as may reasonably be necessary to cure same if Landlord or its
mortgagee acts with commercially reasonable diligence to cure same (provided, that such mortgagee
shall have such additional time to cure same as may be necessary to enable it to exercise any
rights under its deed of trust and other loan documents, including

29

 

foreclosure and acquisition of control and/or possession of the Demised Premises and
Building). The cure periods aforesaid afforded Landlord and its mortgagees shall be further
extended by all delays in such cure actions caused by fire or other casualty, strikes, lockouts
or other labor troubles, shortages of equipment, materials or utilities, power outages, acts of
God or the public enemy, vandalism, governmental requirements, action or inaction or other causes
not reasonably within their control. Tenant shall not be entitled to exercise any legal,
equitable or other remedies for any default of Landlord unless same remains uncured beyond the
grace period after receipt of written notice as aforesaid. Landlord shall not be deemed in
default under this Lease, if Landlord or its mortgagee(s) cure(s) such default within the
applicable grace period after notice as aforesaid. Tenant’s rights and remedies with respect to
any default of Landlord hereunder shall be subject to the terms and provisions of this Lease, and
in no event shall include any right of Tenant to withhold or to any abatement or setoff with
respect to any Rent or other sums payable by Tenant under this Lease, nor any right to terminate
this Lease.

     26. MORTGAGEE REVISIONS.

          If requested by Landlord’s mortgage lender, Tenant agrees to join with Landlord in executing
such amendments to this Lease as such lender may reasonably require, provided same do not increase
the rentals or other amounts payable by Tenant hereunder, nor materially alter Tenant’s rights
and/or obligations, any Tenant’s lender’s rights and/or obligations or Landlord’s rights and/or
obligations under this Lease.

     27. QUIET POSSESSION.

          Landlord covenants and agrees with Tenant that upon Tenant’s paying the Rent and Additional
Rent and observing and performing all terms, covenants and conditions of this Lease on Tenant’s
part to be performed, Tenant shall during the term of this Lease have quiet possession of the
Demised Premises (subject, however, to all terms, conditions and provisions of this Lease),
without interference by Landlord.

     28. MISCELLANEOUS GENERAL PROVISIONS.

          (A) PURPOSELY DELETED.

          (B) ENTIRE
AGREEMENT. This Lease, including the exhibits referenced
herein and annexed hereto, constitutes the entire agreement of the parties in respect of the
Demised Premises thereby leased, and there are no oral agreements between the parties. This
Lease cannot be modified or amended, except by written instrument executed by Landlord and
Tenant.

          (C) WAIVER
OF JURY TRIAL. The Tenant and Landlord waive all right to
trial by jury in any proceeding which may be instituted by one party against the other party
in
respect of the Demised Premises or this Lease.

          (D) SEVERABILITY. If any provision of this Lease shall at any time be finally
adjudicated to be invalid or illegal by any court of competent jurisdiction, this Lease shall
not be

30

 

invalidated thereby; and in such event this Lease shall be read and construed as if such
invalid or illegal provision had not been contained herein, but only to the extent same is so
adjudicated to be invalid or illegal.

          (E) HEADINGS. The paragraph or section captions hereof are for convenience
of reference only and shall not limit or affect the provisions hereof.

          (F) MINIMUM
TEMPERATURE. Tenant at its own expense agrees to maintain
the temperature level in the Demised Premises at a level sufficient to prevent freezing of or
damage to any water or sprinkler pipes or lines in or serving the Demised Premises.

          (G) BUSINESS
DAYS. For purposes hereof, the phrase “business days” shall
mean Mondays through and including Fridays, excluding holidays on which federal government
and Maryland State government offices are closed.

          (H) AUTHORITY
OF PARTIES. Landlord and Tenant represent to each other that each is
duly organized, validly existing and in good standing under the laws of their respective states of
formation, and that each of the individuals signing this Lease on behalf of Landlord and Tenant
have the full right, power, capacity and authority to execute and deliver this Lease as a binding
and valid obligation of the Landlord and Tenant as the case may be hereunder.

          (I) APPLICABLE
LAW. This Lease shall be construed under the laws of the State of
Maryland, without regard to choice of law or conflict of laws principle.

          (J) INTERPRETATION. The parties confirm they have been represented by their own
counsel in the negotiation and preparation of this Lease, and no provision of this Lease shall be
construed against Landlord based on any rules of construction which assume that Landlord has
prepared this Lease or that same should be construed against the party preparing same.

          (K) LANDLORD
APPROVAL. All powers of approval given to Landlord under this Lease, and
exercise thereof, are solely for its benefit and do not constitute any representation or warranty
from Landlord.

          (L) DRAFT
NOT BINDING. Submission of this Lease in any number of drafts unexecuted by
Landlord and Tenant shall not constitute a reservation of or option for lease, nor shall any
negotiations between Landlord and Tenant constitute a legally binding obligation of Landlord and
Tenant of any kind; it being agreed that this Lease shall only be binding upon Landlord and Tenant
when fully executed by Landlord and Tenant with a counterpart fully executed original hereof
received by each of said parties.

          (M) BINDING
EFFECT. The provisions of this Lease shall bind, and inure to the
benefit of, the parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and (subject to Section 7 hereof) assigns.

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          (N) GENDERS;
PRONOUNS. Wherever required in the context, the singular number
shall include the plural number, the plural number shall include the singular number, and the use
of any gender shall be deemed to include all genders. It is understood and agreed that the
relationship between Landlord and Tenant created by this Lease is that of landlord and tenant only
and no other and they shall not be deemed partners or agents of the other party hereto.

     29. RENEWAL OPTIONS.

          (A) OPTIONS. Provided that no Event of Default of Tenant exists under this
Lease at the time of exercise of any of these renewal options, or at time of commencement of
any
of the renewal terms, the Tenant shall have the right and option to renew and extend the term
of
this Lease for two (2) additional, consecutive periods of five (5) years each (each a “Renewal
Term”), commencing therefor at 12:01 a.m. on the day immediately following the expiration date
of the Initial Term or of the immediately expired prior Renewal Term, as the case may be. Each
such renewal option may be exercised only by written notice from Tenant to Landlord given at
least two hundred seventy (270) days prior to the expiration of the then current term hereof.
Such renewal shall be upon the same terms and conditions of this Lease, except that Tenant
shall
be limited to said two (2) Renewal Terms, and Landlord shall not be obligated to perform, pay
for or grant Tenant any allowance for any work described in Paragraph 2(B) hereof or any other
work for the Demised Premises during or with respect to the Renewal Terms. If Tenant fails to
exercise its option for the first Renewal Term provided herein, then both renewal option
rights
shall automatically lapse and become null and void. The renewal option rights herein shall
apply
only with respect to the entire Demises Premises under this Lease, and shall not be assignable
by
Tenant without Landlord’s prior written consent in each case (except as provided in Section 7
above).

          (B) RENEWAL
RENT. Basic Annual Rental during the Renewal Terms shall be
at NINETY-FIVE PERCENT (95%) of the prevailing rate (including also annual increases, other
additional charges, and market concessions) as reasonably determined by Landlord and Tenant
for other similar space in the Germantown sub-market similar to the Demised Premises tendered
by Landlord to Tenant prior to Tenant’s Work (the “Renewal Rental”). Notwithstanding the
foregoing, the Renewal Rental payable by Tenant for the first lease year of the first Renewal
Term shall not be less than the Basic Annual Rental payable by Tenant during the seventh
(7th)
Lease Year of the Initial Term, nor more than one hundred five percent (105%) of the Basic
Annual Rental payable by Tenant during the 10th Lease Year of the Initial Term.
The Renewal
Rental payable by Tenant for the first Lease Year of the second Renewal Term shall not be less
than the Basic Annual Rental payable by Tenant during the third (3rd) Lease Year of
the first
Renewal Term, nor more than one hundred five percent (105%) of the Basic Annual Rental
payable by Tenant during the 5th Lease Year of the first Renewal Term. Furthermore,
the Basic
Annual Rental payable by Tenant during the first Lease Year of each Renewal Term shall be
subject to a fixed escalation of not less than three percent (3%) per year as of the
commencement
of the second and each succeeding Lease Year during the applicable Renewal Term. Landlord
shall notify Tenant as to the Renewal Rental within ten (10) business days after request by
Tenant for such information, which request shall be made by Tenant not earlier than two
hundred
seventy (270) days before the end of the then current Term. Basic Annual Rental shall be
payable during the Renewal Terms in the manner as prescribed in this Lease. In addition to the

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Renewal Rental, Tenant shall pay to Landlord, at the times indicated herein, the Additional
Rent and other sums required to be paid by Tenant pursuant to the terms of this Lease.

     30. REMOVAL BY TENANT.

          (A) By the expiration of the Initial Term (or any duly exercised Renewal Term,
as the case may be), or any termination of this Lease, Tenant shall have removed from the
Demised Premises all of Tenant’s and its assignees’ and subtenants’ merchandise, furniture and
other personal property (excluding any items which belong to Landlord or which are not to be
removed by Tenant, as elsewhere provided), and Tenant at its own expense will promptly repair
any damage done to the Demised Premises or the Building of which same are a part by
installation or use thereof or by any such removal, reasonable wear and tear excepted. Any of
Tenant’s property not removed by the expiration or termination of this Lease shall, at
Landlord’s
option, be deemed abandoned and may be retained, disposed of or otherwise dealt with by
Landlord as it deems fit (and all at the risk, cost and expense of Tenant).

          (B) Prior to the expiration or termination of this Lease, Tenant shall cause the
Demised Premises to be inspected for Hazardous Substances (as defined in Section 34, including
radioactive material) by a reputable company regularly engaged in providing environmental
assessments and consulting services (the “Testing
Company”). Tenant shall provide Landlord
with a written report of such inspection (the “Inspection
Report”). In the event that the
Inspection Report indicates the existence of radioactive or other Hazardous Substances that
did
not exist at the Commencement Date, as evidenced in the Existing Condition Report (as defined
below in Section 34(C) prepared by Landlord’s consultant), then Tenant shall have the Demised
Premises cleaned and decontaminated prior to the expiration or termination of the Lease, and
Tenant shall provide Landlord with a written report from the cleaning and decontamination
contractor upon completion of such work (the “Remediation Report”). Tenant shall then cause
the Testing Company to re-inspect the Demised Premises and issue a follow-up report, which
report must indicate that the Demised Premises are free of radioactive or other Hazardous
Substances that did not exist at the Commencement Date in order to satisfy Tenant’s
obligations
under this Section 30 of the Lease.

     31. LIEN ON TENANT’S PROPERTY.

          Landlord’s lien for Rent upon all of the goods, wares, chattels, fixtures, furniture
and other tangible personal property of Tenant which may be in or upon the Demised Premises during
the term of this Lease or any renewal, extension or holdover term shall be subordinated to the
rights of any lender, now or in the future, who acquires a security interest in the property of the
Tenant in material accordance with the Landlord’s Consent & Waiver, the form of which is attached
hereto as Exhibit “F” and made a part hereof. However, Landlord will at all times retain
ownership of and all rights to the leasehold improvements (except for the personal property of
Tenant as reflected in the schedule of personal property as described in Section 3(D)) without
subordination to a Tenant lender. Notwithstanding anything to the contrary contained herein,
Landlord agrees that the following personal property of Tenant is expressly exempt from Landlord’s
lien as set forth in this Section 31, and that at no time shall Landlord have any claim or rights
with respect thereto: all scientific instrumentation, computers, routers, storage devices

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and servers used in Tenant’s business and research, all data generated by or created for
Tenant, all software developed or adapted by or for Tenant, all databases to which Tenant has
contributed data or had data contributed on its behalf, all biological samples, chemical
compounds, reagents or research animals held by Tenant, all intellectual property related to any
of the foregoing (whether or not patented or patentable), together with all patent rights and
other intellectual property rights therein and any other such proprietary thing as may pertain to
Tenant’s business, research, design, development activities or its collaborators, clients or
Tenant affiliates, including but not limited to contract rights, licensing rights or royalty
rights.

     32. BROKERAGE.

          Landlord and Tenant recognize Scheer Partners Inc. and Manekin LLC (the “Brokers”) as the
sole real estate brokers in connection with this Lease. Landlord agrees to pay Brokers a leasing
commission for procuring this Lease pursuant to separate written commission agreements executed
between Landlord and Brokers. Tenant and Landlord represent and warrant to each other that it has
not engaged or dealt with any other real estate brokers or agent in connection with this Lease
other than the Brokers. Tenant and Landlord agree to indemnify, defend and hold each other
harmless, as the case may be, from any commission or other related claims, including court costs
and reasonable attorneys’ fees, which either party may suffer, incur or be made a party to as a
result of any misrepresentation by the other party regarding other brokers used in connection with
this Lease.

     33. RULES AND REGULATIONS.

          Tenant and its Permittees shall at all times abide by the Rules and Regulations attached
hereto as Exhibit “B” and made a part hereof. In addition, Tenant and its Permittees shall
abide by such other reasonable rules and regulations for the operation and maintenance of the
Building as may be promulgated from time to time by Landlord to all tenants in the Building, with
a copy sent to Tenant, provided, however, that the same are necessary in Landlord’s reasonable
judgment for the general well being, safety, care and/or for the cleanliness of the Building or
its appurtenances, and that the same apply to all tenants of office or warehouse space in the
Building similar to the Demised Premises. Nothing contained in this Lease shall be construed to
impose on Landlord any duty to enforce such Rules and Regulations against any other tenant, and
Landlord shall not be liable to Tenant for violations of the same by any other tenant or its
Permittees. However, Landlord will use reasonable efforts to cause other tenants in the Building
to cease having any excessive noise or noxious fumes emanating outside their space which
unreasonably disturb Tenant, but Landlord will not be liable therefor nor shall this Lease be
affected thereby. If there is any inconsistency between this Lease and said Rules and Regulations,
this Lease shall govern.

     34. ENVIRONMENTAL HAZARDS; LANDLORD’S REPRESENTATION.

          (A) In the conduct of its business at the Demised Premises, Tenant covenants and agrees at
its own expense to comply with all Environmental Laws (as hereinafter defined) applicable to the
Demised Premises, and not to store, use, or dispose of any Hazardous Substances (as hereinafter
defined) in, at or about the Demised Premises, except reasonable

34

 

amounts of such substances that are necessary for the lawful conduct of Tenant’s business
operations and consistent with the permitted Tenant’s Use (as set forth in Section 3(A)) at the
Demised Premises, none of which shall be stored, used or disposed of in a manner which violates
any Environmental Laws or endangers human health or habitation or damages the Building, Common
Areas or Land or subjects Landlord to any expense or liability or violates this Section 34, and
Tenant agrees not to cause, permit or suffer any “Release” (as that term is defined or used in any
Environmental Law) of any Hazardous Substances from the Demised Premises or onto or into the soil,
groundwater or air or any water, sewer or other drains or storm water management facilities at or
near the Demised Premises in violation of any Environmental Laws or which endangers human health
or habitation or damages the Building, Common Areas or Land or subjects Landlord to any expense or
liability or violates this Section 34. The phrases “Environmental Laws” and “Hazardous
Substances”, as used herein, are defined, as follows:

               (i) The term “Environmental Laws” means and includes, without limitation, or any federal,
state, county or local law, statute, regulation or ordinance pertaining to health, industrial
hygiene, pollution, or environmental or ecological conditions including without limitation each of
the following: the Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (“CERCLA”), 42 U.S. Code Sections 9601 et seq.; the Resource Conservation and Recovery
Act of 1976, as amended (“RCRA”), 42 U.S.C.
Sections 6901 et seq.; the Toxic Substance Control
Act, as amended, 15 U.S.C. Sections 2601 et seq.; the Clean Air Act, as amended, 42 U.S.C.
Sections 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Sections
1251 et seq.; the Federal Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq.;
and the rules, regulations and ordinances of the U.S. Environmental Protection Agency and of all
other agencies, boards, commissions and other governmental bodies and officers having jurisdiction
over the Demised Premises or the use or operation thereof. The phrase “U.S.C.” as used herein
refers to the United States Code.

               (ii) The term “Hazardous Substance”, as used herein, means and includes, without limitation:
(1) Those substances included within the definitions of “hazardous substances,” “hazardous
materials”, “toxic substances” or “solid waste” in any Environmental Laws; (2) Those substances
listed in the U.S. Department of Transportation Table or amendments thereto (49 CFR 172.101) or by
the U.S. Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR
Part 302 and any amendments thereto); (3) Those other substances, materials and wastes which are or
become prior to or during the lease term, regulated under any applicable federal, state, county or
local law, regulation or ordinance, or by any governmental agency, board, commission or other
governmental body (including any regulations promulgated thereunder), or which are or become prior
to or during the lease term classified as hazardous or toxic by any such law, regulation, or
ordinance; and (4) Any material, waste or substance which is any of the following: (a) asbestos;
(b) polychlorinated biphenyls (PCB’s); (c) any substance at any time designated or listed prior to
or during the lease term as a “hazardous substance” pursuant to Sections 311 or Sections 307 of the
Clean Water Act (33 U.S.C. Sections 1251 et seq.); (d) explosive; (e) radioactive substance; (f)
carcinogenic substance, or (g) chlorofluorocarbons (CFC’ s).

          (B) Tenant shall defend, indemnify and hold Landlord and its partners, members and agents and
its and their successors and assigns harmless from and against any and all loss,

35

 

damage, costs, expense and liability (including, without limitation, reasonable attorneys’
fees and court costs) directly or indirectly arising out of or attributable to the Tenant’s or
Tenant Permittees’ installation, use, generation, manufacture, production, storage, Release or
threatened Release, discharge, disposal or presence of any Hazardous Substance, in, under or about
the Demised Premises or in any drains or utility lines thereof or of the Building, Common Areas or
Land or any lands owned by Landlord or its affiliates by Tenant or any Tenant Permittees, or
arising out of the violation by Tenant or any Tenant Permittees of any Environmental Law
applicable to the Demised Premises, including without limitation: (i) all bodily injury or death
and property damage; (ii) the costs of any required or necessary repair, cleanup, abatement,
removal, disposal, detoxification and other remedial measures; and (iii) the preparation and
implementation of any closure, remedial or other required plans. This indemnity shall survive the
termination or expiration of this Lease for the applicable periods of statutes of limitation.

          (C) LANDLORD’S
REPRESENTATION. Landlord represents and warrants that to the best of
Landlord’s actual knowledge, which knowledge includes the Phase I Environmental Site Assessment
prepared by EMG and dated January 21, 1998 (a copy of which has been provided to Tenant), there
are no Hazardous Substances located in, on or under the Building or the Land and Landlord has
received no notices concerning violation of any laws relating to Hazardous Substances with respect
to the Building or the Land. If Hazardous Substances are discovered in the Building or on the Land
after the Commencement Date and were not caused or permitted by Tenant or its Permittees, Landlord
will be responsible for the costs and expenses associated with regulatory requirements to
eliminate any violations of law resulting from such presence and Landlord shall indemnify and hold
Tenant and Tenant’s employees, assignees, agents and invitees, harmless from any and all claims,
costs, liabilities or expenses associated with such Hazardous Substances. Landlord agrees, at its
own expense and prior to the Commencement Date, to have the Demised Premises, the Building and the
Land inspected by its environmental site inspection engineer, and to furnish Tenant a copy of the
resulting inspection report (the “Existing Condition
Report”), upon which the Tenant may rely.

     35. ROOF & SITE RIGHTS.

          Tenant shall have the right to install, free of charge, at Tenant’s sole cost, risk and
expense, reasonable amounts of mechanical or other equipment (the
“Tenant Equipment”) on the roof
of the Building and/or on portions of the Land, in an amount and of a type determined by Tenant,
subject to Tenant’s compliance with the all applicable Laws, the Covenants, Conditions and
Restrictions in Seneca Meadows Corporate Center, and subject further to Landlord’s prior written
approval of location, placement, plans and specifications for the Tenant’s Equipment and type and
placement of all cabling and wiring ancillary thereto, all of which Landlord approvals shall not
be unreasonably withheld, conditioned or delayed. Landlord makes no representation concerning the
suitability of the rooftop or the Land as a location for the Tenant’s Equipment, and Landlord’s
approval of Tenant’s plans and specifications shall in no event be construed as constituting such
a representation. Tenant shall be responsible, at its own expense, for obtaining and maintaining
in full force and effect all approvals, permits and licenses required by any federal, state or
local government for installation and operation of the Tenant’s Equipment and for paying all fees
attendant thereto and for complying with all other Laws relating to the Tenant’s Equipment. If the
Tenant’s Equipment is installed, Tenant shall have sole

36

 

responsibility for the maintenance, repair and replacement thereof and of all cabling and
wiring ancillary thereto and for the removal thereof on or before termination of this Lease.
Tenant shall coordinate with Landlord’s property manager concerning any penetration of the roof or
the exterior facade of the Building, and shall in no event take any action that will void any
then-existing roof warranty. All repairs to the Building made necessary by reason of the
furnishing, installation, maintenance, operation or removal of the Tenant’s Equipment shall be
performed promptly by Tenant at its sole expense, and Tenant, at its sole expense, shall repair
any damage to the Building caused by the installation or removal of the Tenant’s Equipment and
related cabling and wiring. In the event Tenant fails to remove the Tenant’s Equipment on or
before the expiration of the Term, Landlord may remove and dispose of such Tenant’s Equipment at
Tenant’s risk and expense, and Tenant shall pay to Landlord upon request the entire reasonable
cost thereof. Tenant’s Equipment shall not interfere with the structure of the Building, any of
the building systems, or the equipment (including airwaves reception and other equipment) of any
other tenant in the Building or surrounding buildings who shall have similar rights to their own
equipment and shall have exercised those rights prior to the exercise thereof by Tenant hereunder.
Any such similar rights granted to any other tenant shall similarly restrict such other tenant’s
equipment from interfering with Tenant’s Equipment, and Landlord shall enforce all such
restrictions. Tenant shall be responsible for and promptly shall correct and pay for any damage to
or interference with the operation of the Tenant’s Equipment by any third party.

With respect to Tenant’s Equipment, it is further agreed that: (a) no such equipment shall emit or
produce any radiation, sound or light waves or other features including vibration, that is in
violation of any Laws, nor involve or include Hazardous Materials in violation of any Laws or of
Tenant’s obligations pursuant to Sections 6 and 21 hereof, (b) Tenant will provide Landlord, upon
request, copies of all permits for said equipment, (c) all installation thereof shall be done in
compliance with the terms of this Lease, (d) all such equipment shall conform to the plans for
same approved by Landlord and the permit authority, and (e) all of Tenant’s rights under this
Section 35 shall cease upon the expiration of the Term. Tenant shall not assign or sublet its
rights under this Section 35 separate from an assignment or sublease of this Lease.

     36. OPTION TO LEASE ADDITIONAL SPACE IN THE BUILDING.

          Provided that no Event of Default of Tenant or Events of Bankruptcy of Tenant exists under
this Lease at the time of exercise of this option or at consummation thereof, and that Tenant has
not assigned this Lease nor sublet all or more than twenty five percent (25%) of the Demised
Premises, and that Tenant is then occupying for its own use at least seventy-five percent (75%) of
the Demised Premises then leased to it, and provided there then remains unexpired at least three
(3) years in the (then operative) Term of this Lease, or any then operative exercised Renewal Term,
Landlord agrees that, prior to committing to lease space in the Building, the Landlord shall advise
the Tenant in writing of Landlord’s desire to lease such additional space (the “Offer Space”),
including the rentals and other basic terms and conditions thereof. The Tenant shall have the right
of first refusal to lease solely for its own use all (but not less than all) of such Offer Space,
which was described in Landlord’s notice, and Tenant shall have fourteen (14) calendar days after
date of its receipt of such notice in which to accept or reject such offer by the Landlord, by
giving Landlord written notice within said fourteen (14) days. In the event Tenant does not respond
in writing within said fourteen (14) days, such failure

37

 

to respond shall serve to extinguish any right of the Tenant under this Section 36 to lease
said Offer Space, and Landlord shall have the right to lease such Offer Space to any parties upon
such terms, rental and conditions as it may, in its sole discretion, determine. In no event shall
Landlord be obligated to evict any other tenant, or to decline to renew or extend the lease of any
other tenant, in order to make such tenant’s space available to Tenant for purposes of this
paragraph. The provisions of this Section 36 shall not be applicable to any renewal or extension
of a lease granted to an initial or existing tenant in the Building, whether or not contained in
such party’s lease (nor to any subsequent other tenants if Tenant fails to exercise its first
refusal under this paragraph). If Tenant exercises this option within the time frame provided
above, then Landlord will prepare for and deliver to Tenant an amendment to the Lease (the “Lease
Amendment”) covering the annual base rental rate, the base rental escalation, the amount of the
additional space being leased by the Tenant and the subsequent modification in the Tenant’s
proportionate share of the Building, pass-throughs for Impositions, Insurance Premiums, Operating
Expenses, other necessary monetary items, the term that the additional space is to be leased and
any tenant improvement allowance or work, if any, that is offered by and is to be provided by the
Landlord in its sole discretion. Tenant shall execute in triplicate and return to Landlord such
Lease Amendment within fourteen (14) days after Tenant’s receipt thereof, accompanied by the first
month’s rent and any security deposit called for in Landlord’s offer aforesaid; failing which,
Tenant’s rights under this Section 36 with respect to said additional space shall terminate
without further obligation from Tenant. Tenant’s rights under this Section 36 (i) are subject to
any prior Offer Space rights or expansion rights that Landlord may have granted to other tenants
in the Building prior to the date of execution of this Lease, (ii) shall not be assignable or
transferable, and (iii) may be exercised only by Tenant.

     37. OPTION TO LEASE ADDITIONAL SPACE IN BUILDING #2.

          Landlord has site plan approval from the Maryland-National Capital Park & Planning
Commission to construct a building containing approximately 90,000 square feet of space on the
adjacent Lot 15, Block A (“Building #2”). For a period of one (1) year from the Rent Commencement
Date, and provided that no Event of Default of Tenant or Events of Bankruptcy of Tenant exists
under this Lease at the time of exercise of this option or at consummation thereof, and that Tenant
has not assigned this Lease nor sublet all or more than twenty five percent (25%) of the Demised
Premises, and that Tenant is then occupying for its own use at least seventy-five percent (75%) of
the Demised Premises then leased to it, Landlord agrees that, upon receipt of acceptable terms for
the leasing of space in Building #2 from another prospective tenant, and prior to committing to
lease said space in Building #2, Landlord shall advise the Tenant in writing of Landlord’s desire
to lease such space in Building #2 (the “Building #2 Offer Space”), including the rentals and
other basic terms and conditions thereof. The Tenant shall have the right of first refusal to lease
solely for its own use all (but not less than all) of such Building #2 Offer Space, which was
described in Landlord’s notice, and Tenant shall have fourteen (14) calendar days after date of its
receipt of such notice in which to accept or reject such offer by the Landlord, by giving Landlord
written notice within said fourteen (14) days. In the event Tenant does not respond in writing
within said fourteen (14) days, such failure to respond shall serve to extinguish any right of the
Tenant under this Section 37 to lease said Building #2 Offer Space, and Landlord shall have the
right to lease such Building #2 Offer Space to another tenant upon the terms, rental and conditions
as previously described to Tenant. If

38

 

Tenant exercises this option within the time frame provided above, then Landlord will prepare
for and deliver to Tenant a lease for the space in Building #2 (the
“#2 Lease”) covering the
annual base rental rate, the base rental escalation, the amount of space being leased by the
Tenant, Tenant’s proportionate share of the Building, pass-throughs for Impositions, Insurance
Premiums, Operating Expenses, other necessary monetary items, the term that the space is to be
leased and any tenant improvement allowance or work, if any, that is offered by and is to be
provided by the Landlord. Tenant shall execute in triplicate and return to Landlord such #2 Lease
within fourteen (14) days after Tenant’s receipt thereof, accompanied by the first month’s rent
and any security deposit called for in Landlord’s offer aforesaid; failing which, Tenant’s rights
under this Section 37 with respect to Building #2 shall terminate without further obligation from
Tenant. Tenant’s rights under this Section 37 shall not be assignable or transferable, and may be
exercised only by Tenant.

     38. ADDITIONAL PROVISIONS.

          (A) INTERRUPTION OF SERVICES. In the event that any essential service to be provided
by Landlord under the Lease is interrupted or curtailed rendering the Premises untenantable for
Tenant’s Use for a period of 48 hours due to any cause or occurrence which Tenant believes to
reasonably be within Landlord’s control, then Tenant shall immediately give Landlord written notice
thereof and provide therein such facts and evidence in support of any such claim. Within three (3)
business days after receipt of Tenant’s notice, Landlord shall notify Tenant of its determination
(either orally or in writing) as to whether or not it is responsible for such service interruption.
If such determination is conveyed orally, then Landlord shall provide Tenant with written notice
thereof within seven (7) business days from date of oral notification. In the event that Landlord
should accept responsibility for such occurrence as aforesaid, then all Rent for the Premises shall
completely abate from and after such 48-hour period and shall continue abated until such service is
fully restored. Notwithstanding anything herein to the contrary, Tenant shall have the right to
pursue any other remedies that it may have available.

39

 

     IN WITNESS WHEREOF, the Landlord has caused this instrument to be executed by its
undersigned Agent, and the Tenant has caused this instrument to be signed, and to be witnessed or
attested on its behalf by its undersigned authorized officer(s), all done on the date first
hereinabove written.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	LANDLORD:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	WESTPHALIA CENTER II LIMITED PARTNERSHIP
	 
	 	 	 	 	 	 	 	 	 	 
	WITNESS:	 	 	 	By:	 	PNC REALTY, INC., a Maryland corporation,	 	 
	

	 	 	 	 	 	its General Partner	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Mary E. Pitrone

	 	 	 	By:
	 	/s/ Paul N. Chod
	(SEAL)	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	(SIGNATURE)

	 	 	 	 	 	Paul N. Chod, President	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	TENANT:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	 	 	AVALON PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ James S. Ireland

	 	 	 	By:
	 	/s/ Kenneth C. Carter
	(SEAL)	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	James S. Ireland	 	 	 	 	 	Kenneth C. Carter, Ph.D.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Senior Bioinformatics Scientist

	 	 	 	 	 	President & CEO	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	(PRINT NAME & TITLE)

	 	 	 	 	 	(PRINT NAME & TITLE)	 	 	 	 

40

 

EXHIBIT “A”

[Graphic Omitted - Description of Premises]

41

 

EXHIBIT “B”

RULES AND REGULATIONS

     These Rules and Regulations are attached to the Lease and are to be incorporated therein by
reference. Definition of terms are set forth in the Lease. In the event of any ambiguity or
conflict between these Rules and Regulations and the terms and provisions of the Lease to which
this Exhibit is attached, the terms of the Lease shall control.

     The following rules and regulations have been formulated for the safety and well-being of all
tenants of the Building and to insure compliance with all municipal and other requirements. Strict
adherence to these rules and regulations is necessary to promote the end that each and every
tenant will enjoy a safe and unannoyed occupancy in the Building in accordance with the Lease. Any
continuing violation of these rules and regulations by Tenant beyond any grace period provided for
in the Lease, after notice from Landlord, shall be sufficient cause for termination of the Lease,
at the option of Landlord.

     Landlord may at its exclusive discretion, upon request by any tenant, waive the compliance by
such tenant with any of these rules and regulations, provided that (i) no waiver shall be
effective unless signed by Landlord or Landlord’s authorized agent, (ii) any such waiver shall not
relieve such tenant from the obligation to comply with such rule or regulation in the future
unless expressly consented to by Landlord, (iii) no waiver granted to any tenant shall relieve any
other tenant from the obligation of complying with the rules and regulations unless such other
tenant has received a similar waiver in writing from the Landlord, and (iv) any such waiver by
Landlord shall not relieve Tenant from any obligation or liability of Tenant to Landlord pursuant
to the Lease for any loss or damage occasioned as a result of Tenant’s failure to comply with any
such rule or regulation.

     B-l. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors
and halls and other parts of the Building not occupied by any tenant shall not be obstructed or
encumbered by any tenant or used for any purpose other than ingress and egress to and from the
premises. Landlord shall have the right to control and operate the public portions of the Building,
and the facilities furnished for common use of the tenants, in such manner as Landlord deems best
for the benefit of the tenants generally. No tenant shall permit the visit to the premises of
persons in such numbers or under such conditions as to interfere with the use and enjoyment by
other tenants of the entrances, corridors and other common or public portions or facilities of the
Building.

     B-2. No awning or other projections shall be attached to the outside walls of the Building
without the prior written consent of Landlord. No drapes, blinds, shades, or screens shall be
attached to or hung in or used in connection with any window or door of the premises, without the
prior written consent of Landlord. Such awnings, projections, curtains, blinds, shades, screens or
other fixtures must be of a quality, type, design and color, and attached in a manner approved by
Landlord.

42

 

     B-3. No showcases or other articles shall be put in front of or affixed to any part of the
exterior of the Building, nor placed in the halls, corridors or vestibules without the prior
written consent of Landlord.

     B-4. The water and wash-closets and other plumbing fixtures shall not be used for any
purposes other than those for which they were constructed, and no sweeping, rubbish, rags, or
other substances shall be thrown therein. All damages resulting from any misuse of the fixtures
shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees,
shall have caused the same.

     B-5. There shall be no marking, painting, drilling into or in any way defacing the Building
or any part of the premises. Tenant shall not construct, maintain, use or operate within the
premises any electrical device, wiring or apparatus in connection with a loud speaker system or
other sound system, except as reasonably required for its communication system and approved prior
to the installation thereof in writing by Landlord. No such loud speaker or sound system shall be
constructed, maintained, used or operated outside of the premises.

     B-6. No animals, birds or pets of any kind shall be brought into or kept in or about the
premises, or permitted by any tenant on the premises. No tenant shall cause or permit any odors,
vapors, or other substances to be produced upon or to emanate from the premises.

     B-7. The use of the premises by each tenant as stated in its lease was approved by Landlord
prior to execution of the lease and such use may not be changed without the prior written approval
of Landlord.

     B-8. No tenant shall make any unseemly or disturbing noises or disturb or interfere with
occupants of this or neighboring buildings or premises or those having business with them, whether
by the use of any musical instrument, radio, talking machine, unmusical noise, whistling, music,
dancing, singing, or in any other way. No tenant shall throw anything out of the doors or windows
or down the corridors or stairs.

     B-9. No flammable, combustible or explosive fluid, chemical or substance shall be brought or
kept upon the premises unless in quantities and stored in a manner complying with all applicable
fire codes and other laws and regulations and the requirements of Landlord’s insurers.

     B-10. No additional locks or bolts of any kind shall be placed upon any of the doors or
windows by any tenant, nor shall any changes be made in existing locks or the mechanism thereof.
The doors leading to the corridors or main halls shall be kept closed during business hours except
as they may be used for ingress or egress. Each tenant shall, upon the termination of his tenancy,
return to the Landlord all keys of stores, offices, storage and toilet rooms either furnished to,
or otherwise procured by, such tenant, and in the event of the loss of any keys so furnished, such
tenant shall pay to Landlord the loss thereof. Tenant’s key system shall be separate from that for
the rest of the Building.

     B-11. Tenant shall prohibit its employees and visitors from leaving trucks and other
vehicles parked with their motors running, adjacent to the Building.

43

 

     B-12. Landlord reserves the right to exclude from the Building at all times any person who is
not known or does not properly identify himself to the Building management or Tenant’s watchman on
duty. Landlord may, at its option, require all persons admitted to or leaving the Building between
the hours of 6:00 p.m. and 7:00 a.m., Monday through Friday, and at any hour, Saturdays, Sundays
and legal holidays, to register. Each tenant shall be responsible for all persons for whom he
authorizes entry into or exit out of the Building, and shall be liable to Landlord for all acts or
omissions of such persons.

     B-13. The premises shall not, at any time, be used for lodging or sleeping or for any immoral
or illegal purpose.

     B-14. Landlord’s employees shall not perform any work or do anything outside of their regular
duties, unless under special instruction from the management of the Building. The requirements of
tenants will be attended to only upon application to Landlord or its management agent, and any
such special requirements shall be billed to Tenant (and paid with the next installment of rent
due) at the schedule of charges maintained by Landlord from time to time or at such charge as is
agreed upon in advance by Landlord and Tenant.

     B-15. Canvassing, soliciting and peddling in the Building is prohibited and each tenant shall
cooperate to prevent the same.

     B-16. There shall not be used in any space, or in the public halls of the Building, either by
any tenant or by jobbers or others, in the delivery or receipt of merchandise, any hand trucks,
except those equipped with rubber tires and side guards and Tenant shall be responsible to
Landlord for any loss or damage resulting from any deliveries of Tenant’s to the Building.

     B-17. Mats, trash or other objects shall not be placed in the public corridors or
stairways.

     B-18. Drapes and blinds installed by Landlord for the use of Tenant, or curtains installed by
Tenant, which are visible from the exterior of the Building, must be cleaned by Tenant at least
once a year, without notice, at Tenant’s own expense.

     B-19. All office and other machines shall be installed upon proper insulation or pads, to
prevent vibration from such machines damaging the Building or annoying other occupants.

     B-20. Tenant shall, at Tenant’s expense, subscribe to a pest control service for its premises
as necessary.

     B-21. Tenant will not install any vending or coin operating machines without Landlord’s
approval, and if such vending machines are installed, proper ventilation shall be provided by
Tenant.

     B-22. Tenant may not store any equipment, furniture or boxes outside of the building, except
as approved in writing by Landlord.

44

 

     B-23. If Landlord consents to Tenant performing any work, same shall be done only in the
evenings between 7 p.m. and 7 a.m. and not during usual business hours unless expressly approved
in advance in writing by Landlord.

     B-24. No bicycles, motorcycles, motor scooters or other vehicles of any kind shall be brought
into, stored, operated or parked anywhere within the building or demised premises, or parked in
front of or adjacent to or leaned against the building, and instead shall be parked in areas
designated by Landlord.

     B-25. All deliveries to, or shipments from, or service to, the demised premises done by
Tenant, its agents and contractors shall be conducted in such fashion and at such times as will not
unreasonably interfere with or obstruct the orderly flow of pedestrian traffic into and out of the
building.

45

 

EXHIBIT “C”

LANDLORD’S WORK

C-l. SPACE PLAN.

     Except for Landlord’s Work, as set forth hereinbelow, Landlord shall deliver possession of
the Demised Premises together with all existing leasehold improvements and conditions now
installed and constructed therein “AS IS”, as shown on the space plan for the Premises attached to
this Exhibit “C” and to be made a part hereof (the “Space Plan”); it being expressly agreed,
however, that except as otherwise specified in the Landlord’s Work, the Structure, plumbing,
electrical systems, HVAC and mechanical systems serving the Demised Premises shall be in good
working order on the date upon which Landlord delivers possession of the Demised Premises to
Tenant.

C-2. LANDLORD’S WORK.

     2.1 Prior to delivery of possession, Landlord shall furnish and install, at Landlord’s sole
cost and expense, certain new leasehold improvements in the Demised Premises (the “Landlord’s
Work”), which shall be performed by Landlord and/or its agents and subcontractors in a good and
workmanlike manner. An affiliate of Landlord, namely, Minkoff Development Corporation
(“MDC”), shall act as general contractor and construction manager for Landlord’s Work. The
scope of Landlord’s Work shall be as follows, and unless otherwise noted, all materials, finishes,
fixtures, hardware and equipment installed as part of Landlord’s Work shall be selected from
Landlord’s Building Standard items:

	 	Ø	Construct a full height, 2 hour rated demising wall along column line
11 on the second floor of the Building, located on the column line 10 side of
column line 11, as shown on the Building architectural drawings prepared by DNC
Architects, Inc. The wall will be taped, spackled, sanded and ready for painting
by Tenant. All existing improvements that (i) are in the way of constructing the
new demising wall, or (ii) penetrate the new wall will be disconnected and/or
demolished on the Tenant’s side of the new demising wall; they will not be
reconnected and/or reconstructed in the Demised Premises. Accordingly, to the
extent that the existing plumbing, electrical, HVAC and mechanical systems are
affected by the construction of the new demising wall, they will not be in good
working order on the date Landlord delivers possession of the Demised Premises to
Tenant, as Tenant will be modifying and completing those systems as part of
Tenant’s Work.
	 
	 	Ø	Construct a full height, 2 hour rated demising wall along column line
13 on the first floor of the Building, located on the column line 12.5 side of
column line 13 and immediately adjacent to the existing wall on column line 13.
The wall will be taped, spackled, sanded and ready for painting by Tenant.
All existing improvements that (i) are in the way of constructing the new
demising wall, or (ii) penetrate the new wall will be disconnected and/or
demolished on the Tenant’s

46

 

	 	   	side of the new demising wall; they will not be reconnected and/or reconstructed in
the Demised Premises. Accordingly, to the extent that the existing plumbing,
electrical, HVAC and mechanical systems are affected by the construction of the new
demising wall, they will not be in good working order on the date Landlord delivers
possession of the Demised Premises to Tenant, as Tenant will be modifying and
completing those systems as part of Tenant’s Work.
	 
	 	Ø	Remove all HVAC ductwork and controls between column lines 8 and 11 on
the second floor that are connected to the existing VAV roof top unit. That VAV unit
will only serve the adjacent tenant space after completion of the Landlord’s Work.
Tenant, as part of Tenant’s Work, will furnish and install the HVAC equipment,
ductwork and associated controls to serve this area.
	 
	 	Ø	Remove all HVAC ductwork and controls between column lines 11 and 13 on
the first floor that are connected to the two (2) existing constant volume roof top
units “B”. One (1) of those units will continue to serve the Tenant’s space
between column lines 11 and 13 on the first floor. Landlord shall furnish and
install the main supply and return ducts from that unit, and shall stub them
through the new demising wall on column line 13 into the Demised Premises.
Tenant, as part of Tenant’s Work, shall complete the HVAC ductwork and control
system for this area.
	 
	 	Ø	Disconnect all lighting fixtures and switches, power receptacles,
battery packs and exit lights whose circuits cross the new demising walls on each
floor, and remove the circuit back to the nearest junction box. On the first
floor, completely remove the existing UPS room.
	 
	 	Ø	Provide any modifications to the sprinkler system and fire alarm system
that are required due to the construction of the new demising walls.
	 
	 	Ø	Remove all debris created by constructing the new demising walls, and
leave the Premises broom clean.

     2.2 Landlord and/or MDC reserve the right (i) to make substitutions of materials of equivalent
grade and quality when and if any specified material shall not be readily and reasonably available,
and (ii) to make changes necessitated by conditions met in the course of construction, provided
that the Tenant’s approval of any substantial change shall first be obtained (which approval shall
not be unreasonably withheld, conditioned or delayed so long as the proposed changes are in general
conformity with the scope of Landlord’s Work; and which approval shall automatically be deemed
given if not refused in writing by Tenant with full and proper reasons stated therefor within three
(3) business days after Landlord’s written request).

     2.3 Landlord agrees to allow Tenant to begin Tenant’s Work while Landlord is performing
Landlord’s Work, provided Tenant agrees to conduct such work in the Demised Premises in a manner so
as not to interfere with Landlord’s Work or cause any damage or delay

47

 

to Landlord’s Work. Any damage to Landlord’s Work caused by Tenant, its employees, agents or
invitees shall be promptly repaired by and at the sole cost and expense of Tenant.

C-3. SUBSTANTIAL COMPLETION.

     Landlord shall exercise its reasonable best efforts to cause Landlord’s Work to be
Substantially Complete by September 1, 2001, the anticipated Lease Commencement Date, subject to
extensions of said date occasioned by any “Tenant Delays” or “Force Majeure Delays” (said later
date, as so extended, being herein referred to as the
“Outside Date”). For purposes hereof, the
phrase “Tenant Delays” shall mean all delays in performance of Landlord’s Work caused by or
attributed to any of the following: (i) failure of Tenant to furnish any required plan,
information, approval or consent within the required period of time, or any failure to reasonably
cooperate with Landlord during performance of Landlord’s Work; (ii) performance of any work or
activity in the Premises by Tenant or any of its employees, agents or contractors; (iii) breach or
default by Tenant, its Permittees or agents of any term or provision of the Lease or of the
requirements of this Exhibit “C”; (iv) “Change Orders” to Landlord’s Work requested by Tenant or
any governmental authority having jurisdiction over the Premises or the Building of which the
Premises is a part after the date of execution of the Lease; (v) the inclusion of any “Special
Items” in Landlord’s Work which cause or may reasonably be expected to cause a delay provided
Landlord has notified Tenant of same; or (vi) any failure of Tenant to comply with the terms of
Section C-2.3, herein, if the same shall result in a delay in completion of Landlord’s Work. The
phrase “Force Majeure Delays” shall mean, for purposes hereof, any delays in performance of
Landlord’s Work caused by strikes, lockouts or other labor or industrial disturbance, shortage or
unavailability of materials, utilities or labor, civil disturbance, orders of any government, court
or regulatory body claiming jurisdiction, exercise of police power, act of the public enemy, riot,
war, sabotage, blockage, embargo, acts of God, lightning, earthquake, fire, storm, hurricane,
tornado, flood, washout, explosion, casualty damage, delay in issuance of any permits, inspections,
approvals or use and occupancy certificate, if required, by any governmental authority having
jurisdiction over the Premises or Building in which the Premises are a part, or any other cause
whatsoever beyond the reasonable control of Landlord, in all cases provided that Landlord has
informed Tenant of such conditions within three (3) business days of the occurrence of the event.
The phrase “Change Orders” as used herein shall mean any modifications, substitutions or changes in
Landlord’s Work after the date of execution of the Lease requested by Tenant or any governmental
authority having jurisdiction over the Premises or the Building of which the Premises are a part.
Landlord’s Work shall be deemed “Substantially Complete” (which phrases shall include phrases of
similar import used herein concerning Landlord’s Work) (i) when Landlord’s Work to be performed by
Landlord and/or its contractors in the Premises is completed to the extent reasonably necessary for
Tenant to occupy the Premises for its intended use notwithstanding minor Punch List Items, the
non-completion of which would not materially interfere with Tenant’s use and occupancy of the
Premise as certified in writing by Landlord to Tenant or (ii) when any requisite Use and Occupancy
Certificate has been obtained by Landlord, if required. In making any such determination of
Substantial Completion of Landlord’s Work, the Landlord shall not take into account the incomplete
status of any Change Orders, Special Items or “Punch List Items” (defined herein below). If
Tenant disputes any such determinations or certifications made by Landlord, then the matter shall
be resolved by arbitration pursuant to the

48

 

American Arbitration Association - Construction Rules of Arbitration, and the decision in such
arbitration shall be binding and conclusive on the parties. The arbitrator shall be empowered to
allocate all reasonable legal fees, costs and expenses of arbitration among the parties. “Special
Items” as used herein shall mean all materials and other items forming part of Landlord’s Work
which are not readily available, or which require more than twenty-one (21) days to order, obtain
and install (as determined and certified in writing by Landlord to Tenant, or by arbitration as
aforesaid if disputed by Tenant). The phrase “Punch List Items”, as used herein, shall mean any
unperformed or incomplete elements of Landlord’s Work which, individually or in the aggregate, are
minor in character and do not materially interfere with Tenant’s access to, use or enjoyment of
the Premises; all as determined by the Landlord or by arbitration aforesaid if Tenant disagrees
with the determination of the Landlord in regard thereto. Landlord shall cause such Punch List
Items to be completed within thirty (30) days after Substantial Completion of Landlord’s Work (or
as soon thereafter as practicable). After the date of Substantial Completion and delivery of the
Premises to Tenant, Tenant shall provide Landlord and its contractors access to the Premises on
request at all reasonable times during normal business hours and on weekends, as coordinated with
Tenant, to perform work on the Punch List Items, and Tenant shall not interfere with such work.

C- 4. RENT CREDIT.

     If Landlord is unable to tender possession of the Demised Premises with Landlord’s Work
Substantially Complete by September 1, 2002, and if no Event of Default of Tenant under the Lease
remains uncured, then Tenant shall be entitled to a rent credit (the
“Rent Credit”) after the Rent
Commencement Date in an amount equal to $2,000.00 per day for each day after September 1, 2002
until the date the Landlord so tenders to Tenant possession of the Demised Premises Substantially
Complete; such Rent Credit to be applied until exhausted on account of the earliest due
installments of Basic Monthly Rental and Additional Rent.

C-5. CODE COMPLIANCE AND WARRANTY.

     Landlord represents and warrants to Tenant that on the date of delivery of possession of the
Premises to Tenant, the Building, Common Areas and Landlord’s Work performed in the Premises will
be in compliance with all applicable laws, ordinances, rules, orders, regulations and other
governmental requirements, as well as requirements of the board of fire underwriters, or any
similar body having jurisdiction over the Premises and the Building of which the Premises are a
part. Landlord will warrant all of Landlord’s Work to be free of defects in materials and
workmanship for a period of one (1) year from the date that Landlord delivers possession of the
Premises to the Tenant with all of Landlord’s Work Substantially Complete.

C-6. EXISTING IMPROVEMENTS.

     Landlord, at its sole cost and expense, shall have the right to remove from the Demised
Premises any existing leasehold improvements that Tenant does not intend to reuse in its
renovation of the Demised Premises as part of Tenant’s Work. Upon its review of the Working

49

 

Drawings prepared by Tenant’s design consultants as called for in the Lease, Landlord shall
indicate, through a schedule and marked drawing, which of the existing improvements not shown as
being reused in the Demised Premises Landlord wishes to remove. Tenant shall review the schedule
and marked drawing for approval of the existing leasehold improvements to be removed by Landlord.
Landlord shall remove said improvements from the Demised Premises in a manner so as not to
interfere with Tenant’s Work or cause any damage or delay to Tenant’s Work. Any damage to Tenant’s
Work caused by Landlord, its employees, agents or invitees shall be promptly repaired by and at the
sole cost and expense of Landlord. If Landlord delays the Tenant’s Work, as reasonably determined
by the Landlord and Tenant, then Tenant shall receive the Rent Credit specified above for each day
of delay.

50

 

[Graphic Omitted - Techical Drawings]

 

 

EXHIBIT “D”

CERTIFICATE OF DELIVERY OF POSSESSION AND

COMMENCEMENT DATE OF LEASE

     THIS CERTIFICATE OF DELIVERY OF POSSESSION AND COMMENCEMENT
DATE OF LEASE, made on this ___day of ___, 2002 (herein after referred to as the
“Certificate”), between WESTPHALIA CENTER II LIMITED PARTNERSHIP, a Maryland limited partnership
(hereinafter referred to as the “Landlord”), whose address for purposes hereof is c/o Minkoff
Development Corporation 9108 Gaither Road, Gaithersburg, MD 20877; and AVALON PHARMACEUTICALS,
INC., a Delaware corporation, qualified to transact business and in good standing under the laws
of the State of Maryland (hereinafter referred to as the
“Tenant”), whose address for purposes
hereof is 20458, 20460, 20462, 20482, 20484 & 20486 Goldenrod Lane, Germantown, Maryland 20876.

RECITALS:

     WHEREAS, Landlord and Tenant have entered into a Lease dated ___, 2002
(the “Lease”), for commercial and warehouse space in Building #1, Seneca Meadows Corporate Center
(the “Building”), said premises being known and described as 20458, 20460, 20462, 20482, 20484 &
20486 Goldenrod Lane, Germantown, Maryland 20876, consisting of approximately 51,931 square feet
(hereinafter referred to as the “Premises”), as more particularly described in the Lease, a copy of
which is incorporated herein by reference; and

     WHEREAS, Landlord has substantially completed the Landlord’s Work as set forth in the Lease
and Exhibit “C” attached thereto; and

     WHEREAS, Landlord has delivered to Tenant possession of the Premises on
___, 2002 (hereinafter the “Delivery of Possession Date”), and the Premises are now
ready for Tenant to take possession thereof and commence the tenant’s Work in the manner described
and contemplated pursuant to the Lease; and

     WHEREAS, Tenant hereby acknowledges that Landlord has completed the Landlord’s Work and
accepts delivery of possession of the Premises from the Landlord on Delivery of Possession Date set
forth herein above; and

     WHEREAS, Tenant hereby acknowledges all of its covenants to pay Rent and such other amounts
as may become due and owing under the Lease, and to perform all of its other obligations, duties
and agreements pursuant to the terms and provisions of the Lease commencing on the Delivery of
Possession Date; and

     WHEREAS, all words, terms and phrases not otherwise defined herein, whether or not
capitalized herein, shall have the meanings given to them in the Lease, unless and except as
otherwise expressly stated herein.

51

 

     NOW, THEREFORE, in consideration of the foregoing recitals, the delivery of and acceptance of
possession of the Premises and all improvements related thereto, and for other good and valuable
consideration heretofore given by the Landlord and Tenant pursuant to the Lease, the receipt and
sufficiency of which are acknowledged, the parties hereby certify, covenant and agree as follows:

     1. LEASE COMMENCEMENT DATE. The actual Commencement Date of the Lease shall begin on ___, 2002.

     2. EXPIRATION DATE. The Initial Term of the Lease shall expire on ___, 200 ___.

     3. COMMENCEMENT OF RENT. Basic Annual Rental and Basic Monthly Rental,
pursuant to Section 1 (C) of the Lease, shall commence on ___, 2002 and shall be due and payable for each respective Lease Year in the amounts set forth herein below:

	 	 	 	 	 	 	 	 	 
	Lease Year	 	 	 	Basic Monthly Rental	 	 	 	Basic Annual Rental
	1st
	 	 	 	 	 	 	 	 
	2nd 
	 	 	 	 	 	 	 	 
	3rd
	 	 	 	 	 	 	 	 
	4th
	 	 	 	 	 	 	 	 
	5th
	 	 	 	 	 	 	 	 
	6th
	 	 	 	 	 	 	 	 
	7th
	 	 	 	 	 	 	 	 
	8th
	 	 	 	 	 	 	 	 
	9th
	 	 	 	 	 	 	 	 
	10th
	 	 	 	 	 	 	 	 

(If the Delivery of Possession Date of is a date other than the 1st of the month, then
Basic Monthly Rental shall be pro-rated from the Delivery of Possession Date through the end of
the month in which Landlord delivers to Tenant possession of the Premises.)

In addition to said Basic Monthly Rental, commencing on the Delivery of Possession Date, Tenant
shall pay to Landlord as Additional Rent, at the times and in the manner set forth in the Lease,
the additional items and amounts specified in Section 4 of the Lease for Utility Charges, Common
Area Maintenance and Building Operating Expenses, and in Section 8 hereof for Real Estate Taxes,
similar Impositions and Insurance Premiums, plus such other sums as are required to be paid by
Tenant pursuant to the terms and provisions of the Lease.

     4. BINDING EFFECT. This instrument contains the entire agreement of the parties hereto
concerning the subject matter hereof. The terms, covenants and conditions setforth herein shall be
binding upon the parties and their personal representatives, successors and assigns. Except as

52

 

expressly set forth herein, all of the terms, provisions and conditions of the Lease shall
remain in full force and effect, unless otherwise modified in writing and signed by the
parties hereto or their duly authorized officers, agents or representatives.

     5. LEGAL AUTHORITY. Each of the individuals signing this Certificate on behalf of a party
do hereby represent and warrant to the other party that they have the full right, power, capacity
and authority to execute and deliver this Certificate as the binding and valid obligation of the
Landlord or Tenant, as the case may be, hereunder.

     6. COUNTERPARTS. This Certificate may be executed in any number of counterparts each of
which when so executed and delivered shall be deemed to be an original, and all of which taken
together shall constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed, sealed
and executed by its proper officers, agents or representatives and its seal to be affixed as
of the date first above written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	LANDLORD:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	WESTPHALIA CENTER II LIMITED PARTNERSHIP
	 
	 	 	 	 	 	 	 	 
	WITNESS:

	 	 	 	By:
	 	PNC Realty, Inc.
 its General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	Paul N. Chod, President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	TENANT:	 	 
	 
	 	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	 	 	AVALON PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	Name/Title	 	 

53

 

EXHIBIT “E”

SPECIMEN LETTER OF CREDIT

	 	 	 	 	 
	

	 	Date:  ____________	 	 

IRREVOCABLE LETTER OF CREDIT NUMBER ______________

Westphalia Center II Limited Partnership

c/o Minkoff Development Corporation

9108 Gaither Road 

Gaithersburg, Maryland 20877

	 
	Gentlemen:

     We hereby establish our irrevocable credit in your favor, by order and for account of Avalon
Pharmaceuticals, Inc., a Delaware corporation, with offices at ____________, in the
maximum aggregate amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (U.S.),
available by your draft(s) on us providing for payment at sight upon your presentation to us, in
a total amount of up to the undrawn portion of said maximum aggregate amount, to be accompanied
by a certificate of one of your managing members or duly authorized officer and agent dated the
date of presentation of said draft, stating that (i) you are entitled to receive payment of the
amount of said draft pursuant to this Letter of Credit under the terms of that certain Lease
Agreement dated ___, 2002, by and between you and Avalon Pharmaceuticals, Inc.
because of an Event of Default by Avalon Pharmaceutical Corporation under the Lease Agreement,
and (ii) said managing member or duly authorized officer and agent has mailed to Avalon
Pharmaceuticals, Inc. an undated and unsigned, but otherwise identical, copy of said certificate
prior to its delivery to us, by certified or registered mail and otherwise in accordance with the
terms of said Lease Agreement.

     This
Letter of Credit remains in force until  ___the day
of___, 200___; and all drafts
drawn hereunder must be presented for payment at our Main Office at ____________, on or
before that date.

     We are authorized to accept any statement furnished by you hereunder as binding and correct,
without investigation or responsibility for the accuracy, veracity or conclusive correctness or
validity of same or any part thereof.

     This credit is a notation credit, as defined in Section 5-108 of the Uniform Commercial
Code. Therefore, this original credit must accompany any drafts drawn hereunder in order that the
payments made might be endorsed hereon.

     Drafts drawn under this credit must be marked: “Drawn Under Irrevocable Letter of Credit
Number ___, dated___, 200___.”

     We hereby engage with you that drafts drawn and presented in compliance with the terms of
this credit will be duly honored by us if presented at this office on or before the expiration
date hereof (___, 200___).

     Except so far as otherwise expressly stated, this credit is subject to the Uniform Customs
and Practice for Documentary Credits (1974 Revision), International Chamber of Commerce Brochure
No. 290.

	 	 	 	 	 	 	 
	 	 	(NAME OF BANK)
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	

	 	 	 	 	 	 
	

	 	 	 	Office Held	 	 

54

 

EXHIBIT “F”

LANDLORD’S CONSENT AND WAIVER

     THIS LANDLORD’S CONSENT AND WAIVER made as of this ___day of
___, 2002, between Westphalia Center II Limited Partnership, a Maryland limited
partnership, with its principal place of business at c/o Minkoff Development Corporation 9108
Gaither Road, Gaithersburg, Maryland 20877 (the “Landlord”),
and_________, a ___corporation (“Lender”), and Avalon Pharmaceuticals, Inc., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

     WHEREAS, Landlord is the owner of certain real estate known by street address as Seneca
Meadows Corporate Center, 20458, 20460, 20462, 20482, 20484 & 20486 Goldenrod Lane, Germantown,
Montgomery County, Maryland 20876 (hereinafter called “Premises”); and

     WHEREAS, Landlord has leased the Premises pursuant to the terms of a certain lease dated
___,2002 (the “Lease”) to Tenant; and

     WHEREAS, contemporaneously herewith, the Tenant and the Lender have entered into certain
financing transactions and in connection therewith the Tenant has granted to the Lender a security
interest in that part of the Tenant’s presently owned and hereafter-acquired accounts receivable,
inventory as set forth in Exhibit “A” attached hereto and made a part hereof and proceeds thereof
(“Collateral”) pursuant to that certain Loan and Security Agreement dated ___(“Agreement”) between
Tenant and Lender; and

     WHEREAS, as a condition of said financing transactions, the Lender has required Tenant to
obtain from the Landlord this Landlord’s Consent and Waiver.

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

     1. To the best of Landlord’s and Tenant’s knowledge, the Lease is in full force and effect,
is binding upon the parties thereto in accordance with its terms and no event has occurred which,
with the passage of time or upon notice or both would give rise to the Landlord’s right to
terminate the Lease. However, nothing contained herein shall waive any rights of Landlord or
obligations of Tenant with respect to any defaults of Tenant under the Lease of which Landlord may
become aware.

     2. The Tenant and Lender hereby inform Landlord of the existence of, and Landlord hereby
acknowledges being so informed of the Tenant’s grant of a security interest to the Lender in the
Collateral, and consents thereto. However, nothing herein contained shall impose upon

55

 

Landlord any liability for any payments or performance under the Agreement or with respect to any
loans made by Lender to Tenant or under any documents now or hereafter evidencing or securing such
financing.

     3. The Landlord hereby subordinates in favor of the Lender to the extent only of the
outstanding Obligations (as defined in the Agreement) from time to time owed by Tenant to Lender
pursuant to the Agreement, any lien, claim or interest, including but not limited to any Landlord’s
lien or right to distress for rent, which the Landlord may have or may hereafter acquire as to the
Collateral whether presently located at the Premises or hereafter to be located at the Premises.
In the event of a default of Tenant under the Agreement, or in the event Landlord terminates the
Lease by reason of default of Tenant thereunder, then in either such event Lender shall, subject to
Lender’s recourse under law and upon giving Landlord at least 24 hours prior written notice, have
the right to enter the Premises and to remove the Collateral therefrom (but only if the Collateral
is then located in the Premises), provided that Lender shall do so at its own expense and shall
complete such removal within thirty (30) days after the termination of the Lease, and Lender shall
promptly repair at its own expense all damage to the Premises and to any property of Landlord or
others caused by such removal. Any such Collateral not removed from the Premises within said
thirty (30) days may be removed by Landlord and stored or disposed of, at the risk, cost and
expense of Tenant and without liability upon Landlord for any damage or loss thereof. Nothing
herein contained shall impose upon Landlord any liability or obligation to see to the safety,
security, repair or protection of the Collateral, nor for any loss thereof or damage thereto.

     4. If Landlord terminates the Lease and recovers possession of the Premises, then the Lender
and Tenant agree that Landlord, at its option and exclusive discretion, shall have the right (but
not the obligation) to relocate and consolidate any or all of Tenant’s personal property forming
part of the Collateral to one or more locations within the Premises as determined by Landlord (the
“Storage Area”), at the risk and expense of Tenant and with no liability upon Landlord for any
damage to or loss of any such Collateral. At all times from and after any termination of the
Lease and recovery of possession of the Premises as a result of Tenant’s default (and subject to
Lender’s rights hereunder applicable during the thirty (30) days mentioned in Paragraph 3),
Landlord shall have the right to offer for leasing and to lease the Premises in whole or part to
any one or more tenants, and to show the Premises to such prospective or new tenants, and Tenant
and Lender shall not interfere with any such actions taken by Landlord. Landlord’s rights under
this paragraph shall not limit any of its other rights and remedies under the Lease in any
circumstances whatsoever.

     5. During the period commencing on the date Landlord terminates the Lease and recovers
possession of the Premises as a result of Tenant’s default and ending on the date (the “Termination
Date”) which is the earlier to occur of (a) the date Lender and/or Tenant have removed all of the
Collateral from the Premises, or (b) the 30th day after the date Landlord so terminates the Lease
and recovers possession of the Premises, Landlord will permit the Lender to enter the Storage Area
in which the Collateral is located, solely for the purpose of removing and/or selling the
Collateral at the sole risk, cost and expense of the Lender and at no liability or expense to the
Landlord. Lender shall at its own expense repair any damage to the Premises

56

 

caused by any acts, omissions or negligence of Lender, its agents, invitees, employees or
contractors (“Lender Faults”), and Lender shall indemnify, defend and hold Landlord harmless from
all loss, costs, damage, litigation, reasonable attorneys’ fees and claims arising out of any
such Lender Faults. Any of the Collateral remaining in the Premises after the Termination Date
may be removed, stored, disposed of or otherwise dealt with by Landlord at the risk, cost and
expense of Tenant and without liability upon Landlord for any loss or damage to such Collateral.

     6. During all periods of time while the Lender and/or its agents, employees or contractors
(“Lender Parties”) are using the Storage Area or any portion thereof for the purposes authorized
and described in paragraph 5 above, or while Lender or any Lender Parties are using any of the
Premises pursuant to Paragraph 3, the Lender shall pay to Landlord per diem rent for such Storage
Area or Premises so used (calculated on a monthly basis by multiplying the monthly rental including
pass-throughs for real estate taxes, insurance and common area charges payable by Tenant for the
last full calendar month of the Lease in which such monthly rental was payable prior to termination
of the Lease); such per diem rent to be paid in an amount equal to l/30th of such monthly rental
and other sums for each day that the Lender Parties are making use of such Storage Area or of any
other part of the Premises as aforesaid. Such rental payments shall be made by Lender to Landlord
within five (5) days after each request of Landlord; such request to be made not more often than
once every seven (7) days. Said per diem rental payments shall be calculated without regard to any
rental abatement provisions of the Lease.

     7. The Landlord further agrees that the Collateral shall at all times be deemed personal
property and not real property or in any way part of the Premises. Landlord will endeavor to give
to Lender written notice of any default of Tenant under the Lease which would entitle Landlord to
terminate the Lease, or of any termination of the Lease by Landlord, provided that Landlord shall
incur no liability to Lender or to Tenant or to their successors or assigns if Landlord fails to
give any such notice. Notwithstanding the foregoing, in no event shall the Collateral be deemed to
include any property which is permanently affixed to the Premises, including but not limited to any
mechanical, electrical or plumbing equipment necessary for the operation of and forming part of
said Premises, by whomsoever installed therein.

     8. All notices, demands, requests, or other communications which may be or are required to be
given, served, or sent by any party to any other party pursuant to this Agreement shall be in
writing and shall be mailed by first-class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by hand delivery, facsimile telecopier, telegram or telex,
addressed as follows:

	 	 	 	 	 	 	 
	 	 	If to Lender:	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	                                                                                	 	 
	

	 	 	 	                                                                                	 	 
	

	 	 	 	                                                                                	 	 
	

	 	 	 	Attn:                                                                        	 	 
	

	 	 	 	Telefacsimile No.                                                   	 	 

57

 

	 	 	 	 	 	 	 
	 	 	If to Landlord:	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Westphalia Center II Limited Partnership	 	 
	

	 	 	 	c/o Minkoff Development Corporation	 	 
	

	 	 	 	9108 Gaither Road	 	 
	

	 	 	 	Gaithersburg, Maryland 20877	 	 
	

	 	 	 	Attn: Paul N. Chod	 	 
	

	 	 	 	Telefacsimile No. 301-948-1168	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	If to Tenant:	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Avalon Pharmaceuticals, Inc.	 	 
	

	 	 	 	                                                                                	 	 
	

	 	 	 	                                                                                	 	 
	

	 	 	 	Attn:                                                                        	 	 
	

	 	 	 	Telefacsimile No.                                                   	 	 

Each party may designate to the others by notice in writing, sent at least thirty (30) days before
such address change is effective, a new address to which any notice, demand, request or
communication may thereafter be so given, served or sent. Each notice, demand, request, or
communication which shall be mailed, delivered or transmitted in the manner described above shall
be deemed sufficiently given, served, sent and received for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a telex or telefacsimile) the printed telecopier receipt or
answerback being deemed conclusive evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation or is attempted but prevented due to invalid address
furnished by the addressee to the Sender.

     9. This Landlord’s Consent and Waiver shall be binding upon and shall inure to the benefit of
the Landlord and its successors and assigns and shall be binding upon and inure to the benefit of
the Lender and the Tenant and their respective successors and assigns. Provided Lender gives
Landlord, within seven (7) days after Lender’s receipt of written request therefor, the information
described in paragraph 10 below, Landlord agrees that if while Landlord has actual knowledge that
any Obligations of Tenant to Lender under the Agreement remain unpaid the Landlord sells and
conveys the Premises, then in such event Landlord will at the time of such sale endeavor to inform
its purchaser as to the existence of this Landlord’s Consent and Waiver and will endeavor to
provide its purchaser a copy hereof provided, however, that Landlord shall incur no liability to
Lender, its successors or assigns if Landlord fails to give any such notices described in this
paragraph. However, the provisions of this paragraph and the other provisions of this instrument
shall only bind the owner of the Premises, as Landlord, while such party owns fee simple record
title to the Premises.

     10. Lender shall promptly notify Landlord in writing when the Tenant’s Obligations under the
Agreement have been fully paid and when the Agreement has been terminated; whereupon this

58

 

Agreement and all of Lender’s rights and Landlord’s obligations hereunder shall fully and
forever terminate, and Lender will join with Landlord and Tenant in executing an instrument as
reasonably requested and furnished by Landlord confirming such termination hereof. Lender
agrees to provide Landlord a written statement as to the outstanding balance of the
Obligations of Tenant under the Agreement on Landlord’s reasonable request, and Tenant hereby
consents to Lender providing said information to Landlord.

     11. Nothing herein contained shall be deemed to modify the Lease in any respect except for
the subordination of Landlord’s lien herein provided.

     IN WITNESS WHEREOF, the parties hereto have executed this Landlord’s Consent and Waiver as
of the date first above written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	LANDLORD:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	WESTPHALIA CENTER II LIMITED PARTNERSHIP
	

	 	 	 	By:
	 	PNC Realty, Inc., its General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Witness

	 	 	 	 	 	Paul N. Chod, President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	LENDER:

	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Witness

	 	 	 	 	 	Name/Title	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	TENANT:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	AVALON PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Witness

	 	 	 	 	 	Name/Title	 	 

59

 

EXHIBIT “G”

ESTIMATE OF OPERATING EXPENSES

The following is the Expense Estimate for Building #1 in Seneca Meadows Corporate Center for
Calendar Year 2002:

	 	 	 	 	 
	Impositions
	$	1.25/sf
	 
	 	 	 	 
	Insurance Premiums
	 	 	0.12	 
	 
	 	 	 	 
	Other Operating Expenses
	 	 	0.45	 
	 
	 	 	 	 
	Property Management Fees
	 	 	+ 0.40	 
	 
	 	 
	Total Estimated Operating Expenses
	$	2.22/sf

60exv10w33

 

Exhibit 10.33

 

 

MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY

as Issuer

and

ALLFIRST TRUST COMPANY NATIONAL ASSOCIATION

as Trustee

TRUST INDENTURE

$12,000,000

Maryland Industrial Development Financing Authority

Taxable Variable Rate Demand Revenue Bonds

(Avalon Pharmaceuticals, Inc. Facility)

Series 2003

Dated as of April 1, 2003

 

 

 

 

TABLE OF CONTENTS

(This table of contents is not part of the Trust Indenture and is only for convenience of
reference)

	 	 	 	 	 
	SECTION	 	PAGE
	 
	 	 	 	 
	RECITALS	 	  2
	GRANTING CLAUSES AND AGREEMENTS	 	  3
	 
	 	 	 	 
	 
	 	ARTICLE I	 	 
	 
	 	DEFINITIONS AND CONSTRUCTION	 	 
	1.1.
	 	Definitions	 	  5
	1.2.
	 	Rules of Construction	 	19
	 
	 	 	 	 
	 
	 	ARTICLE II	 	 
	 
	 	CREATION OF THE SERIES 2003 BONDS; DETAILS OF THE BONDS	 	 
	2.1.
	 	Restriction on Issuance of Bonds	 	20
	2.2.
	 	Source of Payment of the Bonds	 	20
	2.3.
	 	Creation of the Series 2003 Bonds; Details of the Bonds	 	20
	2.4.
	 	Interest Rate on the Bonds	 	21
	2.5.
	 	Execution of the Bonds	 	22
	2.6.
	 	Form of the Bonds; Book-Entry	 	23
	2.7.
	 	Effect of Authentication	 	24
	2.8.
	 	Authentication and Delivery of the Series 2003 Bonds	 	24
	2.9.
	 	Temporary Bonds	 	25
	2.10.
	 	Mutilated, Lost, Stolen or Destroyed Bonds; Bonds Not Delivered for Purchase	 	26
	2.11.
	 	Negotiability, Registration, Transfer and Exchange of Bonds	 	27
	2.12.
	 	Obligations of Issuer Limited	 	28
	2.13.
	 	Cancellation and Disposition of Bonds	 	30
	2.14.
	 	Other Obligations	 	30
	2.15.
	 	Authorization of Additional Bonds;
Conditions Precedent to Delivery of Additional Bonds	 	30	 
	 
	 	 	 	 
	 
	 	ARTICLE III	 	 
	 
	 	REDEMPTION	 	 
	3.1.
	 	Redemption of Bonds Prior to Maturity	 	32
	3.2.
	 	Selection of Bonds To Be Redeemed	 	33
	3.3.
	 	Notice of Redemption	 	34
	3.4.
	 	Effect of Notice of Redemption	 	35
	3.5.
	 	No Partial Redemption After Default	 	35
	3.6.
	 	Payment of Redemption Price	 	35
	3.7.
	 	Redemption in Accordance with Procedures of Depository	 	35

 

 

	 	 	 	 	 
	SECTION	 	PAGE
	 
	 	 	 	 
	 
	 	ARTICLE IV	 	 
	 
	 	PURCHASE OF BONDS ON TENDER DATES	 	 
	4.1.
	 	Purchase of Bonds on Optional Tender Dates	 	36
	4.2.
	 	Purchase of Bonds on Mandatory Tender Dates	 	36
	4.3.
	 	Remarketing of Bonds by Remarketing Agent; Certain Notices	 	37
	4.4.
	 	Sources of Moneys for Purchase of Bonds on Tender Dates	 	39
	4.5.
	 	Delivery of Bonds Purchased on Tender Dates	 	40
	4.6.
	 	Bonds Deemed Tendered and Purchased on Tender Dates	 	40
	4.7.
	 	Bonds Purchased Not Discharged	 	42
	4.8
	 	Mandatory Tenders in Accordance with Procedures of Depository	 	42
	 
	 	 	 	 
	 
	 	ARTICLE V	 	 
	 
	 	FUNDS AND ACCOUNTS; DEPOSIT AND USE OF BOND PROCEEDS; REVENUES;	 	 
	 
	 	CREDIT FACILITY	 	 
	5.1.
	 	Creation of Funds	 	42
	5.2.
	 	Deposit and Use of Proceeds of Series 2003 Bonds	 	42
	5.3.
	 	Procedure for Making Disbursements from Facility Fund	 	43
	5.4.
	 	Custody and Application of Net
Proceeds and Proceeds from the Disposition of Certain Equipment	 	43	 
	5.5.
	 	Excess Bond Proceeds	 	44
	5.6.
	 	Deposits into the Bond Fund; Use of Moneys in the Bond Fund	 	45
	5.7.
	 	Credit Facility; Substitute Credit Facility	 	48
	5.8.
	 	Bonds Not Presented for Payment	 	49
	5.9.
	 	Moneys Held in Trust	 	50
	5.10.
	 	Redemption of All Outstanding Bonds	 	50
	5.11.
	 	Acceleration of Maturity of Bonds	 	50
	5.12.
	 	Refunding of Bonds	 	51
	5.13.
	 	Payment to the Borrower	 	51
	5.14.
	 	Procedure For Making Disbursements
from Issuer’s Fee Fund	 	51
	 
	 	 	 	 
	 
	 	ARTICLE VI	 	 
	 
	 	INVESTMENTS	 	 
	6.1.
	 	Investment of Facility Fund and Net Proceeds Escrow Fund	 	51
	6.2.
	 	Investment of Bond Fund	 	53
	6.3.
	 	Accounting for and Sale of Investments; Losses	 	54
	6.4.
	 	Trustee’s Own Bond or Investment Department	 	54
	 
	 	 	 	 
	 
	 	ARTICLE VII	 	 
	 
	 	GENERAL COVENANTS	 	 
	7.1.
	 	Payment of Principal and Interest; No General Obligations	 	54
	7.2.
	 	Performance of Covenants by Issuer; Authority; Due Execution	 	55
	7.3.
	 	Instruments of Further Assurance	 	55
	7.4.
	 	Recording and Filing	 	55

-ii-

 

 

	 	 	 	 	 
	SECTION	 	PAGE
	 
	 	 	 	 
	7.5.
	 	Rights Under Loan Agreement	 	56
	7.6.
	 	No Disposition of Trust Estate	 	56
	7.7.
	 	Access to Books	 	56
	7.8.
	 	Source of Payment of Bonds	 	56
	7.9
	 	Report Concerning Outstanding Bonds	 	56
	 
	 	 	 	 
	 
	 	ARTICLE VIII	 	 
	 
	 	DEFEASANCE	 	 
	8.1.
	 	Defeasance	 	57
	 
	 	 	 	 
	 
	 	ARTICLE IX	 	 
	 
	 	DEFAULTS AND REMEDIES	 	 
	9.1.
	 	Events of Default	 	58
	9.2.
	 	Acceleration; Other Remedies	 	60
	9.3.
	 	Restoration to Former Position	 	62
	9.4.
	 	Owners’ or Credit Facility
Provider’s Right to Direct Proceedings	 	62
	9.5.
	 	Limitation on Owners’ Right to Institute Proceedings	 	63
	9.6.
	 	No Impairment of Right to Enforce Payment	 	63
	9.7.
	 	Proceedings by Trustee Without Possession of Bonds	 	64
	9.8.
	 	No Remedy Exclusive	 	64
	9.9.
	 	No Waiver of Remedies	 	64
	9.10.
	 	Application of Moneys	 	64
	9.11.
	 	Severability of Remedies	 	65
	9.12.
	 	Notice of Event of Default	 	65
	9.13.
	 	Assignment to Credit Facility Provider	 	66
	9.14.
	 	Recognition of Credit Facility Provider or its Assignee as Borrower	 	66
	 
	 	 	 	 
	 
	 	ARTICLE X	 	 
	 
	 	TRUSTEE; PAYING AGENT; REGISTRAR; REMARKETING AGENT	 	 
	10.1.
	 	Acceptance of Trusts	 	66
	10.2.
	 	No Responsibility for Recitals	 	67
	10.3.
	 	Limitations on Liability	 	67
	10.4.
	 	Compensation, Expenses and Advances	 	68
	10.5.
	 	Notice of Events of Default	 	68
	10.6.
	 	Action by Trustee	 	69
	10.7.
	 	Good Faith Reliance	 	69
	10.8.
	 	Dealings in Bonds and with Issuer and Borrower	 	69
	10.9.
	 	Allowance of Interest	 	70
	10.10.
	 	Construction of Indenture	 	70
	10.11.
	 	Resignation of Trustee	 	70
	10.12.
	 	Removal of Trustee	 	70
	10.13.
	 	Appointment of Successor Trustee	 	70
	10.14.
	 	Qualifications of Successor Trustee	 	71
	10.15.
	 	Judicial Appointment of Successor Trustee	 	71

-iii-

 

 

	 	 	 	 	 
	SECTION	 	PAGE
	 
	 	 	 	 
	10.16.
	 	Acceptance of Trusts by Successor Trustee	 	71
	10.17.
	 	Successor by Merger or Consolidation	 	72
	10.18.
	 	Standard of Care	 	72
	10.19.
	 	Intervention in Litigation of the Issuer	 	73
	10.20.
	 	Paying Agent	 	73
	10.21.
	 	Qualifications of Paying Agent; Resignation; Removal	 	73
	10.22.
	 	Remarketing Agent	 	74
	10.23.
	 	Qualifications of Remarketing Agent; Resignation; Removal	 	74
	10.24.
	 	Registrar	 	75
	10.25.
	 	Qualifications of Registrar; Resignation; Removal	 	75
	10.26.
	 	Several Capacities	 	76
	10.27.
	 	Initial Appointments	 	76
	10.28.
	 	Co-Paying Agents, Co-Registrars and Authenticating Agent	 	76
	10.29.
	 	Co-Trustees	 	76
	 
	 	 	 	 
	 
	 	ARTICLE XI	 	 
	 
	 	REFERENCES TO CREDIT FACILITY PROVIDER; EXECUTION OF INSTRUMENTS	 	 
	 
	 	BY OWNERS AND PROOF OF OWNERSHIP OF BONDS	 	 
	11.1.
	 	References to Credit Facility Provider	 	77
	11.2.
	 	Execution of Instruments; Proof of Ownership	 	77
	 
	 	 	 	 
	 
	 	ARTICLE XII	 	 
	 
	 	MODIFICATION OF THIS INDENTURE AND	 	 
	12.1.
	 	Limitations	 	78
	12.2.
	 	Supplemental Indentures Without Owner Consent	 	78
	12.3.
	 	Supplemental Indentures Requiring Owner Consent	 	80
	12.4.
	 	Effect of Supplemental Indenture	 	81
	12.5.
	 	Amendment of Loan Agreement Without Owner Consent	 	81
	12.6.
	 	Amendment of Loan Agreement Requiring Owner Consent	 	81
	12.7.
	 	Consent of Credit Facility Provider, Remarketing Agent and Borrower Required	 	82
	12.8.
	 	Action of Trustee	 	82
	12.9.
	 	Certain Notices to Rating Agencies and Remarketing Agent	 	82
	 
	 	 	 	 
	 
	 	ARTICLE XIII	 	 
	 
	 	MISCELLANEOUS	 	 
	13.1.
	 	Successors of Issuer	 	82
	13.2.
	 	Parties in Interest	 	82
	13.3.
	 	Severability	 	83
	13.4.
	 	No Personal Liability of Issuer Officials	 	83
	13.5.
	 	Bonds Owned by Issuer or Borrower	 	83
	13.6.
	 	Counterparts	 	83
	13.7.
	 	Governing Law	 	83
	13.8.
	 	Notices	 	84
	13.9.
	 	Holidays	 	85

-iv-

 

 

	 	 	 	 	 
	SECTION	 	PAGE
	 
	 	 	 	 
	13.10.
	 	Effective Date	 	86
	EXHIBIT A	 	 
	EXHIBIT B	 	 

-v-

 

 

EXHIBIT A

$12,000,000

Maryland Industrial Development Financing Authority

Taxable Variable Rate Demand Revenue Bonds

(Avalon Pharmaceuticals, Inc. Facility)

Series 2003

FORM OF BOND

A-1

 

 

TRUST INDENTURE

     THIS TRUST INDENTURE is dated as of April 1, 2003, and is made and entered into by and
between the MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY, a body politic and corporate and
a public instrumentality of the State of Maryland (the “Issuer”), and ALLFIRST TRUST COMPANY
NATIONAL ASSOCIATION, a national banking association, duly organized, existing and authorized to
accept and execute trusts of the character herein set out, under and by virtue of the laws of the
United States of America, as Trustee (the “Trustee”).

RECITALS

     Certain of the terms and words used in these Recitals, and in the following Granting Clauses
and Agreements, are defined in Section 1.1 of this Indenture.

     Pursuant to, and in accordance with, the Acts, the Issuer has determined to issue and sell
the Series 2003 Bonds in the aggregate principal amount of $12,000,000, and to lend the proceeds
thereof to the Borrower, upon the terms and conditions of the Loan Agreement, for the sole and
exclusive purpose of financing the acquisition by the Borrower of the 2003 Facility.

     It is the intention of the Borrower and the Issuer that the Series 2003 Bonds and any
Additional Bonds be secured by (among other things) the execution and delivery of this Indenture.

     In order to enhance the marketability of the Series 2003 Bonds, the Borrower has requested
the Bank to issue to the Trustee its irrevocable transferable direct-pay letter of credit to
provide payment for and secure the payment of the principal of and interest on, and the purchase
price of, the Series 2003 Bonds. The Bank will issue the Letter of Credit concurrently with the
issuance and delivery of the Series 2003 Bonds.

     The issuance, sale and delivery of the Series 2003 Bonds and the execution and delivery of
this Indenture and the Loan Agreement have been in all respects duly and validly authorized in
accordance with the Acts by the Resolution.

     The Issuer has determined that financing the acquisition of the 2003 Facility constitutes an
undertaking that will accomplish the purposes, objects and powers of the Issuer as mentioned in
the MIDFA Act.

     The Trustee has power to enter into this Indenture and to execute the trusts hereby created
and has accepted the trusts so created and in evidence thereof has joined in the execution hereof.

     All things necessary to make the Series 2003 Bonds, when authenticated by the Trustee and
issued as provided in this Indenture, the valid, binding and legal limited obligations of the
Issuer according to the terms thereof, and to constitute this Indenture a valid assignment and
pledge of the Trust Estate for the payment of the principal of and interest on, and purchase price
of, the Series 2003 Bonds, and the creation, execution and delivery of this Indenture, and the

2

 

creation, execution and issuance of the Series 2003 Bonds, subject to the terms hereof, have
in all respects been duly authorized.

     THE BONDS AND THE PREMIUM (IF ANY) AND INTEREST THEREON, AND THE PURCHASE PRICE
THEREOF, ARE LIMITED OBLIGATIONS OF THE ISSUER, THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST
ON, AND THE PURCHASE PRICE OF, WHICH ARE PAYABLE SOLELY FROM THE REVENUES TO BE RECEIVED IN
CONNECTION WITH THE FINANCING AND REFINANCING OF THE 2003 FACILITY AND ANY ADDITIONAL FACILITIES
AND FROM ANY OTHER MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE. NEITHER THE BONDS NOR ANY
PREMIUM OR INTEREST THEREON, NOR THE PURCHASE PRICE THEREOF, SHALL EVER CONSTITUTE AN INDEBTEDNESS
OR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE STATE OF MARYLAND, THE DEPARTMENT,
THE ISSUER OR ANY OTHER PUBLIC BODY WITHIN THE MEANING OF ANY CONSTITUTIONAL OR CHARTER PROVISION
OR STATUTORY LIMITATION AND NONE OF THE ABOVE SHALL EVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY
LIABILITY OF THE STATE OF MARYLAND, THE DEPARTMENT, THE ISSUER OR ANY OTHER PUBLIC BODY. THE BONDS
DO NOT CONSTITUTE AN INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE OF MARYLAND, THE
DEPARTMENT, THE ISSUER OR ANY OTHER PUBLIC BODY IS PLEDGED. THE ISSUER HAS NO TAXING POWER.

GRANTING CLAUSES AND AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and the acceptance by the Trustee of the
trusts hereby created and of the purchase and acceptance of the Bonds issued and sold by the Issuer
under this Indenture by those who shall own the same from time to time, and of the sum of one
dollar, lawful money of the United States of America, duly paid to the Issuer by the Trustee at or
before the execution and delivery of this Indenture, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and for the purpose of fixing and
declaring the terms and conditions upon which the Bonds are to be executed, authenticated, issued,
delivered and accepted by all persons who shall from time to time be or become owners thereof, and
in order to secure the payment of the principal of and interest on, and purchase price of, the
Bonds according to their tenor and effect and the performance and observance by the Issuer of all
the covenants expressed or implied herein and in the Bonds and the payment and performance of all
other of the Issuer’s Obligations, the Issuer does hereby grant, bargain, sell, convey, pledge and
assign, without recourse, unto the Trustee and unto its successors in trust forever, and grants to
the Trustee and to its successors in trust, a security interest in, all of the Trust Estate.

     SAVING AND EXCEPTING HOWEVER, and reserving unto the Issuer all of the Reserved Rights of the
Issuer.

3

 

     TO HAVE AND TO HOLD all and singular the Trust Estate with all privileges and
appurtenances hereby conveyed and assigned, or agreed or intended so to be, to the Trustee and its
successors in trust forever.

     IN TRUST NEVERTHELESS, under and subject to the terms and conditions hereinafter set forth,
(a) for the equal benefit, protection and security of the Owners of any and all of the Bonds, all
of which regardless of the time or times of their issuance or maturity shall be of equal rank,
without preference, priority or distinction of any of the Bonds over any other Bonds, except as
otherwise provided in or pursuant to this Indenture, (b) for securing the observance and
performance of the Issuer’s Obligations and of all others of the conditions, promises,
stipulations, agreements and terms and provisions of this Indenture and the uses and purposes
herein expressed and declared, and (c) for the benefit of the Credit Facility Provider, as set
forth in Section 9.13 hereof.

     PROVIDED, HOWEVER, that any Credit Facility securing a Series of Bonds shall secure only that
particular Series of Bonds and no other and shall not be available to pay the principal of,
interest on, or the purchase price of, any other Series of Bonds.

     PROVIDED, FURTHER, that (subject to the provisions of Section 9.13 hereof) if the Issuer, its
successors or assigns, well and truly pays, or causes to be paid, the principal of the Bonds
issued hereunder and interest due or to become due thereon, and the purchase price thereof, at the
times and in the manner mentioned in the Bonds and as provided in Article VIII hereof, according
to the true intent and meaning thereof, and shall cause the payments to be made into the Bond Fund
as required under Article V hereof, or shall provide, as permitted hereby, for payment thereof in
accordance with Article VIII hereof, and shall well and truly keep, perform and observe all of the
covenants and conditions pursuant to the terms of this Indenture and all other of the Issuer’s
Obligations to be kept, performed and observed by it, and shall pay or cause to be paid to the
Trustee all sums of money due or to become due in accordance with the terms and provisions hereof,
then upon such final payments or deposits as provided in
Article VIII hereof, and upon the
termination of the Loan Agreement, the lien of this Indenture shall be discharged and satisfied
and shall be null and void and the right, title and interest of the Trustee in and to the Trust
Estate shall cease, terminate and be void, and the Trustee shall thereupon assign, transfer, and
turn over the Trust Estate to the Credit Facility Provider; provided, that if the Trustee shall
have received written certification from the Credit Facility Provider that all obligations of the
Borrower under the Credit Facility Documents have been satisfied and that the Credit Facility
Agreement has been terminated, or if no Credit Facility Provider shall then exist, the Trust
Estate shall be assigned, transferred and turned over to the Borrower; and the Trustee shall
execute and deliver to the Issuer, the Credit Facility Provider and the Borrower such instruments
in writing as shall be requisite to evidence such transfer of the Trust Estate. Upon the Trustee’s
assignment, transfer and turning over to the Credit Facility Provider or the Borrower, as
appropriate, of the Trust Estate pursuant to Section 8.1 hereof, the Trustee shall have no further
duties, responsibilities or obligations under and pursuant to this Indenture.

     AND IT IS EXPRESSLY DECLARED that all Bonds issued and secured hereunder are to be issued,
authenticated and delivered and all of the Trust Estate hereby pledged is to be dealt with and
disposed of under, upon and subject to the terms, conditions, stipulations, covenants,

4

 

agreements, trusts, uses and purposes hereinafter expressed, and the Issuer has agreed and
covenanted and does hereby agree and covenant with the Trustee and with the respective Owners from
time to time of the Bonds, or any part thereof, as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

     SECTION
1.1. Definitions. Certain terms used in this Indenture and in the other Bond
Documents and in the Credit Facility Documents are defined in this Section or are defined by
reference to one of the Credit Facility Documents or one of the other Bond Documents; and when and
if used herein, such terms shall have the meanings given to them by the language employed in this
Section defining such terms or by the language employed in such Credit Facility Document or other
Bond Document defining such terms, unless the context clearly indicates otherwise.

     “Acceleration Drawing” has the meaning given to that term in the Credit Facility.

     “Acquisition” or “acquisition” means, when used in regard to the 2003 Facility or any
Additional Facilities, and shall include, where applicable, and without limitation, the
acquisition, construction, rehabilitation, remodeling, extension, equipping and permanent
improvement of such facility, and paying the necessary costs of preparing, printing and selling
the related Bonds, and such other costs as may be permitted by the Acts.

     “Acts” means, collectively, the Revenue Bond Act and the MIDFA Act.

     “Act of Bankruptcy” means the filing of a petition in bankruptcy under the Bankruptcy Code,
or the commencement of a proceeding under any other applicable law concerning insolvency,
reorganization or bankruptcy, by or against the Borrower or the Issuer, as debtor.

     “Additional Bonds” means bonds of the Issuer issued pursuant to Section 2.15 of this
Indenture.

     “Additional Facilities” means any project undertaken by the Borrower that is financed or
refinanced pursuant to the Acts and this Indenture by the Issuer through the issuance of Additional
Bonds.

     “Additions” means any and all alterations, additions, accessions, extensions, betterments and
improvements, substitutions, and renewals and replacements.

     “Adjustment Date” means each of (a) April 11, 2003, (b) the Friday of each week thereafter
or, if any such Friday is not a Business Day, the immediately succeeding Business Day, and (c)
each Mandatory Tender Date.

     “Administration Expenses” means compensation, indemnities and reimbursement of fees, expenses
and advances payable to the Issuer, the Trustee, the Remarketing Agent, the Paying Agent and the
Registrar, all as described in Article VII of the Loan Agreement.

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     “Agency Obligations” has the meaning given that term in Section 6.1(b) of this Indenture.

     “Authorized Borrower Representative” means the President, Chief Financial Officer and General
Counsel of the Borrower or such other person at the time authorized to act on behalf of the
Borrower as designated by written certificate furnished to the Issuer, the Trustee and the Credit
Facility Provider containing the specimen signature of such person and signed on behalf of the
Borrower by its President or Chief Financial Officer. Such certificates may designate an alternate
or alternates.

     “Authorized Denomination” means $100,000 or any integral multiple of $5,000 in excess of
$100,000.

     “Authorized Issuer Representative” means the Chairman, the Vice Chairman or the Executive
Director of the Issuer, or such other person at the time designated to act on behalf of the Issuer
by written certificate furnished to the Borrower, the Trustee and the Credit Facility Provider
containing the specimen signature of such person and signed on behalf of the Issuer by the
Chairman, the Vice Chairman or the Executive Director of the Issuer. Such certificate may
designate an alternate or alternates.

     “Available Moneys” means:

          (a) moneys that have been on deposit with the Trustee for at least 123 days during and prior
to which no Act of Bankruptcy has occurred with respect to the Borrower or the Issuer;

          (b) Refunding Proceeds, but only to the extent that (i) such Refunding Proceeds are paid
directly to the Trustee for the benefit of the Owners and shall not have come into the possession
or control of the Borrower or the Issuer; and (ii) the Trustee shall have received an opinion of
Independent Counsel acceptable to the Trustee and, if the Bonds are then rated by Moody’s or S&P,
acceptable to Moody’s and/or S&P, as the case may be, to the effect that distributions of payments
of principal of and interest on the Bonds made to the Owners from such Refunding Proceeds will not
constitute preferential payments pursuant to the provisions of (A) Section 547(b) of the Bankruptcy
Code in a bankruptcy proceeding by or against the Paying Agent or the Borrower; or (B) Chapter 9 of
the Bankruptcy Code, if the Issuer should become a debtor under Chapter 9 of the Bankruptcy Code;

          (c) Excess Bond Proceeds; and

          (d) moneys received from a drawing under the Credit Facility.

For the purposes of this definition, moneys shall be deemed to be on deposit with the Trustee only
when cash or its equivalent is so deposited or, in the case of checks or drafts, when final
payment thereof has been made to the Trustee by the payor bank.

     “Bank” means Manufacturers and Traders Trust Company, a New York banking corporation, its
successors and assigns.

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     “Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. 101 et seq., and all
future acts supplemental thereto or amendatory thereof.

     “Bond Counsel” means Whiteford, Taylor & Preston L.L.P. and Brown, Diffenderffer & Kearney,
LLP, as co-bond counsel, or any other Independent Counsel approved by the Issuer that regularly
renders opinions with general acceptance in the municipal bond market and that is familiar with
the transactions contemplated under this Indenture. Unless specifically otherwise provided, any
opinion of Bond Counsel or other Independent Counsel required by any of the Bond Documents or the
Credit Facility Documents shall be in writing.

     “Bond Documents” means and includes (without limitation) the Bonds, the Placement and
Remarketing Agreement, this Indenture, the Loan Agreement, the Pledged Bonds Custody Agreement,
and any and all other documents which the Issuer, the Borrower, or any other party or parties or
their representatives have executed and delivered, or may hereafter execute and deliver, to
evidence or secure the Issuer’s Obligations or the Borrower’s Bond Obligations, or any part
thereof, or in connection therewith, together with any and all Supplements thereto; provided,
however, that the term “Bond Documents,” with the exception of the Pledged Bonds Custody
Agreement, does not include the Credit Facility Documents.

     “Bond Fund” means the Bond Fund created in Section 5.1 of this Indenture.

     “Bond Payment Date” means any Interest Payment Date or any Sinking Fund Installment Date and
any other date on which the principal of, premium (if any) on or interest on the Bonds is to be
paid to the Owners thereof (whether at maturity thereof, or by acceleration of maturity or after
notice of redemption or prepayment or otherwise).

     “Bond Purchase Drawing” means a Bond Purchase Interest Drawing or a Bond Purchase Principal
Drawing.

     “Bond Purchase Interest Drawing” and “Bond Purchase Principal Drawing” each has the meaning
given to that term by the Credit Facility.

     “Bonds” means, collectively, the Series 2003 Bonds and any Additional Bonds.

     “Bonds Tendered or Deemed Tendered for Purchase” means Bonds of a Series tendered, or deemed
to have been tendered, to the Trustee for purchase on an Optional Tender Date or on a Mandatory
Tender Date, as provided in Sections 4.1 and 4.2, respectively, of this Indenture.

     “Book-Entry Form” or “Book-Entry System” means a form or system, as applicable, under which
(i) the ownership of beneficial interests in the Bonds of a Series may be transferred only through
a book entry and (ii) physical bond certificates in fully registered form are registered only in
the name of a Depository or its nominee as holder, with the physical bond certificates
“immobilized” in the custody of the Depository.

     “Borrower” means Avalon Pharmaceuticals, Inc., a Delaware corporation, its successors and
assigns.

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     “Borrower’s Architect” means the Independent Architect selected by the Borrower and approved
by the Credit Facility Provider.

     “Borrower’s Bond Obligations” means the obligations of the Borrower under the Bond Documents
to (a) pay the principal of and interest on the Loans as required by Section 3.3 of the Loan
Agreement and any Supplements thereto, when and as the same become due and payable (whether at the
stated maturity thereof, or by acceleration of maturity or after notice of redemption or
prepayment or otherwise), (b) pay all other payments required by the Bond Documents to be paid by
the Borrower to the Issuer, to the Trustee or to others, when and as the same shall become due and
payable, and (c) timely perform, observe and comply with all of the terms, covenants, conditions,
stipulations, and agreements, express or implied, which the Borrower is required by any of the
Bond Documents to perform or observe.

     “Borrower’s Credit Facility Obligations” means the obligations of the Borrower under the
Credit Facility Documents to pay all payments required by the Credit Facility Documents, when and
as the same become due and payable, and timely perform, observe and comply with all of the terms,
covenants; conditions, stipulations and agreements, express or implied, which the Borrower is
required by the Credit Facility Documents to perform, observe or comply with. The term “Borrower’s
Credit Facility Obligations” includes the Borrower’s Letter of Credit Obligations.

     “Borrower’s Letter of Credit Obligations” has the meaning given to that term by the Letter of
Credit Agreement.

     “Business Day” or “business day” means any day other than a day on which either (a) banks
located in any of the cities in which the Principal Office of the Trustee, the Credit Facility
Provider, the Paying Agent and the Remarketing Agent is located are required or authorized by law
or executive order to close for business, or (b) The New York Stock Exchange is closed.

     “Cash Collateral Pledge and Security Agreement and Control Agreement” has the meaning given
to that term in the Letter of Credit Agreement.

     “Closing Date” means April 8, 2003, the date of the issuance and delivery of the Series 2003
Bonds to the initial purchaser(s) thereof and any other date on which any Additional Bonds are
issued and delivered to the initial purchaser(s) thereof.

     “Code” means the Internal Revenue Code of 1986, as amended, and any applicable predecessor
statutory provision. Each reference to a section of the Code herein shall be deemed to include the
United States Treasury Regulations in effect or proposed from time to time with respect thereto
and applicable to the Bonds or the use of the proceeds thereof.

     “Completion Certificate” means a Completion Certificate, substantially in the form attached to
the Loan Agreement as Exhibit A and made a part thereof, signed by an Authorized Borrower
Representative, furnished by the Borrower pursuant to Section 6.3 of the Loan Agreement.

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     “Completion Date” means, with respect to the 2003 Facility, and, if applicable, any
Additional Facilities, the date of completion thereof as that date is specified in the Completion
Certificate therefor submitted in accordance with Section 6.3 of the Loan Agreement.

     “Contractor” has the meaning given that term by the Credit Facility Agreement.

     “Costs of Issuance” means all fees, costs and expenses incurred in connection with the
issuance of the Bonds.

     “Credit Facility” means (a) the Letter of Credit, (b) any Substitute Credit Facility and (c)
any Initial Credit Facility.

     “Credit Facility Agreement” means (a) the Letter of Credit Agreement and (b) any other
agreement between the Borrower and a Credit Facility Provider pursuant to which a Credit Facility
is issued, together with any and all Supplements thereto.

     “Credit Facility Documents” means the Credit Facility, the Credit Facility Agreement, the
Security Agreement, the Cash Collateral Pledge and Security Agreement and Control Agreement, the
Pledged Bonds Custody Agreement, the Pledge and Security Agreement, the Insurance Agreement and
any and all other documents which the Borrower, or any other party or parties or their
representatives, has executed and delivered or may hereafter execute and deliver, to evidence or
secure the Borrower’s Credit Facility Obligations, or any part thereof, or in connection
therewith, together with any and all Supplements thereto. The term “Credit Facility Documents”
includes the Letter of Credit Documents.

     “Credit Facility Provider” means (a) the Bank and (b) the issuer of any Credit Facility, if
any, other than the Letter of Credit, then in effect.

     “Department” means the Department of Business and Economic Development, a principal
department of the State.

     “Depository” means any securities depository that is a “clearing corporation” within the
meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, operating and maintaining, with
its participants or otherwise, a Book-Entry System to record ownership of beneficial interests in
municipal bonds, and to effect transfers of municipal bonds, in Book-Entry Form.

     “Direct Costs of Construction” means direct costs of constructing the 2003 Facility and any
Additional Facilities as set forth in the Construction Contract and in the trade form cost
breakdown furnished by the Borrower and approved by the Credit Facility Provider and the Issuer.

     “Encumbrance” means any mortgage, pledge, lien, security interest, charge or other
encumbrance.

9

 

     “Equipment Collateral” has the meaning given to that term in the Letter of Credit
Agreement.

     “Excess Bond Proceeds” means proceeds of a Series of Bonds, and all investment earnings
thereon, transferred from the Facility Fund to the Principal Account or the Purchase Account of
the Bond Fund pursuant to Section 5.5(a), Section 5.10 or Section 5.11 of this Indenture.

     “Facility Costs” means the 2003 Facility Costs and the costs of the acquisition of any
Additional Facilities.

     “Facility Fund” means the Facility Fund created in Section 5.1 of this Indenture.

     “Government Obligations” has the meaning given that term in Section 6.1 (a) of this
Indenture.

     “Indenture” means this Trust Indenture, together with any and all Supplements hereto.

     “Independent Accountant” means an Independent Person engaged in the accounting profession,
either entitled to practice, or having members or officers entitled to practice, as a certified
public accountant under the laws of the State and in fact independent, designated in writing by
the Borrower and qualified to pass upon those matters required by the Bond Documents or the Credit
Facility Documents to be passed upon by an Independent Accountant.

     “Independent Architect” means an Independent Person registered and qualified to practice the
profession of architecture under the laws of the State.

     “Independent Counsel” means an Independent Person duly admitted to practice law before the
highest court of the State.

     “Independent Engineer” means an Independent Person registered and qualified to practice the
profession of engineering under the laws of the State.

     “Independent Person” means a person designated by the Borrower and approved by the Credit
Facility Provider (provided the Credit Facility Agreement has not expired) and not a director,
officer or employee of the Borrower.

     “Initial Credit Facility” means, for the Series 2003 Bonds, the 2003 Letter of Credit, and for
each series of Additional Bonds, any letter of credit, bond insurance policy, bond purchase
agreement, guaranty, line of credit, surety bond or similar credit or liquidity facility that
provides payment for and secures the payment of the principal of and interest on, and the purchase
price of, each Series of Additional Bonds, the administrative provisions of which are reasonably
satisfactory to the Trustee, together with any and all Supplements thereto.

     “Interest Account” means the Interest Account created within the Bond Fund pursuant to Section
5.1 of this Indenture.

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     “Interest Drawing” has the meaning given to that term by the Credit Facility.

     “Interest Payment Date” means (i) the first Business Day of each month, commencing May 1,
2003, (ii) each Mandatory Tender Date, and (iii) the maturity date of the Bonds.

     “Interest Portion” has the meaning given to that term by the Credit Facility.

     “Issuer” means the Maryland Industrial Development Financing Authority, a body politic and
corporate and a public instrumentality of the State of Maryland, its successors and assigns.

     “Issuer’s Fee” means the annual fee due and payable by the Borrower to the Trustee. The first
Issuer’s Fee is $16,250 and shall be due and payable on the Closing Date. Following the payment of
the initial Issuer’s Fee, the Borrower agrees to pay an amount equal to 0.125% of the outstanding
principal balance of the Bonds. Subsequent payments shall be made in arrears on (i) each
subsequent anniversary of the Closing Date, and (ii) the date on which the Bonds are paid in full
(whether by maturity, redemption or otherwise) and shall be calculated on the outstanding
principal balance of the Bonds as of the anniversary of the Closing Date (taking into account any
reduction of principal on such anniversary date) preceding the payment date of the Issuer’s Fee.
The Issuer’s Fee shall be calculated and invoiced by the Trustee, paid by the Borrower to the
Trustee on the date due and payable and promptly remitted by the Trustee to the Issuer. No refund
of the Issuer’s Fee shall be made in the event the Bonds mature or are redeemed, accelerated or
otherwise paid during any period for which the Issuer’s Fee has been paid and no proration of the
Issuer’s Fee paid at maturity shall be made. Neither the failure to receive an invoice for the
Issuer’s Fee nor any defect in such invoice so delivered shall affect the Borrower’s obligation to
make Issuer’s Fee payments.

     “Issuer’s Fee Fund” means the fund created in Section 5.1(d) of this Indenture.

     “Issuer’s Obligations” means the limited obligations of the Issuer under the Bond Documents to
(a) pay (but only from the Revenues and other moneys made available by the Borrower) the principal
of and interest on, and purchase price of, the Bonds, when and as the same become due and payable
(whether at the stated maturity thereof, or by acceleration of maturity or after notice of
redemption or prepayment or otherwise, or on demand by the Owners thereof as provided in this
Indenture), (b) pay, or cause to be paid (but only from the Revenues and other moneys made
available by the Borrower), all other payments (if any) required by the Bond Documents to be paid
by the Issuer, and (c) timely perform, observe and comply with all of the terms, covenants,
conditions, stipulations, and agreements, express or implied, which the Issuer is required by the
Bond Documents to perform and observe.

     “Landlord”
means Westphalia Center II Limited Partnership, its successors and assigns.

     “Lease” means the Lease Agreement dated June 11, 2002 between the Landlord and the Borrower
relating to the Leased Premises, together with any and all Supplements thereto.

11

 

     “Leased Premises” means a portion of the two story building, containing approximately 55,000
rentable square feet, located at 20358 Seneca Meadows Drive, Germantown, Maryland 20876, in the
Seneca Meadows Corporate Center in the City of Germantown, Montgomery County, Maryland, together
with all rights of the Borrower to such building, the land upon which such building is located,
and all fixtures, equipment and other improvements in or upon such building and/or land, including
sidewalks, areaways, parking areas, loading areas, gardens and lawns arising under the Lease.

     “Letter of Credit” means the 2003 Letter of Credit.

     “Letter of Credit Agreement” means the Letter of Credit Agreement dated as of April 1, 2003
between the Borrower and the Bank, together with any and all Supplements thereto.

     “Letter of Credit Documents” has the meaning given to that term by the Letter of Credit
Agreement.

     “LIBOR Rate” means the fluctuating annual rate of interest which shall at all times equal the
interest rate which the Bank announces and declares from time to time to be its one (1) month
London Interbank Offered Rate, adjusted for any Federal Reserve Board requirements imposed on the
Bank from time to time. All interest at the LIBOR Rate or computed thereon shall be calculated on
the basis of a 360 day-year factor applied to actual days elapsed and shall be adjusted on any
date on which a change occurs in the LIBOR Rate.

     “Loans” means, collectively, the Series 2003 Loan and any loan by the Issuer to the Borrower
of the proceeds of any Series of Additional Bonds.

     “Loan Agreement” means the Loan Agreement dated as of April 1, 2003 between the Issuer and
the Borrower evidencing and securing the Loans, together with any and all Supplements thereto.

     “Loan Term” means the period the Loans are to be outstanding as described in Section 3.1 of
the Loan Agreement.

     “Mail” means mail by first-class postage to Owners of the Bonds and, in the case of notices of
redemption of Bonds to Owners of Bonds in an aggregate principal amount of $1,000,000 or more,
certified mail-return receipt requested. Any notice to Owners given by Mail shall be deemed given
and received when deposited by the Trustee into the United States
mail, postage prepaid. In case,
by reason of suspension of regular mail service or by reason of any other cause, it shall be
impracticable to give such notice by Mail, then such notification as shall be made with the
approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.

     “Mandatory Tender Date” means the 5th Business Day before each Termination Date.

     “Mandatory Tender Notice” means a notice of a Mandatory Tender Date given by the Trustee in
accordance with Section 4.2 of this Indenture, which notice shall state:

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          (a) that the Credit Facility then in effect will expire and the date on which it will expire;
and

          (b) that all Bonds of the Series secured by such Credit Facility must be tendered for purchase
at or prior to 10:00 a.m. prevailing Baltimore, Maryland time on the Mandatory Tender Date to the
Trustee with an instrument of transfer satisfactory to the Trustee executed in blank by the Owner
with the signature guaranteed by a bank, trust company or member firm of the New York Stock
Exchange, and that Bonds so tendered will be purchased on the Mandatory Tender Date at a purchase
price equal to the principal amount thereof plus accrued interest thereon; and

          (c) that if there shall be on deposit with the Trustee an amount sufficient to pay the
purchase price of such Bonds on such Mandatory Tender Date, such Bonds will be deemed to have been
tendered and purchased on such Mandatory Tender Date, shall be deemed to be no longer Outstanding
under this Indenture, and shall cease to bear interest as of such Mandatory Tender Date, whether or
not such Bonds are tendered to the Trustee on such date, and that the Owners of such Bonds shall
have no rights with respect thereto or under this Indenture, except to receive the purchase price
of such Bonds.

     “Maximum Rate” means 12% per annum, or such higher or lower rate per annum to which the
Maximum Rate may be increased or decreased in accordance with Section 2.4 of this Indenture.

     “MIDFA Act” means the Maryland Industrial Development Financing Authority Act, and all future
acts supplemental thereto or amendatory thereof.

     “Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under
the laws of the State of Delaware, its successors and assigns, and, if such corporation shall for
any reason no longer perform the functions of a securities rating agency, “Moody’s” shall be
deemed to refer to any other nationally recognized rating agency designated by the Credit Facility
Provider.

     “Net Proceeds” means, when used with respect to any condemnation award or insurance proceeds
allocable to the Property (including, without limitation, title insurance), the gross proceeds from
a condemnation award or insurance proceeds (including, without limitation, the proceeds of title
insurance) so allocable, with respect to which that term is used, remaining after payment of all
expenses (including attorneys’ fees and expenses) incurred in the collection of such gross
proceeds.

     “Net Proceeds Escrow Fund” means the Net Proceeds Escrow Fund created in Section 5.1 of this
Indenture.

     “Optional Tender Date” means, with respect to any Bond, a Business Day on which such Bond, or
a portion thereof in an Authorized Denomination, is required to be purchased upon the demand of
the Owner thereof in accordance with Section 4.1 of this Indenture.

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     “Optional Tender Notice” means an irrevocable written notice given to the Trustee by the
Owner of any Bond in accordance with Section 4.1 of this Indenture of such Owner’s election to
tender such Bond or a portion thereof in an Authorized Denomination for purchase.

     “Outstanding”, “outstanding” or “Bonds Outstanding” means, when used in reference to the
Bonds as of any given date, all Bonds which have been duly authenticated and delivered by the
Trustee under this Indenture (including Bonds which have been remarketed pursuant to this
Indenture, Bonds owned by the Borrower and Pledged Bonds) except:

          (a) Bonds which have been cancelled by the Trustee at or prior to such date or which have been
delivered to the Trustee at or prior to such date for cancellation;

          (b) Bonds deemed to be paid in accordance with Article VIII of this Indenture; and

          (c) Bonds (including, without limitation, Bonds deemed to have been purchased pursuant to
Section 4.6 of this Indenture) in lieu of which other Bonds have been authenticated under Section
2.10 of this Indenture.

     “Owner” or “Owners” or “Owner of Bonds” or “Owners of Bonds” means the person or persons in
whose name any Bond is registered on the books of the Issuer maintained by the Registrar.

     “Paying Agent” means the Trustee, or any successor Paying Agent appointed under this
Indenture.

     “Penalty Rate” means the fluctuating per annum rate of interest that is at all times equal to
the Prime Rate (as defined in the Letter of Credit Agreement) plus 3% per annum.

     “Permitted Encumbrance” has the meaning given to that term by the Security Agreement.

     “Permitted Investments” has the meaning given to that term in Article VI of this Indenture.

     “Person” or “person” means any natural person, firm, association, corporation, company,
trust, partnership, public body or other entity.

     “Placement Agent” means Manufacturers and Traders Trust Company, a New York banking
corporation, or any other person appointed by the Issuer (with the consent of the Borrower) to
place any Additional Bonds, its successors and assigns.

     “Placement and Remarketing Agreement” means (a) the Placement and Remarketing Agreement dated
as of April 1, 2003 by and among the Borrower, the Bank as the Placement Agent and the Remarketing
Agent and the Issuer, together with any and all Supplements thereto, and (b) any other Placement
and Remarketing Agreement or similar agreement by and among the Borrower, the Placement Agent, the
Remarketing Agent and the Issuer, together with any and all Supplements thereto.

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     “Plans and Specifications” means the plans and specifications in accordance with which the
2003 Facility and, if applicable, any Additional Facilities are to be constructed by the General
Contractor, and which have been approved by the Borrower, the Landlord and the Credit Facility
Provider.

     “Pledge and Security Agreement” means (a) the Pledge and Security Agreement dated as of April
1, 2003, by and between the Borrower and the Bank, together with any and all Supplements thereto,
and (b) any other pledge and security agreement or similar agreement by the Borrower and the
Credit Facility Provider pursuant to which Pledged Bonds are pledged as security for the
Borrower’s Credit Facility Obligations, together with any and all Supplements thereto.

     “Pledged Bonds” means Bonds of a Series that, subsequent to a Bond Purchase Principal
Drawing, are delivered to and held by the Pledged Bonds Custodian as security for the Borrower’s
Credit Facility Obligations and registered as directed by the Credit Facility Provider.

     “Pledged Bonds Custodian” means (a) Allfirst Trust Company National Association, as agent for
the Bank under the Pledged Bonds Custody Agreement, or any successor custodian of the Pledged
Bonds acting as the Bank’s agent, and (b) any other person who, pursuant to a Pledged Bonds
Custody Agreement with the Credit Facility Provider and as agent for the Credit Facility Provider,
acts as custodian of the Pledged Bonds.

     “Pledged Bonds Custody Agreement” means (a) the Pledged Bonds Custody Agreement dated as of
April 1, 2003 by and between the Bank and the Pledged Bonds Custodian, together with any and all
Supplements thereto, and (b) any other custody agreement or similar agreement by the Credit
Facility Provider, the Borrower and the Pledged Bonds Custodian, pursuant to which the Pledged
Bonds Custodian, as agent for the Credit Facility Provider, acts as custodian of the Pledged
Bonds, together with any and all Supplements thereto.

     “Prime Rate” has the meaning given to that term by the Letter of Credit Agreement.

     “Principal Account” means the Principal Account created within the Bond Fund pursuant to
Section 5.1 of this Indenture.

     “Principal Drawing” has the meaning given to that term by the Credit Facility.

     “Principal Office” means, with respect to the Trustee, the Registrar, the Paying Agent, the
Remarketing Agent or the Credit Facility Provider, the office at the address set forth in Section
13.8 of this Indenture, or such other office which may be designated as such, from time to time,
by the respective party in writing to the Issuer, the Borrower, the Trustee, the Registrar, the
Paying Agent, the Remarketing Agent and the Credit Facility Provider.

     “Principal Portion” has the meaning given to that term in the Credit Facility.

     “Projected Completion Date” has the meaning given to that term in the Credit Facility
Agreement.

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     “Property” means the Leased Premises, the 2003 Facility, any Additional Facilities and all
Additions to all of the foregoing.

     “Property Taxes” means all taxes, payments in lieu of taxes, water rents, sewer rents, ground
rents, assessments and other governmental or municipal or public or private dues, charges and
levies and any liens (including federal tax liens) which are or may be levied, imposed or assessed
upon the Property or any part thereof or upon any leases, or upon the rents, issues, income or
profits thereof, whether any or all of the aforementioned be levied directly or indirectly or as
excise taxes or as income taxes, or otherwise.

     “Purchase Account” means the Purchase Account created within the Bond Fund pursuant to
Section 5.1 of this Indenture.

     “Record Date” means (a) the last day before each Interest Payment Date, and (b) in the case
of the payment of any defaulted interest, the fifth day before such payment; provided, however,
that if any such day is not a Business Day, the Record Date will be the Business Day immediately
preceding such day.

     “Refunding Proceeds” means the proceeds of the sale of any refunding obligations issued in
accordance with Section 2.14 of this Indenture.

     “Registrar” or “Bond Registrar” means the Trustee, or any successor Registrar appointed under
this Indenture.

     “Remarketing Agent” means Manufacturers and Traders Trust Company, a New York banking
corporation, or any successor Remarketing Agent appointed under this Indenture, its successors and
assigns.

     “Reserved
Rights of the Issuer” means (a) all rights of the Issuer as
set forth in Article VII of the Loan Agreement; (b) the right of the Issuer to receive notices, reports or other
information, make determinations and grant approvals hereunder and under the other Bond Documents;
(c) all rights of the Issuer set forth in the Bond Documents regarding the use of Bond proceeds and
the 2003 Facility and any Additional Facilities; (d) any and all rights, remedies and limitations
of liability of the Issuer set forth in the Bond Documents regarding (1) the negotiability,
registration and transfer of the Bonds, (2) the loss or destruction of the Bonds, (3) the limited
liability of the Issuer as provided in the Acts and in the Bond Documents, (4) the maintenance of
insurance by the Borrower, (5) no liability of the Issuer to third parties, and (6) no warranties
of suitability or merchantability by the Issuer; (e) all rights of the Issuer in connection with
any amendment to or modification of the Bond Documents; and (f) all enforcement remedies (other
than the declaration of a default under any of the Bond Documents) with respect to the foregoing.

     “Resolution” means the Resolution adopted by the Issuer on July 25, 2002, as amended on
November 21, 2002 and extended by the Issuer’s Executive Director on March 7, 2003, pertaining to
the Series 2003 Bonds.

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     “Revenue Bond Act” means the Maryland Economic Development Revenue Bond Act, and all future
acts supplemental thereto or amendatory thereof.

     “Revenues” means (a) all moneys paid or payable to the Trustee for the account of the Issuer
pursuant to the Loan Agreement and all revenues of the Issuer attributable to the financing and
refinancing of the 2003 Facility and any Additional Facilities with the proceeds of the Bonds,
including (without limitation) any moneys realized from the liquidation and sale of any security
for the Loans, (b) any moneys received under any of the Bond Documents, (c) all moneys drawn under
the Credit Facility and deposited in the Bond Fund to pay principal of the Bonds (whether at
maturity or upon acceleration of maturity or after notice of redemption or prepayment or
otherwise), or to pay interest on, or the purchase price of, the Bonds when due, and (d) all other
receipts of the Trustee credited under the provisions of this Indenture against such payments;
provided that the term “Revenues” does not include Reserved Rights of the Issuer.

     “Security Agreement” means the Security Agreement dated as of April 1, 2003, by the Borrower
in favor of the Bank, together with any and all Supplements thereto.

     “Series 2003 Bonds” means the Issuer’s $12,000,000 Taxable Variable Rate Demand Revenue Bonds
(Avalon Pharmaceuticals, Inc. Facility), Series 2003.

     “Series 2003 Loan” means the loan in the amount of $12,000,000 made by the Issuer to the
Borrower from the proceeds of the Series 2003 Bonds evidenced by and described in the Loan
Agreement.

     “Sinking Fund Installment” means the principal amount of Bonds to be called for redemption on
any Sinking Fund Installment Date as provided in Section 3.1(c) of this Indenture and in each
Supplement to this Indenture authorizing any Series of Additional Bonds.

     “Sinking Fund Installment Date” means the date of any Sinking Fund Installment provided in
Section 3.1(c) of this Indenture and in each Supplement to this Indenture authorizing any Series
of Additional Bonds.

     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies, its
successors and assigns, and, if such entity shall for any reason no longer perform the functions
of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Credit Facility Provider.

     “State” means the State of Maryland.

     “Stated Amount” has the meaning given to that term in the Credit Facility.

     “Substitute Credit Facility” means any letter of credit, bond insurance policy, bond purchase
agreement, guaranty, line of credit, surety bond or similar credit or liquidity facility (provided
that such credit or liquidity facility provider, insurer, surety or guarantor, as the case may be,
has a credit rating issued by S&P or Moody’s which is not less than the then current credit or
liquidity facility provider, insurer, surety or guarantor, as the case may be) meeting the

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requirements of, and delivered to the Trustee in accordance with, Section 3.6 of the Loan
Agreement, together with any and all Supplements thereto, the administrative provisions of which
are reasonably satisfactory to the Trustee.

     The requirements for the provision of a Substitute Credit Facility include the following
items:

     (i) an opinion of Bond Counsel addressed to the Issuer and the Trustee stating that the
delivery of the proposed Substitute Credit Facility to the Trustee is permitted under this
Indenture and the Loan Agreement and comply with the terms of the Loan Agreement,

     (ii) an opinion of Independent Counsel addressed to the Issuer and the Trustee to the effect
that the exemption of the Bonds from the registration requirements of the Securities Act of 1933,
as amended, and the exemption of this Indenture from qualification under the Trust Indenture Act
of 1939, as amended, will not be impaired as a result of the delivery of the proposed Substitute
Credit Facility, and that the Substitute Credit Facility is exempt from the registration
requirements of the Securities Act of 1933, as amended,

     (iii) an opinion of Independent Counsel addressed to the Issuer and the Trustee to the effect
that the Substitute Credit Facility has been duly authorized, executed and delivered by the Credit
Facility Provider issuing the Substitute Credit Facility and constitutes the valid and legally
binding obligation of the Credit Facility Provider issuing the Substitute Credit Facility, and

     (iv) the written consent of the Remarketing Agent to the substitution of the proposed
Substitute Credit Facility for the Credit Facility then in effect, which consent shall not be
unreasonably withheld.

     “Supplement” or “Supplements” means any and all extensions, renewals, modifications,
amendments, supplements and substitutions.

     “Taxes” means all taxes, assessments and governmental levies imposed or assessed upon the
applicable person or on its income or its property, including without limitation, all Property
Taxes.

     “Tender Date” means (a) an Optional Tender Date or (b) a Mandatory Tender Date.

     “Termination Date” means (a) the expiration date of the Credit Facility then in effect
occurs, and (b) the effective date of any Substitute Credit Facility that replaces any Credit
Facility then in effect.

     “Trust Estate” means and includes:

          (a) the Revenues;

          (b) all of the Issuer’s right, title and interest in and to and remedies under the Loan
Agreement and all other Bond Documents, including (without limitation) any and all security for the
Loans referred to therein;

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          (c) all moneys which are at any time or from time to time on deposit in the Bond Fund, the
Facility Fund and the Net Proceeds Escrow Fund; and

          (d) all right, title and interest in and to and all remedies with respect to any and all other
property of every description and nature from time to time hereafter by delivery or by writing of
any kind conveyed, pledged, assigned or transferred, as and for additional security hereunder, by
the Issuer or by anyone on its behalf or with its written consent, to the Trustee, which is hereby
authorized to receive any and all such property at any and all times and to hold and apply the same
subject to the terms hereof, provided, however, that the term “Trust Estate” does not include
Reserved Rights of the Issuer.

     “Trustee” means Allfirst Trust Company National Association having its Principal Office in
Baltimore, Maryland, and its successor or successors in the trust created by this Indenture.

     “Uniform Commercial Code” means the Uniform Commercial Code of Maryland and the Uniform
Commercial Code of any other applicable jurisdiction.

     “Variable Rate” means the rate of interest borne by the Bonds, which rate shall be determined
by the Remarketing Agent on each Adjustment Date as provided in Section 2.4 of this Indenture.

     “2003 Facility” means (a) the construction of tenant improvements to the Leased Premises,
including (without limitation) structural modifications of the existing improvements for wet lab
space and vivarium and office/administrative space, (b) the acquisition and installation of
certain necessary or useful equipment and machinery, to be located in the Leased Premises, and (c)
the acquisition of such other interests in land or improvements as may be necessary or suitable
for the foregoing, including roads and rights of access, utilities and other necessary site
preparation facilities, such facilities to be leased from the Landlord and (d) associated “soft
costs” related to (a) through (c) above, including costs of issuance of the Bonds.

     “2003 Facility Costs” means those costs associated with the acquisition of the 2003 Facility
which are approved by the Credit Facility Provider.

     “2003 Letter of Credit” means the Irrevocable Transferable Letter of Credit No. SB-904507-0101
issued by the Bank to secure the Series 2003 Bonds dated the Closing Date. Any extension, amendment
or renewal of or substitution issued by the Bank for the 2003 Letter of Credit shall, without any
action on the part of the Borrower, the Trustee or the Bank, be deemed part of the 2003 Letter of
Credit.

     SECTION 1.2. Rules of Construction. The words “hereof,” “herein,” “hereunder,”
“hereto,” and other words of similar import refer to this Indenture in its entirety.

     The terms “agree” and “agreements” contained herein are intended to include and mean
“covenant” and “covenants.”

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     References to Articles, Sections, and other subdivisions of this Indenture are to the
designated Articles, Sections, and other subdivisions of this Indenture.

     The headings of this Indenture are for convenience only and shall not define or limit the
provisions hereof.

     All references made (a) in the neuter, masculine or feminine gender shall be deemed to have
been made in all such genders, and (b) in the singular or plural number shall be deemed to have
been made, respectively, in the plural or singular number as well.

     Any reference to particular sections or subsections of the Code and applicable United States
Treasury Regulations shall include any successor provisions of law or regulations, to the extent
the same shall apply to the Bonds.

ARTICLE II

CREATION OF THE SERIES 2003 BONDS; DETAILS OF THE BONDS

     SECTION 2.1. Restriction on Issuance of Bonds. No Bonds may be issued under the
provisions of this Indenture except in accordance with this Article. The total principal amount of
Series 2003 Bonds that may be issued and Outstanding hereunder is expressly limited to
$12,000,000.

     SECTION 2.2. Source of Payment of the Bonds. The Issuer shall be obligated to pay the
principal of and interest on, and the purchase price of, the Bonds only out of the Revenues
pledged for the payment thereof under this Indenture, and not otherwise. The Issuer may, at its
option, pay the principal of and interest on, and the purchase price of, the Bonds out of any
other moneys made available to the Issuer for the payment thereof. All the Bonds to be issued
hereunder shall be equally and ratably secured, to the extent provided herein, by this Indenture.

     SECTION
2.3. Creation of the Series 2003 Bonds; Details of the
Bonds. (a) There is
hereby created for issuance under this Indenture a series of bonds limited in aggregate principal
amount to $12,000,000, and designated “Maryland Industrial Development Financing Authority Taxable
Variable Rate Demand Revenue Bonds (Avalon Pharmaceuticals, Inc. Facility), Series 2003.” The
Series 2003 Bonds shall be issuable only as fully registered bonds in Authorized Denominations,
substantially in the form, appropriately completed, attached hereto as Exhibit A and made a part
hereof. The Series 2003 Bonds shall be lettered “R”, and shall be numbered separately from “1”
consecutively upward.

     (b) The Series 2003 Bonds shall (i) be dated, for purposes of reference, as of April 1, 2003,
(ii) mature and all outstanding principal and accrued interest thereon shall be due and payable on
the first Business Day of April, 2013, and (iii) be subject to redemption and purchase as provided
in Article III and Article IV, respectively, hereof.

     Each Bond shall bear interest from the Interest Payment Date immediately preceding the date on
which such Bond is authenticated; provided, however, (i) if any Bond is authenticated on

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an Interest Payment Date, such Bond shall bear interest from such Interest Payment Date, and (ii)
if any Bond is authenticated prior to the first Interest Payment Date, such Bond shall bear
interest from the Closing Date, and (iii) if at the time of authentication of any Bond, the Issuer
is in default with respect to the payment of interest on such Bond, such Bond shall bear interest
from the date to which interest shall have been paid. The certificate of authentication on each
Bond shall be dated the date on which such Bond is authenticated by the Trustee.

     Principal of and interest on, and purchase price of, the Bonds shall be payable in any coin
or currency of the United States of America which, at the respective times of payment, is legal
tender for the payment of public and private debts, but only from the Revenues and from any other
moneys made available to the Issuer for such purpose. Principal of the Bonds, and interest accrued
thereon prior to an Interest Payment Date, shall be payable at the Principal Office of the Paying
Agent upon presentation and surrender of the Bonds as the same become due. Interest on the Bonds
payable on any applicable Interest Payment Date shall be paid to the Owners of the Bonds in whose
names the Bonds are registered at the close of business on the Record Date by check mailed to such
Owners at their addresses as they appear on the registration books kept by the Registrar or at
such other address as is furnished to the Paying Agent in writing by any such Owner.

     At the option of any Owner of at least 25% in aggregate principal amount of the Outstanding
Bonds of a Series, any payment due on such Bonds owned by such Owner may be transmitted by wire
transfer to such Owner, at such Owner’s written request, to the bank account number on file with
the Registrar on the fifth day before the Record Date or, if any such day is not a Business Day,
the Business Day immediately preceding such day. Such instructions shall remain in effect until
revoked in writing by such Owner. Furthermore, at the option of the Credit Facility Provider, the
principal of and interest on all Pledged Bonds may be transmitted by wire transfer to the Credit
Facility Provider at the Credit Facility Provider’s written request, to the bank account number on
file with the Registrar on the fifth day before the Record Date or, if any such day is not a
Business Day, the Business Day immediately preceding such day.

     The purchase price of Bonds Tendered or Deemed Tendered for Purchase as provided in Article
IV of this Indenture shall be payable by check or wire transfer with immediately available funds,
but only from the moneys available therefor as described in Article IV of this Indenture.

     If any payment of the principal of or interest on, or purchase price of, the Bonds is due on
a Bond Payment Date that is not a Business Day, such payment will be made on the next succeeding
Business Day, and no interest will accrue on the amount of such payment during the intervening
period.

     SECTION
2.4. Interest Rate on the Bonds.

          (a) Variable
Rate. The Bonds shall bear interest at the Variable Rate. From and
including the date of initial authentication and delivery of the Series 2003 Bonds to and
including April 11, 2003, the Series 2003 Bonds shall bear
interest at the rate of _____% per
annum. Thereafter, the Variable Rate shall be determined as provided in subsection (b) below.

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Interest on the Bonds shall be computed on the basis of a year of 365 days (366 days in leap
years) for the actual number of days elapsed and shall be payable on each Interest Payment Date.

          (b) Determination of the Variable Rate. The Variable Rate shall be determined by the
Remarketing Agent on each Adjustment Date in accordance with the terms and conditions of the
Placement and Remarketing Agreement. The Variable Rate determined by the Remarketing Agent on
each Adjustment Date shall be and remain in effect from and including such Adjustment Date to, but
excluding, the earlier of (i) the immediately succeeding Adjustment Date and (ii) the immediately
succeeding Mandatory Tender Date.

          (c) Notice of Interest Rates. The Remarketing Agent shall, on each
Adjustment Date, give the Trustee, the Borrower, the Credit Facility Provider, the Issuer (if it so
requests), the Bond Registrar and the Paying Agent notice by telecopy of the Variable Rate
determined on such Adjustment Date.

          (d) Maximum Rate. Notwithstanding the foregoing provisions of this Section, so long as
a Credit Facility is in effect with respect to a Series of Bonds, the interest rate payable on such
Bonds may not exceed the Maximum Rate. The Issuer may from time to time, upon the written request
of the Borrower, change the Maximum Rate to increase or decrease the same by delivering to the
Trustee (i) the approval of the Issuer authorizing such change in the Maximum Rate evidenced by the
signature of the Authorized Issuer Representative, (ii) an opinion of Bond Counsel to the effect
that such change in the Maximum Rate has been duly and properly approved by the Issuer and that the
approval of the Issuer is valid and binding, (iii) an amendment to such Credit Facility providing
that, or other evidence satisfactory to the Trustee that, the amount that can be realized under
such Credit Facility for the payment of interest on such Bonds is equal to 50 days’ interest on
such Bonds, calculated at the Maximum Rate after giving effect to such change (provided, that if
the Trustee shall agree or otherwise be satisfied with less than 50 days’ interest, the Trustee
shall first obtain confirmation from Moody’s (if such Bonds are then rated by Moody’s) and S&P (if
such Bonds are then rated by S&P) that such decrease in days’ interest will not adversely affect
the rating of such Bonds), and (iv) if the Maximum Rate is being decreased, the Trustee shall
obtain confirmation from Moody’s (if such Bonds are then rated by Moody’s) and S&P (if such Bonds
are then rated by S&P) that the decrease in the Maximum Rate will not adversely affect the rating
of such Bonds . The Trustee shall give written notice to the Bond Registrar, the Paying Agent and
the Remarketing Agent of any change in the Maximum Rate promptly upon its receipt of the items
referred to in this paragraph (d). The Trustee shall give Moody’s (if such Bonds are then rated by
Moody’s) and S&P (if such Bonds are then rated by S&P) written notice of any such change in the
Maximum Rate, subject to the provisions of Section 12.9 hereof.

          (e) Interest Rates Conclusive and Binding. The determination by the
Remarketing Agent of the Variable Rate as provided in this Section shall be conclusive and binding
upon the Issuer, the Trustee, the Borrower, the Paying Agent, the Registrar, the Remarketing Agent,
the Credit Facility Provider, the Owners of the Bonds and all other Persons.

     SECTION 2.5. Execution of the Bonds. The Bonds shall be executed on behalf of the
Issuer by the manual or facsimile signature of the Chairman or the Vice Chairman of the Issuer,

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and the seal of the Issuer or a facsimile thereof shall be impressed or otherwise
reproduced thereon and attested by the manual or facsimile signature of the Executive Director of
the Issuer. In case any officer of the Issuer whose signature or a facsimile of whose signature
shall appear on any of the Bonds shall cease to be such officer before the authentication and
delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and
sufficient for all purposes, the same as if such officer had remained in office until
authentication and delivery. Furthermore, it shall not be necessary that the same officer sign all
of the Bonds that may be issued hereunder at any one time or from time to time.

     SECTION 2.6. Form of the Bonds; Book-Entry. The definitive Bonds, which may be
engraved, printed or typewritten, including the Trustee’s certificate of authentication to be
endorsed thereon and the form of assignment, shall be substantially in the form attached hereto as
Exhibit A and made a part hereof, with respect to the Series 2003 Bonds and in the form attached
to any Supplement to this Indenture authorizing Additional Bonds, with, in the case of definitive
Bonds, such appropriate variations, omissions and insertions as permitted or required by this
Indenture.

     At the direction of the Remarketing Agent, a system for registration of the Bonds of a Series
in Book-Entry Form with a Depository may be established, in which case the Issuer and the Trustee
shall execute and deliver to the Depository any representation letters or other agreements as may
be required by the Depository in order to qualify the Bonds for registration in Book-Entry Form
(the “Letters of Representation”). All payments of principal of, interest on, and the purchase
price of, the Bonds to be held in Book-Entry Form and all notices with respect thereto, including
(without limitation) notices of redemption, shall be made and given at the times and in the manner
set out in the Letters of Representation. The terms and provisions of the Letters of
Representation shall govern in the event of any inconsistency between the provisions of this
Indenture and the Letters of Representation. The Letters of Representation may be amended without
the consent of the Owners of the Bonds.

     The Book-Entry System for the Bonds of a Series may be terminated, and certificates delivered
to and registered in the name of the beneficial owners, under any of the following circumstances:

                    (a) The Depository notifies the Issuer or the Trustee that it is no longer willing
or able to act as Depository for the Bonds and a successor Depository is not appointed by the
Issuer at the direction of the Borrower prior to the effective date of such discontinuation;
or

                    (b) The Issuer or the Remarketing Agent determines that continuation of the
Book-Entry System is not in the best interest of the Owners of the Bonds; or

                    (c) The Trustee receives a written request from the beneficial owners of 100%
of the Bonds of a Series maintained in Book-Entry Form to terminate the Book-Entry System
with respect thereto and a successor Depository is not appointed by the Issuer at the
direction of
such beneficial owners prior to the effective date of such termination.

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     In the event a successor Depository is appointed by the Issuer at the direction of the
Borrower, the applicable Bonds will be registered in the name of such successor Depository or its
nominee. In the event certificates are required to be issued to beneficial owners, the Trustee,
the Borrower and the Issuer shall be fully protected in relying upon a certificate of the
Depository or any participants in the Depository as to the identity of and the principal amount of
Bonds held by such beneficial owners.

     The beneficial owners of Bonds maintained in Book-Entry Form will not receive physical
delivery of certificates except as provided herein. For so long as there is a Depository for the
Bonds of a Series, all of such Bonds shall be registered in the name of the nominee of the
Depository, all transfers of beneficial ownership interests in such Bonds will be made by the
nominee of the Depository, and no investor or other party purchasing, selling or otherwise
transferring beneficial ownership of such Bonds is to receive, hold or deliver any certificate.
The Issuer, the Trustee and the Borrower shall have no responsibility or liability for transfers
of beneficial ownership interests in such Bonds.

     The Issuer, the Borrower and the Trustee will recognize the Depository or its nominee as the
Bondholder for all purposes, including receipt of payments, notices and voting; provided the
Trustee may recognize votes by or on behalf of Beneficial Owners as if such votes were made by
Bondholders of a related portion of the Bonds when such votes are received in compliance with an
omnibus proxy or other comparable evidence delivered to the Trustee by the Bondholders.

     With respect to any Bond held under a Book-Entry System, the Issuer, the Borrower and the
Trustee shall be entitled to treat the person in whose name such Bond is registered as the
absolute owner of such Bond for all purposes of this Indenture, and neither the Issuer nor the
Borrower nor the Trustee shall have any responsibility or obligation to any beneficial owner of
such Bond. Without limiting the immediately preceding sentence, neither the Issuer nor the
Borrower nor the Trustee shall have any responsibility or obligation with respect to (a) the
accuracy of the records of any Depository or any other person with respect to any ownership
interest in Bonds held under a Book-Entry System, (b) the delivery to any person, other than an
Owner, of any notice with respect to such Bonds, including any notice of redemption or refunding,
(c) the selection of particular Bonds or portions thereof to be redeemed or refunded in the event
of a partial redemption or refunding of part of such Bonds or (d) the payment to any person, other
than an Owner, of any amount with respect to the principal of or interest on such Bonds.

     SECTION 2.7. Effect of Authentication. Only Bonds as shall have endorsed thereon a
certificate of authentication substantially in the form set forth in the form of the Bonds attached
hereto as Exhibit A and in any Supplement to this Indenture authorizing any Additional Bonds and
duly executed by the Trustee, or by a duly authorized authenticating agent of the Trustee, shall be
entitled to any right, benefit or security under this Indenture. No Bond shall be valid or
obligatory for any purpose unless and until such certificate of authentication shall have been duly
executed by the Trustee, and such executed certificate of the Trustee upon any such Bond shall be
conclusive evidence that such Bond has been authenticated and delivered under this Indenture. The
Trustee’s certificate of authentication on any Bond shall be deemed to have been executed

24

 

by it if manually signed by a duly authorized officer of the Trustee, but it shall not be
necessary that the same person sign the certificate of authentication on all of the Bonds issued
hereunder.

     SECTION 2.8. Authentication and Delivery of the Series 2003 Bonds. The Issuer shall
execute and deliver to the Trustee, and the Trustee shall authenticate the Series 2003 Bonds and
deliver the same as directed by the Issuer as provided in this Section upon receipt of the
following:

                    (a) A certified copy of the Resolution.

                    (b) An original, fully executed counterpart of each of the Bond Documents.

                    (c) The original, executed Letter of Credit.

                    (d) A request and authorization signed by the Authorized Issuer
Representative to the Trustee to authenticate and deliver the Series 2003 Bonds to the initial
purchaser(s) thereof upon payment to the Trustee for the account of the Issuer of the amount
of the initial purchase price for the Series 2003 Bonds specified in such request and
authorization.

                    (e) An opinion of Bond Counsel to the effect that the Series 2003 Bonds have
been duly and validly authorized and issued by the Issuer. The opinion of Bond Counsel may be
qualified as to such matters as are acceptable to the Placement Agent, the Remarketing Agent,
the Credit Facility Provider, the Issuer and the Borrower.

                    (f) An opinion or opinions of Independent Counsel to the effect that the Series
2003 Bonds, the Letter of Credit, the Bond Documents and the Letter of Credit Documents have
been duly executed and delivered by the parties thereto and constitute valid and binding
obligations of such parties, enforceable against such parties in accordance with their
respective
terms (subject to customary exceptions as to bankruptcy, insolvency or other laws affecting
creditors’ rights generally, and customary exceptions as to principles of equity).

                    (g) An original, fully executed counterpart of each of the other Letter of Credit
Documents.

     The proceeds from the sale of the Series 2003 Bonds shall be paid over directly to the
Trustee and deposited to the credit of the Facility Fund as provided under Article V hereof.

     SECTION 2.9. Temporary Bonds. Until Bonds in definitive form are ready for delivery,
the Issuer may execute, and upon the Issuer’s request in writing, the Trustee shall authenticate
and deliver in lieu thereof, and subject to the same provisions, limitations and conditions, one or
more printed, lithographed or typewritten Bonds in temporary form, substantially in the form of the
Bonds attached hereto as Exhibit A with respect to the Series 2003 Bonds and otherwise in the form
of Bonds set forth in any Supplement to this Indenture authorizing Additional Bonds, and with
appropriate omissions, variations and insertions as permitted or required by this Indenture. Such
Bond or Bonds in temporary form shall be delivered in Authorized Denominations, may be numbered
using the prefix “T” before any number thereon as authorized

25

 

by this Indenture, and may bear a legend thereon setting forth the terms for the exchange thereof
for Bonds in definitive form. Until temporary Bonds are exchanged for Bonds in definitive form,
such Bonds in temporary form shall in all respects be entitled to the same benefits and security
of this Indenture as the definitive Bonds to be issued and authenticated hereunder. The Issuer
shall, without unreasonable delay (unless the Owners of the Bonds issued in temporary form agree
otherwise), prepare, execute and deliver to the Trustee definitive Bonds, and, upon the
presentation and surrender of the Bond or Bonds in temporary form, the Trustee shall authenticate
and deliver, in exchange therefor, a Bond or Bonds in a definitive authorized form in Authorized
Denominations, bearing the same interest rate or rates and for the same aggregate principal amount
as the Bond or Bonds in temporary form surrendered. Such exchange shall be made by the Issuer at
the Borrower’s expense and without making any charge to the Owners of the Bonds therefor.

     SECTION
2.10. Mutilated, Lost, Stolen or Destroyed Bonds; Bonds Not Delivered for
Purchase. (a) In the event any Bond is mutilated, lost, stolen or destroyed, the Issuer shall
execute and the Trustee shall authenticate a new Bond of like principal amount and denomination as
that of the Bond mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated
Bond, such mutilated Bond shall first be surrendered to the Trustee, and, in the case of any lost,
stolen or destroyed Bond there shall be first furnished to the Issuer and the Trustee evidence of
such loss, theft or destruction satisfactory to the Issuer and the Trustee, together with
indemnity satisfactory to each of them. In the event any such Bond shall have matured, instead of
issuing a substitute Bond the Trustee may pay the same without surrender thereof. The Issuer and
the Trustee may charge the Owner of such Bond their expenses and reasonable fees, if any, in this
connection. If, after the delivery of such substitute Bond, a bona fide purchaser of the original
Bond (in lieu of which such substitute Bond was issued) presents for payment such original Bond,
the Issuer and the Trustee shall be entitled to recover such substitute Bond from the person to
whom it was delivered or any other person who receives delivery thereof, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity provided therefor or
otherwise to the extent of any loss, damage, cost or expense incurred by the Issuer or the Trustee
in connection therewith.

                    (b) In the event that any Bond to be purchased pursuant to Section 4.1 or Section 4.2 hereof
is not tendered by the Owner thereof on the applicable Tender Date and sufficient moneys are
available to the Trustee to pay the purchase price of such Bond on the applicable Tender Date, such
Bond shall be deemed to have been tendered for purchase and to have been purchased. Thereafter, (i)
such Bond deemed to have been tendered and purchased shall no longer be Outstanding under this
Indenture; (ii) interest on such Bond deemed to have been tendered and purchased shall cease to
accrue to the former Owner thereof as of the applicable Tender Date; (iii) the former Owner of such
Bond shall cease to be entitled to the benefits and security of this Indenture as of the date on
which such Bond is deemed to have been tendered and purchased, except to receive the moneys
representing the purchase price of such Bond against delivery thereof at the Principal Office of
the Trustee; and (iv) the Registrar will not register, and the Trustee will not recognize, any
further transfers by the former Owner of such Bond deemed to have been tendered and purchased.

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     The Issuer shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds
of like principal amount and denomination as any Bond Tendered or Deemed Tendered for Purchase.
Any Bond or Bonds executed and authenticated in lieu of a Bond Tendered or Deemed Tendered for
Purchase shall be delivered to the person to whom such Bond or Bonds would have been delivered as
set forth in Section 4.5 hereof, and the Trustee shall register such Bond or Bonds as provided in
Section 4.5 hereof.

                    (c) All substitute Bonds issued and authenticated pursuant to this Section 2.10 shall
constitute original, contractual obligations of the Issuer (whether or not, in the case of
paragraph (a), lost, stolen or destroyed Bonds be at any time found by anyone) and shall be
entitled to equal and proportionate rights and benefits hereunder as all other Outstanding Bonds
issued hereunder.

     SECTION
2.11. Negotiability, Registration, Transfer and Exchange of
Bonds. All of the
Bonds issued under this Indenture shall be negotiable, subject to the provisions for registration
and transfer contained in this Indenture and in the Bonds. So long as any of the Bonds remain
Outstanding, the Registrar shall keep and maintain books for the registration and transfer of
Bonds; and, upon presentation thereof for such purpose at such office, the Registrar shall
register or cause to be registered therein, and permit to be transferred thereon, under such
reasonable regulations as the Issuer or the Registrar may prescribe, any Bond entitled to
registration or transfer. At reasonable times and under reasonable regulations established by the
Registrar, such books may be inspected and copied by the Issuer, the Borrower, the Remarketing
Agent, the Credit Facility Provider or by Owners (or a designated representative thereof) of 15%
or more in aggregate principal amount of Bonds of the applicable Series then Outstanding.

     Each Bond shall be transferable only upon the books of the Issuer maintained for such purpose
by the Registrar, at the written request of the registered Owner thereof or the Owner’s attorney
duly authorized in writing, upon presentation and surrender thereof, together with a written
instrument of transfer substantially in the form set forth in the form of the Bonds attached
hereto as Exhibit A with respect to the Series 2003 Bonds and otherwise in the form of Bonds
attached to any Supplement to this Indenture authorizing any Additional Bonds, or as may otherwise
be satisfactory to the Trustee, duly executed by the registered Owner or the Owner’s attorney duly
authorized in writing. Upon the surrender for transfer of any Bond, the Issuer shall issue, and
the Trustee shall authenticate, in the name of the transferee, in Authorized Denominations, a new
Bond or Bonds of the same Series and of the same aggregate principal amount as the surrendered
Bond.

     The Issuer, the Remarketing Agent, the Registrar, the Credit Facility Provider, the Borrower,
the Trustee and the Paying Agent may deem and treat the person in whose name any Outstanding Bond
is registered upon the books of the Issuer maintained by the Registrar as the absolute owner of
such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or
on account of, the principal of and interest on, and purchase price of, such Bond and for all other
purposes, and all such payments so made to any such registered Owner or upon his order shall be
valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum
or sums so paid, and neither the Issuer, the Remarketing

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Agent, the Registrar, the Credit Facility Provider, the Borrower, the Trustee nor the Paying Agent
shall be affected by any notice to the contrary.

     Upon payment of any required tax or other governmental charge, and subject to such payment,
upon surrender at the Principal Office of the Registrar, Bonds in an aggregate principal amount
equal to the Authorized Denomination may, at the option of the registered Owner thereof, be
exchanged for an equal aggregate principal amount of Bonds of any other Authorized Denomination.

     For every exchange or transfer of Bonds, whether temporary or definitive, the Issuer or the
Trustee may make a charge sufficient to reimburse themselves for any tax or other governmental
charge required to be paid with respect to such exchange or transfer, which sum or sums shall be
paid by the person requesting such exchange or transfer as a condition precedent to the exercise
of the privilege of making such exchange or transfer. Notwithstanding any other provision of this
Indenture to the contrary, the cost of preparing each new Bond upon each exchange or transfer and
any other expenses of the Issuer or the Trustee incurred in connection therewith (except any
applicable tax or other governmental charge) shall be paid by the Borrower as required by the Loan
Agreement. If the Borrower does not make such payment, the Issuer or the Trustee shall be
reimbursed with funds from the Bond Fund (excluding, however, the proceeds of any funds drawn
under the Credit Facility).

     The Issuer and the Registrar shall not be required to issue, exchange or register the
transfer of any Bond or any portion thereof (A) for a period of 15 days prior to the date on which
Bonds are selected for redemption, or (B) after such Bond or portion thereof is called for
redemption, unless the transferee of such Bond or portion thereof delivers to the Trustee and to
the Registrar a written acknowledgement of such call for redemption and agrees in writing to be
bound by such call for redemption. In addition, the Issuer and the Registrar shall not be required
to issue, exchange or register the transfer of any Bond or any portion thereof:

                         (i) prior to the Optional Tender Date for any Bond or any portion thereof with
respect to which an Optional Tender Notice has been received by the Trustee; or

                         (ii) prior to the Mandatory Tender Date after a Mandatory Tender Notice has
been Mailed;

unless, in each such case, the transferee of such Bond or portion thereof delivers to the Trustee
and to the Registrar a written acknowledgement of such Optional Tender Notice or Mandatory Tender
Notice and agrees in writing to be bound by such Optional Tender Notice or Mandatory Tender Notice.

     The Registrar shall not register the transfer of any Pledged Bond unless the Registrar shall
have received written notice from the Credit Facility Provider that the Principal Portion of the
Credit Facility has been reinstated in the amount of the Bond Purchase Principal Drawing, the
proceeds of which were used to purchase such Pledged Bond from the former Owner thereof.

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     Bonds delivered upon any transfer as provided herein, or as provided in Section 2.10 hereof,
shall be valid limited obligations of the Issuer, evidencing the same obligation as the Bonds
surrendered, shall be secured by this Indenture and shall be entitled to all of the security and
benefits hereof to the same extent as the Bonds surrendered.

     SECTION 2.12. Obligations of Issuer Limited. The Bonds and interest thereon, and the
purchase price thereof, do not constitute an indebtedness to which the faith and credit of the
Issuer are pledged but are limited obligations of the Issuer payable from the Bond Fund, proceeds
of the remarketing and sale of Bonds pursuant to Section 4.3 hereof, moneys received by the
Trustee pursuant to a draw under the Credit Facility or any other moneys made available to the
Issuer for such purpose, and shall be a valid claim of the respective Owners thereof only against
the Revenues and other moneys pledged thereto and which constitute the Trust Estate, which are
hereby assigned for the equal and ratable payment of the Bonds and the interest thereon and shall
be used for no other purpose than to pay the principal of and interest on, and purchase price of,
the Bonds, except as may be otherwise expressly authorized in this Indenture.

     THE BONDS AND THE PREMIUM (IF ANY) AND INTEREST THEREON, AND THE PURCHASE PRICE THEREOF, ARE
LIMITED OBLIGATIONS OF THE ISSUER, THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON, AND THE
PURCHASE PRICE OF, WHICH ARE PAYABLE SOLELY FROM THE REVENUES TO BE RECEIVED IN CONNECTION WITH
THE FINANCING AND REFINANCING OF THE 2003 FACILITY AND ANY ADDITIONAL FACILITIES AND FROM ANY
OTHER MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE. NEITHER THE BONDS NOR ANY PREMIUM OR
INTEREST THEREON, NOR THE PURCHASE PRICE THEREOF, SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A
CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE STATE OF MARYLAND, THE DEPARTMENT, THE
ISSUER OR ANY OTHER PUBLIC BODY WITHIN THE MEANING OF ANY CONSTITUTIONAL OR CHARTER PROVISION OR
STATUTORY LIMITATION AND NONE OF THE ABOVE SHALL EVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY
LIABILITY OF THE STATE OF MARYLAND, THE DEPARTMENT, THE ISSUER OR ANY OTHER PUBLIC BODY. THE BONDS
DO NOT CONSTITUTE AN INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE OF MARYLAND, THE
DEPARTMENT, THE ISSUER OR ANY OTHER PUBLIC BODY IS PLEDGED. THE ISSUER HAS NO TAXING POWER.

     Neither the members of the Issuer, nor the officials or officers of the Issuer, nor any person
executing the Bonds or any agreement entered into by the Issuer under the Act, nor any employee of
the Issuer, the Department or the State shall be liable personally on the Bonds or such agreement
or be subject to any personal liability or accountability by reason of the issuance, execution or
delivery thereof. Each Bond, on its face, shall plainly state that it has been issued under the
provisions of the Acts and that it does not constitute an indebtedness to which the faith and
credit of the State, any political subdivision thereof, the Department, the Issuer or any other
public body of the State is pledged.

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     It is recognized that, notwithstanding any other provision of this Indenture, no Owner
shall look to the Issuer for damages suffered by such Owner as a result of the failure of the
Issuer to perform any covenant, undertaking or obligation under any of the Bond Documents, or as a
result of the incorrectness of any representation made by the Issuer in the Bond Documents.
Although this Indenture recognizes that the Bond Documents shall not give rise to any pecuniary
liability of the Issuer, nothing contained in this Indenture shall be construed to preclude in any
way any action or proceeding (other than that element of any action or proceeding involving a
claim for monetary damages against the Issuer) in any court or before any governmental body,
agency or instrumentality or otherwise against the Issuer or any of its officers or employees (but
only in their official capacities) to enforce the provisions of any of the Bond Documents.

     Although the Issuer may have the right to seek remedies in the event of a default by the
Borrower, the Issuer, by this Indenture, assigns the rights to take action to the Trustee in order
to implement the purposes and intent of the Acts, namely, to facilitate the financing and
refinancing of the 2003 Facility and any Additional Facilities by the Borrower without incurring
any pecuniary obligation or liability by the Issuer. In any cases where action by the Trustee
requires simultaneous or subsequent action by the Issuer, the Issuer will cooperate with the
Trustee and take any and all action reasonably necessary to effectuate the purposes and intent of
this Indenture.

     SECTION 2.13. Cancellation and Disposition of Bonds. All Bonds which have been
surrendered due to mutilation or for payment or purchase or redemption or for registration of
transfer or exchange pursuant to this Article II shall be canceled and disposed of by the Paying
Agent, and a counterpart of the certificate of disposition evidencing such disposition shall be
furnished by the Paying Agent, upon request, to the Issuer, the Trustee and the Borrower. Any
mutilated Bond surrendered to the Trustee in exchange for a new Bond pursuant to Section 2.10 or
any Bond surrendered to the Trustee for transfer to a new Owner or for exchange shall be canceled
by the Trustee and shall not be reissued and, upon the disposition thereof, a counterpart of the
certificate of disposition evidencing such destruction shall be furnished by the Trustee, upon
request, to the Issuer, the Paying Agent and the Borrower. Any Bonds so canceled may be retained by
the Trustee for such period of time as the Trustee may determine and shall be disposed of by the
Trustee at the end of such period. Any Bond so canceled shall thereafter no longer be considered
Outstanding for any purpose of this Indenture or the Loan Agreement. Bonds issued in exchange for,
or on registration of transfer of, Bonds deemed to have been purchased pursuant to Section 4.1 and
Section 4.2 hereof shall remain Outstanding and shall be delivered as set forth in Section 4.5
hereof, provided that Bonds purchased in the amount of moneys on deposit in the Purchase Account
shall be canceled by the Trustee.

     SECTION 2.14. Other Obligations. The Issuer expressly reserves the right (but shall
be under no obligation) to issue, to the extent permissible under applicable law, obligations
pursuant to this Indenture or to another indenture or other indentures to provide additional funds
to complete the acquisition of the 2003 Facility, to provide funds to finance or refinance
Additional Facilities, or to redeem all or any principal amount of the Bonds, or any combination
of the foregoing; provided, however, that the proceeds of any such refunding obligations shall be
paid

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directly to the Trustee or any trustee appointed pursuant to such other indenture(s) and
shall not come into the possession or control of the Borrower.

     SECTION 2.15. Authorization of Additional Bonds: Conditions Precedent to Delivery of
Additional Bonds. In addition to the Series 2003 Bonds, the Issuer may, with the agreement of
the Borrower, issue from time to time Additional Bonds under and secured by this Indenture,
subject to the conditions hereinafter provided in this Section, for any purpose for which
obligations of the Issuer may be issued under the Acts, including (without limitation) (i)
refunding or advance refunding any Outstanding Bonds; (ii) obtaining funds necessary to complete
the acquisition of the 2003 Facility and any Additional Facilities; and (iii) obtaining funds to
finance or refinance the costs of the acquisition of any Additional Facilities. The costs to be
incurred by the Borrower in connection with the issuance and sale of any such Additional Bonds,
the establishment of necessary reserves and the payment of interest prior to and during
construction and for a limited period after the completion of any such Additional Facilities shall
be included within each of the foregoing authorized purposes. The issuance of any Series of
Additional Bonds shall be authorized by a Supplement to this Indenture, which shall specify all
matters required to be provided by this Section.

     Each Series of Additional Bonds shall be on a parity with, and shall be entitled to the same
benefit and security of this Indenture, including (without limitation) the pledge of the Trust
Estate made hereby, as the Series 2003 Bonds and any other Series of Additional Bonds that may be
issued from time to time as provided in this Section.

     Any Supplement to this Indenture authorizing the issuance of any Series of Additional Bonds
shall specify the maturity, Sinking Fund Installments, if any, the form and other details of such
Additional Bonds. Any Supplement to this Indenture authorizing the issuance of Additional Bonds
may provide for the creation of a separate Bond Fund, Facility Fund and Net Proceeds Escrow Fund
for each Series of Bonds.

     If any Supplement to this Indenture authorizing the issuance of Additional Bonds provides for
the establishment of separate funds and accounts for each Series of Bonds, then such Supplement to
this Indenture shall require that amounts on deposit in the Bond Fund, Facility Fund and Net
Proceeds Escrow Fund created for each Series of Bonds shall be applied solely to the payment of
the principal of and interest on, and the purchase price of, the Bonds of such Series or to the
reimbursement of the issuer of any Credit Facility securing such Bonds and shall not be available
to satisfy the claims of Owners of Bonds of any other Series or of the Credit Facility Provider of
any Credit Facility securing any other Series of Bonds.

     The Issuer shall execute and deliver to the Trustee, and the Trustee shall authenticate, the
Bonds of each Series of Additional Bonds and deliver the same as directed by the Issuer as
provided in this Section upon receipt of the following:

                    (a) A certified copy of the resolution of the Issuer authorizing such Bonds;

                    (b) An executed counterpart of the Supplement to this Indenture authorizing
such Bonds;

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                    (c) The original, executed Initial Credit Facility;

                    (d) A request and authorization signed by the Authorized Issuer
Representative to the Trustee to authenticate and deliver such Bonds to the initial
purchaser(s)
thereof upon payment to the Trustee for the account of the Issuer of the amount of the initial
purchase price for such Bonds specified in such request and authorization;

                    (e) An opinion of Bond Counsel to the effect that such Bonds have been duly
and validly authorized and issued by the Issuer. The opinion of Bond Counsel may be qualified
as to such matters as are acceptable to the Placement Agent, the Remarketing Agent, the Credit
Facility Provider and the Issuer;

                    (f) An opinion or opinions of Independent Counsel to the effect that such
Bonds, the Initial Credit Facility, the Supplement to this Indenture and the Supplement to the
Loan Agreement referred to in (g) below have been duly executed and delivered by the parties
thereto and constitute valid and binding obligations of such parties, enforceable against such
parties in accordance with their respective terms (subject to customary exceptions as to
bankruptcy, insolvency or other laws affecting creditors’ rights generally, and customary
exceptions as to principles of equity);

                    (g) An executed counterpart of a Supplement to the Loan Agreement, which
shall require the Borrower to make payments in such amounts as shall be sufficient to provide
for
the timely payment of the principal of and interest on such Additional Bonds and otherwise
provide for the security of such Additional Bonds on a parity with the Series 2003 Bonds and
any
other Outstanding Additional Bonds to the extent provided in this Indenture;

                    (h) An Opinion of Bond Counsel to the effect that the Issuer is duly authorized and entitled
to issue such Additional Bonds and Additional Bonds executed, authenticated and delivered as
provided in this Indenture have been duly and validly issued and constitute valid and binding
limited obligations of the Issuer; and

                    (i) A certificate of the Authorized Borrower Representative to the effect that, as of the date
of the issuance of such Additional Bonds and after giving effect to the issuance of such Additional
Bonds, no event that upon the giving of notice or the passage of time or both would constitute an
Event of Default, and no Event of Default, shall have occurred and be continuing under the Bond
Documents or the Credit Facility Documents.

ARTICLE III

REDEMPTION

     SECTION 3.1. Redemption of Bonds Prior to Maturity. In the manner and with the effect
provided in this Indenture, the Bonds shall be subject to redemption prior to maturity as follows:

                    (a) Mandatory Redemption of Bonds in the Amount of Excess Bond Proceeds. Each Series
of Bonds shall be redeemed by the Issuer (solely from the Trust Estate)

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(which moneys shall be Available Moneys so long as the Credit Facility is in effect), in
whole or in part, on any Interest Payment Date, at a redemption price equal to the principal
amount thereof, in the amount of Excess Bond Proceeds derived from such Series transferred to the
Principal Account from the Facility Fund pursuant to Section 5.5 hereof, such redemption to be
made on the first Interest Payment Date that is at least 45 days following receipt by the Trustee
of the Completion Certificate.

                    (b) Mandatory Redemption in the Amount of Net Proceeds and Proceeds from
the Disposition of Certain Equipment. The Bonds shall be redeemed by the Issuer
(solely from
the Trust Estate), in whole or in part, on any Interest Payment Date, at a redemption price
equal
to the principal amount thereof, in the amount of moneys in the Principal Account furnished by
the Borrower (which moneys shall be Available Moneys so long as the Credit Facility is in
effect), or by the Credit Facility Provider on behalf of the Borrower, representing Net
Proceeds or
proceeds from the disposition of certain equipment pursuant to Section 9.9 of the Letter of
Credit
Agreement to be applied to redeem the Bonds, such redemption to be made on the next Interest
Payment Date that is at least 45 days after receipt of such Net Proceeds or proceeds from the
disposition of certain equipment pursuant to Section 9.9 of the Letter of Credit Agreement.

                    (c) Mandatory Redemption in Amount of Annual Reduction of Principal
Portion of Stated Amount of the Letter of Credit. The Series 2003 Bonds shall be
redeemed by
the Issuer, in whole or in part, on any Interest Payment Date, at a redemption price equal to
the
principal amount of the Bonds being redeemed, in an amount equal to any annual reduction of
the Principal Portion of the Stated Amount of the Letter of Credit made in accordance with the
provisions of Section 4.9 and Schedule A of the Letter of Credit Agreement, as the same may be
amended from time to time (plus accrued interest through the date of redemption). Such
redemption shall be made at the written direction of the Borrower to the Trustee (such
direction
to be given by the Borrower at least 45 days prior to the date fixed for redemption in the
Letter of
Credit Agreement), and upon notice by the Trustee, in the name of the Issuer, to the Owners as
set forth in Section 3.3 hereof.

                    (d) Optional Redemption. The Bonds of a Series shall be subject to optional
redemption by the Issuer (solely from the Trust Estate) (which moneys shall be Available
Moneys so long as the Credit Facility is in effect), at the written direction of the Borrower
to the
Trustee (such direction to be given by the Borrower at least 45 days prior to the date fixed
for
redemption), upon notice to the Owners as set forth in Section 3.3 hereof, in whole or in part
(but
in part only if the aggregate principal amount of Outstanding Bonds of the Series to be
redeemed
immediately following such redemption will be at least $500,000), on any Interest Payment
Date,
at a redemption price equal to the principal amount of the Bonds to be redeemed.

                    (e) Redemption on Mandatory Tender Dates. The Bonds of a Series shall be
subject to redemption by the Issuer (solely from the Trust Estate) (which moneys shall be
Available Moneys so long as the Credit Facility is in effect), at the written direction of the
Borrower to the Trustee (such direction to be given by the Borrower at least 45 days prior to
the
date fixed for redemption), upon notice to the Owners of such Bonds as set forth in Section
3.3
hereof, in whole or in part, on any Mandatory Tender Date applicable to such Bonds, at a
redemption price equal to the principal amount of the Bonds to be redeemed.

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                    (f) Denominations in Redemptions. Bonds, or portions of Bonds, redeemed
pursuant to this Section 3.1 shall be redeemed in Authorized Denominations, provided, however, no
redemption shall be permitted if such redemption would result in a Bond in a denomination of less
than $100,000.

     SECTION 3.2. Selection of Bonds To Be Redeemed. A redemption of a series of Bonds
shall be a redemption of the whole or of any part of such series of Bonds, but solely from funds
available for that purpose in accordance with the provisions of this Indenture. If fewer than all
the Bonds of a series are called for redemption under any provision of this Indenture permitting
such partial redemption, the particular Bonds or portions thereof to be redeemed shall be selected
by the Trustee, in such manner as the Trustee, in its discretion, may deem appropriate and fair,
in the principal amounts designated to the Trustee by the Borrower or otherwise as required by
this Indenture; provided, that Pledged Bonds shall be selected for redemption prior to other Bonds
of the same series. Notwithstanding the provisions of the foregoing sentence, no Pledged Bonds
shall be selected for redemption from amounts realized under the Credit Facility (other than Bonds
deemed to have been redeemed upon the purchase thereof in accordance with the provisions of this
Indenture) unless the amount that may be realized under the Principal Portion of the Credit
Facility after such redemption shall be not less than the aggregate principal amount of the Bonds
which remain Outstanding following such redemption. If a portion of any Bond is to be called for
redemption, then, upon notice of intention to redeem such portion of such Bond, the Owner of such
Bond shall forthwith surrender such Bond to the Paying Agent for (a) payment to such Owner of the
redemption price of such portion of such Bond and (b) delivery to such Owner of a new Bond or
Bonds in the aggregate principal amount of the unredeemed balance of the principal amount of such
Bond. New Bonds representing the unredeemed balance of the principal amount of a Bond shall be
issued to the Owner thereof, without charge therefor. If the Owner of any Bond or portion thereof
selected for redemption fails to present such Bond to the Paying Agent for payment and exchange as
aforesaid, such Bond or portion thereof shall, nevertheless, become due and payable on the date
fixed for redemption to the extent of the principal amount called for redemption (and to that
extent only), and interest on such Bond or such portion thereof shall cease to accrue on the date
fixed for redemption.

     The Trustee shall advise the Registrar of the identity of Bonds which have been selected for
redemption and the Registrar shall inscribe a notation of the selection of any Bond for redemption
on the earliest date after such selection on which such Bonds are presented to the Registrar for
purchase, endorsement, exchange or transfer.

     SECTION 3.3. Notice of Redemption. In the event any of the Bonds are called for
redemption, the Trustee shall give notice, in the name of the Issuer, of the redemption of such
Bonds, which notice shall (i) specify the Bonds to be redeemed by CUSIP number, the redemption
date, the redemption price and the place or places where amounts due upon such redemption will be
payable (which shall be the Principal Office of the Paying Agent) and, if fewer than all of the
Bonds are to be redeemed, the numbers of such Bonds to be redeemed and the portions of Bonds that
are to be redeemed in part, and (ii) state that on the redemption date the Bonds or portions
thereof to be redeemed shall cease to bear interest. Such notice may set forth any additional
information relating to such redemption. Such notice shall be given by Mail,

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not more than 45 days and not less than 30 days prior to the date fixed for redemption, to
the Owners of Bonds or portions of Bonds to be redeemed, at the addresses shown on the
registration books of the Registrar as of the third day immediately preceding the date on which
notice by Mail is given, or, if any such day is not a Business Day, the Business Day immediately
preceding such day. The failure to give notice by Mail to any Owner of any Bonds to be redeemed,
or any defect therein, shall not affect the validity of the proceedings for redemption of any
other Bonds. Upon presentation and surrender of Bonds so called for redemption at the place or
places of payment, such Bonds or such portions thereof shall be redeemed. The Trustee will use its
best efforts to Mail a second notice of redemption to Owners of Bonds who have not presented their
Bonds for redemption 60 days after the date fixed for redemption.

     SECTION 3.4. Effect of Notice of Redemption. Bonds or portions thereof called for
redemption shall become due and payable on the date fixed for redemption at the redemption price
provided for herein. Any Bond or portion thereof called for redemption which is not delivered to
the Trustee on the date fixed for redemption shall nonetheless be deemed to have been redeemed and
paid if moneys for its redemption have been deposited with the Trustee on or before such date
fixed for redemption in accordance with this Indenture; and (a) interest on such Bond or such
portion thereof shall cease to accrue to the Owner thereof as of such date fixed for redemption,
and (b) the Owner of such Bond or such portion thereof shall cease to be entitled to the benefits
and security of this Indenture as of such date fixed for redemption except to receive the moneys
representing the redemption price of such Bond against delivery thereof at the Principal Office of
the Trustee.

     SECTION 3.5. No Partial Redemption After Default. Anything in this Indenture to the
contrary notwithstanding, if there shall have occurred and be continuing an Event of Default,
there shall be no redemption of fewer than all of the Bonds at the time Outstanding.

     SECTION 3.6. Payment of Redemption Price.

                    (a) The redemption price to be paid for Bonds redeemed pursuant to Section
3.1 hereof shall be accompanied by all interest accrued on the Bonds to be redeemed to the
date
fixed for redemption.

                    (b) In no event shall the Trustee give notice of any redemption of Bonds under
Sections 3.1 (a), 3.1(b), 3.1(d) or 3.1(e) until an amount of moneys sufficient to pay the
redemption price of all Bonds to be redeemed is on deposit in the Bond Fund, unless, if a
Credit
Facility is then in effect, the Credit Facility Provider consents in writing to such
redemption.
With respect to any redemption of Bonds under Section 3.1(c), the Trustee shall draw on the
Letter of Credit, in an amount sufficient to pay the redemption price of all Bonds to be
redeemed,
one Business Day prior to delivering notice to the Bondholders of such redemption.

                    (c) For the redemption of any of the Bonds, the Issuer shall cause to be
deposited in the Bond Fund, solely out of the Revenues and any other moneys constituting the
Trust Estate, an amount sufficient to pay the principal and interest to become due on the date
fixed for such redemption. The obligation of the Issuer to cause any such deposit to be made
hereunder shall be reduced by the amount of moneys in the Bond Fund available for and used on

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such redemption date for payment of the principal of and accrued interest on the Bonds to be
redeemed within the meaning of Article VIII hereof. All action required by this Article for a
particular redemption shall be taken by the Trustee, and the Issuer shall have no obligations
under this Article or otherwise to take any such action, provided, however, that the Trustee shall
not be responsible for the failure of the Issuer to cause deposits to be made into the Bond Fund
hereunder.

     SECTION 3.7. Redemption in Accordance with Procedures of Depository. Notwithstanding
any provisions contained herein, during any period in which Bonds of a Series are maintained
pursuant to a Book-Entry System, redemption of such Bonds shall occur in accordance with the
Depository’s standard procedures for redemption of obligations such as the Bonds.

ARTICLE IV

PURCHASE OF BONDS ON TENDER DATES

     SECTION 4.1. Purchase of Bonds on Optional Tender Dates.

     (a) The Issuer will purchase or cause to be purchased (but solely from the Revenues and
proceeds of the remarketing of such Bond by the Remarketing Agent and amounts realized from a
drawing under the Credit Facility) pursuant to Section 4.4 hereof in the order prescribed therein,
any Bond (or portion thereof in an Authorized Denomination provided such tender does not result in
a Bond in a denomination of less than $100,000), other than a Pledged Bond, at a price equal to
the principal amount thereof plus accrued interest (if any) thereon to the date of purchase,
payable by check or wire transfer in immediately available funds, upon:

               (i) delivery to the Trustee at its Principal Office of an Optional Tender Notice,
which Optional Tender Notice shall state (A) the principal amount of such Bond or such
portion thereof to be purchased, (B) the number of each Bond of which all or a portion is
to be purchased, and (C) the Optional Tender Date on which such Bond or such portion
thereof is to be purchased, which Optional Tender Date shall be a Business Day not fewer
than 7 calendar days after the date of receipt of such Optional Tender Notice by the
Trustee; and

               (ii) delivery of such Bond (with an appropriate instrument of transfer satisfactory
to the Trustee executed in blank by the owner with the signature guaranteed by a bank,
trust company or member firm of the New York Stock Exchange) to the Trustee, not later
than 10:00 a.m., prevailing Baltimore, Maryland time, on the Optional Tender Date.

                    (b) Notwithstanding anything to the contrary herein contained, no optional tender of Bonds
shall be permitted pursuant to this Section 4.1 if such tender would result in a Bond in a
denomination of less than $100,000.

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                    (c) Accrued interest payable on any Bond Tendered or Deemed Tendered for Purchase on any
Interest Payment Date as provided in subsection (a) of this Section shall be paid to the Owner as
of the Record Date immediately preceding such Interest Payment Date in the same manner as if such
Bond had not been purchased or deemed to have been purchased pursuant to subsection (a) of this
Section.

     SECTION 4.2. Purchase of Bonds on Mandatory Tender Dates. The Bonds of a Series
(other than any Pledged Bonds) are subject to mandatory tender and purchase, and the Issuer will
purchase or cause to be purchased (but solely from the Revenues and proceeds of the remarketing of
the Bonds by the Remarketing Agent and amounts realized from a drawing under the Credit Facility)
the Bonds (other than any Pledged Bonds), on each Mandatory Tender Date at a price equal to the
principal amount thereof plus accrued interest (if any) thereon to the date of purchase, payable
by check or wire transfer in immediately available funds.

     At least 35 days prior to each Mandatory Tender Date, the Trustee shall mail a Mandatory
Tender Notice to the Owners of the Bonds of the Series subject to mandatory tender and purchase.

     SECTION
4.3. Remarketing of Bonds by Remarketing Agent; Certain Notices.

                    (a) The Trustee shall promptly notify by telephone (promptly confirmed in
writing) the Remarketing Agent, the Borrower and the Credit Facility Provider of any Optional
Tender Notice given by an Owner to the Trustee pursuant to Section 4.1 hereof, which notice
shall specify the principal amount of the Bonds to be purchased and the Optional Tender Date.

                    (b) Upon receipt of notice from the Trustee of the receipt by the Trustee of
any Optional Tender Notice meeting the requirements of this Indenture, the Remarketing Agent,
pursuant to and subject to the terms of the Placement and Remarketing Agreement, shall use its
best efforts to solicit purchasers for and sell the principal amount of Bonds specified in
such
Optional Tender Notice, any such sale to be made on the Optional Tender Date on which such
Bonds are to be purchased, at a price equal to 100% of the principal amount thereof, plus
accrued
interest (if any) thereon to the Optional Tender Date.

                    (c) At least 40 days before each Mandatory Tender Date, the Trustee shall
give written notice to the Issuer, the Credit Facility Provider, the Borrower, the Bond
Registrar,
the Paying Agent and the Remarketing Agent of such Mandatory Tender Date and the aggregate
principal amount of Bonds to be remarketed on such Mandatory Tender Date, which amount
shall be equal to the aggregate principal amount of Bonds Outstanding on such Mandatory
Tender Date less the aggregate principal amount of Bonds to be redeemed in accordance with
Section 3.1(e) hereof. The Trustee shall give such notice to Moody’s (if the Bonds are then
rated
by Moody’s) and S&P (if the Bonds are then rated by S&P), subject to the provisions of Section
12.9 hereof.

                    (d) Upon receipt of the notice referred to in (c) above, the Remarketing Agent,
pursuant to and subject to the terms of the Placement and Remarketing Agreement, shall use its
best efforts to solicit purchasers for and sell the principal amount of Bonds specified in
such

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notice, any such sale to be made on the Mandatory Tender Date on which such Bonds are to be
purchased at a price equal to 100% of the principal amount thereof, plus accrued interest (if any)
thereon to the Mandatory Tender Date.

                    (e) In no event will the Remarketing Agent remarket any Bonds Tendered or
Deemed Tendered for Purchase on any Tender Date at a price less than 100% of the principal
amount thereof, plus accrued interest (if any) thereon to the applicable Tender Date.

                    (f) Not later than 2:00 p.m. prevailing Baltimore, Maryland time on the
second Business Day prior to each Tender Date on which Bonds are to be purchased pursuant to
Section 4.1 or Section 4.2 hereof, the Remarketing Agent (1) shall give telephonic notice
(promptly confirmed in writing) to the Trustee, the Borrower, the Paying Agent and the Credit
Facility Provider of the principal amount of Bonds that it has been unable to remarket and (2)
shall deliver to the Trustee the name, address and tax identification number of each
prospective
purchaser to whom the Remarketing Agent has remarketed and sold Bonds.

                    (g) The Remarketing Agent, pursuant to and subject to the terms of the
Placement and Remarketing Agreement, shall use its best efforts to solicit purchasers for and
sell
any Pledged Bonds held by the Pledged Bonds Custodian pursuant to the Pledged Bonds Custody
Agreement.

                    (h) There shall be no remarketing of Bonds pursuant to this Section if there shall have
occurred and be continuing an Event of Default hereunder.

                    In addition, anything in this Indenture to the contrary notwithstanding, there shall be no
remarketing of Pledged Bonds pursuant to this Section unless and until an amount equal to the
amount of the Bond Purchase Principal Drawing the proceeds of which were used to purchase such
Pledged Bonds has been restored to the Credit Facility and the Credit Facility Provider has
confirmed in writing to the Trustee that the Credit Facility has not expired in accordance with
its terms.

                    (i) The Remarketing Agent shall hold the proceeds of any sale of Bonds that have been
remarketed by the Remarketing Agent pursuant to this Section in trust for the person who tendered,
or is deemed to have tendered, such Bond for purchase and shall deliver the proceeds of such sale
to the Trustee, and the Trustee shall deposit such proceeds in the Purchase Account of the Bond
Fund. The proceeds of any sale of Pledged Bonds by the Remarketing Agent shall be paid by the
Remarketing Agent directly to the Credit Facility Provider for the account of the Borrower.

                    (j) Notwithstanding anything herein to the contrary, the Remarketing Agent shall not solicit
the Issuer, the Borrower, or any of their respective affiliates, as potential purchasers of the
Bonds Tendered or Deemed Tendered for Purchase on any Optional Tender Date or Mandatory Tender Date
or sell such Bonds to the Issuer, the Borrower, or any of their respective affiliates, except that
the Remarketing Agent may solicit the Issuer, the Borrower and any of their respective affiliates
as potential purchasers of any Pledged Bonds.

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     SECTION 4.4. Sources of Moneys for Purchase of Bonds on Tender Dates.

                    (a) On each Tender Date on which Bonds are to be purchased pursuant to
Section 4.1 or Section 4.2 hereof, such Bonds shall be purchased with immediately available
funds from the Owners thereof at a purchase price equal to 100% of the principal amount
thereof,
plus accrued interest (if any) thereon to the Tender Date. Moneys for the payment of such
purchase price shall be derived solely from the following sources in the order of priority
indicated, neither the Issuer nor the Trustee nor the Paying Agent nor the Remarketing Agent
having an obligation to use moneys from any other source:

                         (i) proceeds of the remarketing and sale of such Bonds pursuant to
Section 4.3 hereof, which are on deposit in the Purchase Account;

                         (ii) Excess Bond Proceeds derived from such Bonds;

                         (iii) moneys received from a Bond Purchase Drawing under the Credit
Facility securing such Bonds;

                         (iv) moneys in the Purchase Account which constitute Net Proceeds or proceeds
from the disposition of certain equipment pursuant to Section 9.9 of the Letter of
Credit Agreement, whether provided by the Borrower or the Credit Facility Provider
on behalf of the Borrower; and

                         (v) any moneys paid by the Borrower for purchase of the Bonds pursuant to the
Loan Agreement.

                    (b) The Trustee shall purchase Bonds pursuant to Section 4.1 and Section 4.2
hereof solely from the sources described in this Section and neither the Trustee nor the
Remarketing Agent shall be responsible for the failure of any other person to furnish moneys
for
the purchase price of such Bonds. In purchasing Bonds hereunder, the Trustee shall be acting
as a
conduit and shall not be deemed to be purchasing Bonds for its own account.

                    (c) If, on any Tender Date, the Trustee, pursuant to a Bond Purchase Drawing,
draws on the Credit Facility for the purpose of paying the purchase price of Bonds on such
Tender Date, and, either (i) subsequent to the Bond Purchase Drawing, the Trustee receives
from
the Remarketing Agent proceeds of the remarketing and sale of such Bonds purchased from the
proceeds of such Bond Purchase Drawing, or (ii) there are moneys furnished by the Borrower,
Excess Bond Proceeds or Net Proceeds or proceeds from the disposition of certain equipment
pursuant to Section 9.9 of the Letter of Credit Agreement on deposit in the Purchase Account
of
the Bond Fund, the Trustee, on such Tender Date, shall transfer to the Credit Facility
Provider (in
immediately available funds by wire transfer or, upon direction by the Credit Facility
Provider,
by deposit into the Credit Facility Provider’s correspondent account with the Trustee;
provided,
however, that the Trustee shall not be required to transfer such moneys in immediately
available
funds to the extent that the moneys on deposit in the Purchase Account are not immediately
available) such moneys as described in clauses (i) and (ii) of this subsection (c) in an
amount not
exceeding an amount equal to such Bond Purchase Drawing and such amount shall be credited

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against the Borrower’s reimbursement obligation to the Credit Facility Provider under the
Credit Facility Agreement.

     SECTION 4.5. Delivery of Bonds Purchased on Tender Dates. All Bonds tendered for
purchase on a Tender Date, and any new Bonds executed and authenticated in lieu of any Bonds
deemed to have been tendered for purchase, shall be delivered as follows:

                    (a) Bonds remarketed and sold by the Remarketing Agent shall be exchanged
for other Bonds, as necessary to correspond to the denominations in which such Bonds have been
sold by the Remarketing Agent, and such Bonds (or new Bonds executed and authenticated in
lieu thereof) shall be re-registered and delivered in accordance with the directions of the
purchasers thereof.

                    (b) Bonds, the purchase price of which shall have been paid by the Trustee
from amounts realized from a Bond Purchase Drawing under the Credit Facility (or new Bonds
executed and authenticated in lieu thereof), shall be registered in the name of the Credit
Facility
Provider, as pledgee, or otherwise upon the Credit Facility Provider’s written direction, and
delivered to the Pledged Bond Custodian.

                    (c) Bonds which are either (i) purchased with the proceeds of a Bond
Purchase Drawing under the Credit Facility, for which drawing the Credit Facility Provider is
immediately reimbursed with Available Moneys furnished by the Borrower in accordance with
Section 4.4(c) hereof, or (ii) purchased with Available Moneys furnished by the Borrower,
shall
be deemed to have been redeemed and delivered to the Trustee for cancellation.

     SECTION 4.6. Bonds Deemed Tendered and Purchased on Tender Dates.

                    (a) Any Optional Tender Notice given by an Owner shall be irrevocable. Any Bond described in
an Optional Tender Notice as a Bond to be purchased on an Optional Tender Date which is not
tendered by the Owner thereof to the Trustee on such Optional Tender Date, and any Bond to be
purchased on a Mandatory Tender Date which is not delivered by the Owner thereof to the Trustee on
such Mandatory Tender Date, shall nonetheless be deemed to have been tendered by the Owner thereof
for purchase and to have been purchased from moneys described in Section 4.4 hereof, if moneys for
such purchase have been deposited with the Trustee on or before any such Tender Date in accordance
with this Indenture. Thereafter (i) the Issuer shall execute and the Trustee shall authenticate and
deliver a new Bond or Bonds in the same aggregate principal denomination as the Bond deemed to have
been tendered and purchased to the person to whom the Bond deemed to have been tendered and
purchased would have been delivered as set forth in Section 4.5 hereof, and the Trustee shall
register such new Bond in the manner provided in Section 4.5 hereof; (ii) such Bond deemed to have
been tendered and purchased shall no longer be Outstanding under this Indenture; (iii) interest on
such Bond deemed to have been tendered and purchased shall cease to accrue to the former Owner
thereof as of the Tender Date on which such Bond is deemed to have been tendered and purchased;
(iv) the former Owner of such Bond shall cease to be entitled to the benefits and security of this
Indenture as of the date on which such Bond is deemed to have been tendered and purchased, except
to receive the moneys representing the purchase price of such Bond against delivery

40

 

thereof at the Principal Office of the Trustee; and (v) the Registrar will not register,
and the Trustee will not recognize, any further transfers of such Bond by the former Owner
thereof. Any Bond executed and authenticated in lieu of a Bond deemed to have been tendered and
purchased shall be delivered as provided in Section 4.5 hereof.

                    (b) The Trustee shall promptly give notice by Mail to the Owner of any Bond which is deemed
to have been purchased pursuant to this Section, which notice shall state that interest on such
Bond ceased to accrue to the former Owner thereof as of the Tender Date on which such Bond is
deemed to have been tendered and purchased, that the Registrar will not register, and the Trustee
will not recognize, any further transfer of such Bond by the former Owner thereof, and that the
former Owner of such Bond ceased to be entitled to the benefits and security of this Indenture as
of the Tender Date on which such Bond is deemed to have been tendered and purchased, except to
receive the moneys representing the purchase price of such Bond against delivery thereof at the
Principal Office of the Trustee. Moneys to be used for the purchase of any Bond deemed to have
been tendered and purchased pursuant to this Section shall be deposited with the Trustee and held
in trust by the Trustee in a separate escrow account, without liability for interest thereon, and
shall be paid to the former Owner of such Bond upon presentation thereof. Except as provided in
the following paragraph, the former Owner of such Bond shall thereafter be restricted exclusively
to such moneys for the satisfaction of any claim of whatever nature on its part under this
Indenture or on, or with respect to, such Bond.

     Any moneys which the Trustee holds in trust for the payment of the principal amount of any
Bond deemed to have been tendered and purchased pursuant to this Section and which remain
unclaimed for a period of one year after the Tender Date on which such Bond is deemed to have been
tendered and purchased, upon the Borrower’s written request to the Trustee, but only to the extent
permitted by the unclaimed property laws of the State, shall be paid to the Borrower, with notice
to the Credit Facility Provider of such payment; provided, however, that:

          (i) before the Trustee makes any such payment to the Borrower, the Trustee, at
the Borrower’s expense, shall cause notice to be given once by Mail to the former
Owner of such Bond at the last address for such Owner reflected on the registration
books of the Registrar, to the effect that such moneys remain unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the date
of such notice by Mail, any unclaimed balance of such moneys then remaining will be
paid to the Borrower; and

          (ii) no such payment shall be made to the Borrower if the Trustee has notice,
within the meaning of Section 10.5 hereof, that an Event of Default shall have
occurred and be continuing under any of the Bond Documents or the Trustee has
written notice from the Credit Facility Provider that an Event of Default shall
have occurred and be continuing under any of the Credit Facility Documents.

     After the payment of such unclaimed moneys to the Borrower, the Owner of such Bond shall
thereafter look only to the Borrower for the payment thereof, and all liability of the Issuer, the
Trustee, the Paying Agent and the Credit Facility Provider with respect to such moneys shall
thereupon cease.

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     SECTION 4.7. Bonds Purchased Not Discharged. Except for Bonds deemed to have been
tendered and purchased and in lieu of which new Bonds have been executed and delivered as provided
in Section 4.6 hereof and except as provided in Section 4.5(c) hereof, no purchase of Bonds on a
Tender Date shall be deemed a payment or redemption of such Bonds and no such purchase will
operate to extinguish or discharge the indebtedness evidenced by such Bonds.

     SECTION 4.8 Mandatory Tenders in Accordance with Procedures of Depository.
Notwithstanding any provisions contained herein, during any period in which Bonds of a Series
are maintained pursuant to a Book-Entry System, mandatory tenders and purchases of such Bonds
shall occur in accordance with the Depository’s standard procedures for mandatory tenders and
purchases of obligations such as the Bonds.

ARTICLE V

FUNDS AND ACCOUNTS; DEPOSIT AND USE OF BOND PROCEEDS;

REVENUES; CREDIT FACILITY

     SECTION 5.1. Creation of Funds. There are hereby created by the Issuer and ordered
established the following separate trust funds and trust accounts to be held by the Trustee:

                    (a) A “Bond Fund” to be designated “Maryland Industrial Development
Financing Authority Taxable Variable Rate Demand Revenue Bonds (Avalon Pharmaceuticals,
Inc. Facility), Series 2003 Bond Fund” and created and established therein a “Principal
Account,”
an “Interest Account” and a “Purchase Account;”

                    (b) A “Facility Fund” to be designated “Maryland Industrial Development
Financing Authority Taxable Variable Rate Demand Revenue Bonds (Avalon Pharmaceuticals,
Inc. Facility), Series 2003 Facility Fund;”

                    (c) A “Net Proceeds Escrow Fund” to be designated “Maryland Industrial
Development Financing Authority Taxable Variable Rate Demand Revenue Bonds (Avalon
Pharmaceuticals, Inc. Facility), Series 2003 Net Proceeds Escrow Fund;” and

                    (d) An “Issuer’s Fee Fund” to be designated “Maryland Industrial
Development Financing Authority Taxable Variable Rate Demand Revenue Bonds (Avalon
Pharmaceuticals, Inc. Facility), Series 2003 Issuer’s Fee Fund” which Fund shall be
administered
in accordance with the provisions of Section 5.14 of the Indenture. Moneys in the Issuer’s
Fee
Fund are not for the benefit of the Owners.

     For the purpose of internal accounting, the trust funds created by this Section may contain
one or more accounts and sub-accounts as the Trustee, in its discretion, shall determine.

     SECTION 5.2. Deposit and Use of Proceeds of Series 2003 Bonds. The proceeds of the
sale of the Series 2003 Bonds shall be deposited by the Trustee in the Facility Fund. The moneys in
the Facility Fund shall be disbursed by the Trustee as herein provided and used to pay or

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refinance 2003 Facility Costs and, under certain circumstances, to redeem or purchase Series 2003
Bonds, as hereinafter provided.

     SECTION 5.3. Procedure for Making Disbursements from Facility Fund.

                    (a) Except as otherwise provided herein, each disbursement from the Facility
Fund shall be made only upon the receipt by the Trustee of a requisition therefor either in
the
form attached hereto as Exhibit B and made a part hereof, executed by the Authorized Borrower
Representative and approved by an authorized officer of the Credit Facility Provider.
Requisitions from the Facility Fund will be consecutively numbered. Any requisition delivered
to
the Credit Facility Provider (but not the requisition delivered to the Trustee) will be
accompanied
by copies of invoices, bills or other appropriate documentation supporting the payments or
reimbursements therein requested.

                    (b) The Trustee shall have a period of three (3) Business Days from the date of
receipt by the Trustee of a requisition within which to fund such requisition.

                    (c) All disbursements from the Facility Fund to pay Facility Costs will be
made by the Trustee in accordance with Section 8.4 (h) of the Credit Facility Agreement.

                    (d) The Trustee, the Credit Facility Provider and the Issuer shall not in any
event be responsible or liable to any person other than the Borrower for the disbursement of,
or
failure to disburse, moneys from the Facility Fund, or any part thereof, and neither the
General
Contractor nor any other contractor, subcontractor or material or equipment supplier shall
have
any right or claim against the Trustee, the Credit Facility Provider or the Issuer under this
Indenture.

                    (e) Any and all approvals by the Credit Facility Provider of disbursements and
any other matters pertaining to the 2003 Facility or the use of the proceeds of the Bonds
shall be
given solely for the benefit of the Credit Facility Provider and shall not constitute any
warranty or
representation by the Credit Facility Provider to any other party as to the technical
sufficiency or
adequacy or safety of any structure or any of its component parts, any other physical
condition or
feature pertaining to the 2003 Facility or any use, or the appropriateness of any use, of
proceeds
of the Bonds; provided, however, that such proceeds must be used for approved purposes which
comply with the purposes of the Acts.

                    (f) In paying any requisition under this Section 5.3, the Trustee shall be
entitled to rely as to the completeness and accuracy of all statements in such requisition,
execution thereof to be conclusive evidence of approval of such requisition.

                    (g) The Trustee shall keep and maintain accurate records pertaining to the
Facility Fund and all disbursements therefrom, and the Trustee shall file a monthly statement
of
debits and credits thereto with the Issuer, the Credit Facility Provider and the Borrower.

     SECTION 5.4. Custody and Application of Net Proceeds and Proceeds from the Disposition of
Certain Equipment. Any Net Proceeds, to the extent provided in Section 9.7 of

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the Letter of Credit Agreement, and the proceeds of the disposition of certain equipment in
accordance with Section 9.9 of the Letter of Credit Agreement shall be deposited into the Net
Proceeds Escrow Fund and applied to such purposes as are set forth in Sections 9.7 and 9.9 of the
Letter of Credit Agreement. If Net Proceeds or proceeds from the disposition of certain equipment
pursuant to Section 9.9 of the Letter of Credit Agreement are to be applied to (a) the Borrower’s
reimbursement obligations to the Credit Facility Provider to the extent of any drawings honored by
the Credit Facility Provider to pay the redemption price of Bonds redeemed in accordance with
Section 3.1(b) hereof, or (b) the redemption of Bonds redeemed in accordance with Section 3.1(b)
hereof, such Net Proceeds or proceeds from the disposition of certain equipment pursuant to
Section 9.9 of the Letter of Credit Agreement shall be deposited into the Principal Account. If
Net Proceeds or proceeds from the disposition of certain equipment pursuant to Section 9.9 of the
Letter of Credit Agreement are to be applied to (i) the Borrower’s reimbursement obligations to
the Credit Facility Provider to the extent of any drawings honored by the Credit Facility Provider
to pay the purchase price of Bonds purchased pursuant to Section 4.4 hereof, or (ii) the purchase
of Bonds purchased pursuant to Section 4.4 hereof, such Net Proceeds or proceeds from the
disposition of certain equipment pursuant to Section 9.9 of the Letter of Credit Agreement shall
be deposited into the Purchase Account. As long as there is a Credit Facility in effect and until
the Credit Facility Agreement has expired, Net Proceeds or proceeds from the disposition of
certain equipment pursuant to Section 9.9 of the Letter of Credit Agreement may not be used to
purchase Bonds in accordance with Section 4.4 of this Indenture without the prior written consent
of the Credit Facility Provider, which written consent must be delivered to the Trustee.

     SECTION
5.5. Excess Bond Proceeds. (a) Any amount remaining in the Facility Fund
constituting proceeds of a Series of Bonds or investment earnings thereon following the Trustee’s
receipt of a duly executed Completion Certificate shall be transferred to the Principal Account or
the Purchase Account of the Bond Fund and applied as provided in paragraph (b) below. The Trustee
shall, however, retain in the Facility Fund any amounts certified by the Borrower and approved in
writing by the Credit Facility Provider to be necessary for payment of Facility Costs not then due
and payable. Amounts so retained shall be disbursed as provided in Section 5.3 hereof or shall be
transferred to the Principal Account or the Purchase Account of the Bond Fund upon written notice
from the Borrower that the specified amounts retained in the Facility Fund will not be used to pay
Facility Costs.

     (b) Amounts transferred to the Principal Account or the Purchase Account of the Bond Fund
from the Facility Fund as provided in paragraph (a) above shall be applied, at the written
direction of the Authorized Borrower Representative, either:

                    (i) on the next Interest Payment Date that is at least 45 days after receipt by the Trustee of
the Completion Certificate (A) during any period in which the Credit Facility is in effect, to the
Borrower’s reimbursement obligations to the Credit Facility Provider to the extent of any drawings
honored by the Credit Facility Provider to pay the redemption price of Bonds of the appropriate
Series redeemed pursuant to Section 3.1(a) hereof, or (B) to redeem Bonds of the appropriate
Series pursuant to Section 3.1(a) hereof, in either case, in a principal amount not exceeding the
amount so transferred from the Facility Fund; or

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                    (ii) (A) during any period in which the Credit Facility is in effect, to the Borrower’s
reimbursement obligations to the Credit Facility Provider to the extent of any drawings paid by
the Credit Facility Provider to pay the purchase price of Bonds of the appropriate Series
purchased pursuant to Section 4.4 hereof, or

                           (B) to purchase Bonds of the appropriate Series pursuant to Section 4.4 hereof, provided,
however, that, as long as there is a Credit Facility in effect and until the Credit Facility
Agreement has expired, the Borrower shall not be permitted to direct the Trustee to transfer
Excess Bond Proceeds into the Purchase Account, without the prior written consent of the Credit
Facility Provider, which consent must be delivered to the Trustee.

     (c) Notwithstanding anything to the contrary herein contained, Excess Bond Proceeds shall be
applied as provided herein solely to the Series of Bonds from which the Excess Bond Proceeds
derive.

     SECTION 5.6. Deposits into the Bond Fund: Use of Moneys in the Bond Fund.

                    (a) There shall be deposited into the Principal Account of the Bond Fund (i)
payments made by the Borrower pursuant to the Loan Agreement in respect of principal payable
on the Bonds, (ii) moneys drawn under the Credit Facility pursuant to a Principal Drawing and,
to the extent such moneys are to be used to pay principal, an Acceleration Drawing, (iii) that
portion of any Refunding Proceeds to be used to pay principal on any Bonds to be redeemed,
(iv)
Excess Bond Proceeds, which are to be applied either to (A) the Borrower’s reimbursement
obligations to the Credit Facility Provider to the extent of any drawings honored by the
Credit
Facility Provider to pay the redemption price of Bonds redeemed in accordance with Section
3.1 (a) hereof or (B) the redemption of Bonds redeemed in accordance with Section 3.1(a)
hereof,
and (v) Net Proceeds or proceeds of the disposition of certain equipment pursuant to Section
9.9
of the Letter of Credit Agreement, which are furnished by the Borrower, or by the Credit
Facility
Provider on behalf of the Borrower, and which are to be applied either to (A) the Borrower’s
reimbursement obligations to the Credit Facility Provider to the extent of any drawings
honored
by the Credit Facility Provider to pay the redemption price of Bonds redeemed in accordance
with Section 3.1(b) hereof or (B) the redemption of Bonds redeemed in accordance with Section
3.l(b) hereof.

                    (b) There shall be deposited into the Purchase Account of the Bond Fund (i)
payments made by the Borrower pursuant to the Loan Agreement in respect of the purchase price
of Bonds, (ii) moneys drawn under the Credit Facility pursuant to a Bond Purchase Drawing,
(iii)
proceeds of the remarketing and sale of the Bonds, (iv) Excess Bond Proceeds, which are to be
applied either to (A) the Borrower’s reimbursement obligations to the Credit Facility Provider
to
the extent of any drawings honored by the Credit Facility Provider to pay the purchase price
of
Bonds purchased pursuant to Section 4.4 hereof, or (B) the purchase of Bonds purchased
pursuant to Section 4.4 hereof, and (v) Net Proceeds or proceeds of the disposition of certain
equipment pursuant to Section 9.9 of the Letter of Credit Agreement, which are furnished by
the
Borrower, or by the Credit Facility Provider on behalf of the Borrower, and which are to be
applied either to (A) the Borrower’s reimbursement obligations to the Credit Facility Provider
to
the extent of any drawings honored by the Credit Facility Provider to pay the purchase price
of

45

 

Bonds purchased pursuant to Section 4.4 hereof, or (B) the purchase of Bonds purchased pursuant to
Section 4.4 hereof.

                    (c) There
shall be deposited into the Interest Account of the Bond Fund (i)
payments made by the Borrower pursuant to the Loan Agreement in respect of interest on the
Bonds, (ii) moneys drawn under the Credit Facility pursuant to an Interest Drawing and, to the
extent such moneys are to be used to pay interest, an Acceleration Drawing, and (iii) that
portion
of any Refunding Proceeds to be used to pay accrued interest on any Bonds to be redeemed.

                    (d) Except as provided in this paragraph and in Sections 5.8, 5.13, 9.10 or
10.4 hereof, moneys in the Principal Account of the Bond Fund shall be used solely for the
payment of principal of the Bonds as the same become due and payable at maturity, upon
redemption or upon acceleration of maturity. The Trustee shall at all times maintain accurate
records of deposits into the Principal Account, and the sources and timing of such deposits,
and
shall apply moneys from such sources on any Bond Payment Date in the order of priority
indicated below:

                         (i) Refunding Proceeds, but only to the extent that such Refunding Proceeds
are Available Moneys;

                         (ii) moneys received from a Principal Drawing or an Acceleration Drawing under
the Credit Facility securing such Bonds;

                         (iii) Excess Bond Proceeds derived from such Bonds;

                         (iv) moneys constituting Net Proceeds or proceeds from the disposition of
certain equipment pursuant to Section 9.9 of the Letter of Credit Agreement,
whether provided by the Borrower or the Credit Facility Provider, on behalf of the
Borrower; and

                         (v) any moneys paid by the Borrower pursuant to the Loan Agreement.

     In the event that any principal payments made by the Borrower pursuant to the Loan Agreement,
Excess Bond Proceeds, Net Proceeds, or proceeds from the disposition of certain equipment pursuant
to Section 9.9 of the Letter of Credit Agreement are on deposit in the Principal Account on a Bond
Payment Date, and the Trustee has paid principal of the Bonds from the source described in clause
(ii) of this paragraph, the Trustee, on such Bond Payment Date, shall transfer to the Credit
Facility Provider (in immediately available funds by wire transfer or, upon direction by the Credit
Facility Provider, by deposit into the Credit Facility Provider’s correspondent account with the
Trustee; provided, however, that the Trustee shall not be required to transfer such moneys in
immediately available funds to the extent that the moneys on deposit in the Principal Account are
not immediately available) such moneys in an amount not exceeding an amount equal to such Principal
Drawing or Acceleration Drawing, and such amount shall be credited against the Borrower’s
reimbursement obligations to the Credit Facility Provider under the Credit Facility Agreement.

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                    (e) Except as provided in this paragraph and in Sections 5.8, 5.13, 9.10 or 10.4
hereof, moneys in the Purchase Account of the Bond Fund shall be used solely for the payment of
the purchase price of Bonds purchased pursuant to Sections 4.1 and 4.2 hereof. The Trustee shall
at all times maintain accurate records of deposits into the Purchase Account, and the sources and
timing of such deposits, and shall apply moneys from such sources on any Tender Date in the order
of priority indicated below:

                         (i) proceeds from the remarketing and sale of the Bonds pursuant to Section
4.3 hereof;

                         (ii) moneys received from a Bond Purchase Principal Drawing or a Bond Purchase
Interest Drawing under the Credit Facility securing such Bonds;

                         (iii) Excess Bond Proceeds derived from such Bonds;

                         (iv) moneys constituting Net Proceeds or proceeds from the disposition of
certain equipment pursuant to Section 9.9 of the Letter of Credit Agreement,
whether provided by the Borrower or the Credit Facility Provider, on behalf of the
Borrower; and

                         (v) any moneys paid by the Borrower pursuant to the Loan Agreement.

In the event that any payments made by the Borrower pursuant to the Loan Agreement, Excess Bond
Proceeds, Net Proceeds or proceeds from the disposition of certain equipment pursuant to Section
9.9 of the Letter of Credit Agreement are on deposit in the Purchase Account on a Tender Date, and
the Trustee has paid the purchase price of Bonds from the source described in clause (ii) of this
paragraph, the Trustee, on such Tender Date, shall transfer to the Credit Facility Provider (in
immediately available funds by wire transfer or, upon direction by the Credit Facility Provider,
by deposit into the Credit Facility Provider’s correspondent account with the Trustee; provided,
however, that the Trustee shall not be required to transfer such moneys in immediately available
funds to the extent that the moneys on deposit in the Purchase Account are not immediately
available) such moneys in an amount not exceeding an amount equal to such Bond Purchase Drawing
and such amount shall be credited against the Borrower’s reimbursement obligations to the Credit
Facility Provider under the Credit Facility Agreement.

                    (f) Except as provided in this paragraph, and in Sections 5.8, 5.13, 9.10 and 10.4 hereof,
moneys in the Interest Account of the Bond Fund shall be used solely to pay interest on the Bonds
when due. The Trustee shall at all times maintain accurate records of deposits into the Interest
Account, and the sources and timing of such deposits, and shall apply moneys from such sources on
any Bond Payment Date in the order of priority indicated below:

                         (i) Refunding Proceeds, but only to the extent that such Refunding
Proceeds are Available Moneys;

                         (ii) Moneys received from an Interest Drawing or an Acceleration Drawing
under the Credit Facility securing such Bonds; and

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                         (iii) Any moneys paid by the Borrower pursuant to the Loan
Agreement.

In the event that any interest payments made by the Borrower pursuant to the Loan Agreement are on
deposit in the Interest Account on a Bond Payment Date, and the Trustee has paid interest on the
Bonds from the source described in clause (ii) of this paragraph, the Trustee, on such Bond
Payment Date, shall transfer to the Credit Facility Provider (in immediately available funds by
wire transfer or, upon direction by the Credit Facility Provider, by deposit into the Credit
Facility Provider’s correspondent account with the Trustee; provided, however, that the Trustee
shall not be required to transfer such moneys in immediately available funds to the extent that
the moneys on deposit in the Interest Account are not immediately available) such moneys in an
amount not exceeding an amount equal to such Interest Drawing or Acceleration Drawing and such
amount shall be credited against the Borrower’s reimbursement obligations to the Credit Facility
Provider under the Credit Facility Agreement.

                    (g) The Trustee shall not commingle amounts held in the Bond Fund that are derived from
different sources (namely, payments made by the Borrower, Excess Bond Proceeds, moneys drawn under
the Credit Facility for the Bonds of a Series, Refunding Proceeds, Net Proceeds, proceeds from the
disposition of certain equipment pursuant to Section 9.9 of the Letter of Credit Agreement or
proceeds from the remarketing and sale of the Bonds) or attributable to different Series of Bonds,
but shall establish and maintain separate accounts or subaccounts therefor as necessary.

                    (h) Notwithstanding the foregoing, the Borrower, the Trustee and the Credit Facility
Provider, by mutual agreement, may provide for alternative methods of collecting and holding
payments made by the Borrower under the Loan Agreement and transferring moneys on deposit in the
Bond Fund to the Credit Facility Provider.

     SECTION
5.7. Credit Facility; Substitute Credit Facility.

                    (a) With respect to each Series of Bonds, the Trustee shall draw upon the Credit Facility
securing such series of Bonds in accordance with its terms to the extent necessary to pay on any
Bond Payment Date, including, without limitation, any Interest Payment Date, principal of and/or
interest on such Bonds, whether upon redemption, at maturity, upon acceleration of maturity or
otherwise. The Trustee, in determining the amount of any draw on the Credit Facility in accordance
with the immediately preceding sentence, shall take into consideration the amount on deposit of any
immediately available Refunding Proceeds described in clause (d)(i) or clause (f)(i) of Section 5.6
hereof. In the event that there are not on deposit in the Purchase Account sufficient immediately
available remarketing proceeds attributable to such Series of Bonds pursuant to Section 4.4 (a)(i)
to pay the purchase price of Bonds Tendered or Deemed Tendered for Purchase on any Tender Date, the
Trustee shall, not later than 11:00 A.M., prevailing Baltimore, Maryland time on the Business Day
immediately preceding such Tender Date, make a Bond Purchase Principal Drawing, and, if necessary,
a Bond Purchase Interest Drawing, under the Credit Facility to the extent necessary to pay the
purchase price of Bonds Tendered or Deemed Tendered for Purchase on such Tender Date in excess of
the amount of the purchase price of Bonds to be paid from the proceeds of the remarketing and sale
of Bonds which

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have been deposited in the Purchase Account and constitute immediately available funds. The
Trustee will also provide the Credit Facility Provider with any advance notice of a drawing
thereunder as may be required by the terms of the Credit Facility.

                    The Trustee shall not draw upon the Credit Facility to pay the principal or the purchase
price of any Pledged Bonds, if and to the extent that the Principal Portion of the Credit Facility
has not been reinstated following a Bond Purchase Principal Drawing with respect to such Pledged
Bonds.

                    (b) If at any time there shall have been delivered to the Trustee (i) a proposed
Substitute Credit Facility and (ii) each of the items described in the definition of
“Substitute
Credit Facility” contained in Section 1.1 hereof as requirements for the provision of a
Substitute
Credit Facility, then the Trustee shall accept such proposed Substitute Credit Facility and
promptly, following the Mandatory Tender Date resulting from the delivery of the Substitute
Credit Facility, surrender the Credit Facility then in effect to the Credit Facility Provider
which
issued such Credit Facility for cancellation in accordance with its terms; provided, however,
that
the Trustee shall not accept a Substitute Credit Facility in substitution for an existing
Credit
Facility, unless (A) the Credit Facility then in effect is expiring, or (B) it has received
the written
consent of the Credit Facility Provider which issued the Credit Facility then in effect to the
substitution by the Borrower of a Substitute Credit Facility for the Credit Facility then in
effect.

                    (c) The stated expiration date of any Substitute Credit Facility shall not be
earlier than the earlier of (i) the date that is one year after the effective date of such
Substitute
Credit Facility and (ii) the fifth Business Day after the date of the final maturity of the
Bonds
secured thereby.

                    (d) If at any time there shall cease to be any Bonds Outstanding hereunder, the
Trustee shall promptly surrender the Credit Facility then in effect to the Credit Facility
Provider
which issued such Credit Facility in accordance with the terms thereof for cancellation.

                    (e) The Trustee shall not sell, assign or otherwise transfer the Credit Facility
or any interest in the Revenues except to a successor Trustee hereunder and in accordance with
the terms of the Credit Facility or the Loan Agreement, as the case may be.

                    (f) Any Credit Facility securing a Series of Bonds shall secure only that particular Series
of Bonds and no other and shall not be available to pay the principal of, interest on, or the
purchase price of, any other Series of Bonds.

     SECTION 5.8. Bonds Not Presented for Payment. In the event any Bonds are not presented
for payment when the principal thereof becomes due, either at maturity or at the date fixed for
redemption thereof or the acceleration of maturity, or in the event the interest due thereon is
unclaimed, if moneys sufficient to pay the principal of and interest on such Bonds are held by the
Trustee, the Trustee shall segregate and hold such moneys in trust, without liability for interest
thereon, for the benefit of Owners of such Bonds who shall, except as provided in the following
paragraph, thereafter be restricted exclusively to such moneys for the satisfaction of

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any claim of whatever nature on their part under this Indenture or on, or with respect to,
such Bonds.

     Any moneys which the Trustee segregates and holds in trust for the payment of the principal
of or interest on any Bond and which remain unclaimed for one year after such principal or
interest has become due and payable, upon the Borrower’s written request to the Trustee, but only
to the extent permitted by the unclaimed property laws of the State, shall be paid to the Borrower
with notice to the Credit Facility Provider of such payment; provided, however, that:

                    (a) before the Trustee makes any such payments to the Borrower, the Trustee,
at the expense of the Borrower, shall cause notice to be given once by Mail to the Owner of
such
Bond, at the last address for such Owner listed on the registration books maintained by the
Registrar, to the effect that such moneys remain unclaimed and that, after a date specified
therein,
which shall not be less than 30 days from the date of such notice by Mail, any unclaimed
balance
of such moneys then remaining will be paid to the Borrower, and

                    (b) no such payment shall be made to the Borrower if the Trustee has notice,
within the meaning of Section 10.5 hereof, that an Event of Default shall have occurred and be
continuing under any of the Bond Documents or the Trustee has written notice from the Credit
Facility Provider that an Event of Default shall have occurred and be continuing under any of
the
Credit Facility Documents.

     After the payment of such unclaimed moneys to the Borrower, the Owner of such Bond shall
thereafter look only to the Borrower for the payment thereof, and all liability of the Issuer, the
Trustee, the Paying Agent, the Remarketing Agent and the Credit Facility Provider with respect to
such moneys shall thereupon cease.

     SECTION 5.9. Moneys Held in Trust. All moneys required to be deposited with or paid
to the Trustee for deposit into the Bond Fund or the Facility Fund under any provision hereof, all
moneys realized under the Credit Facility and held by the Trustee, all moneys representing the
proceeds of the remarketing and sale of Bonds by the Remarketing Agent, and any moneys withdrawn
from the Bond Fund and the Facility Fund and held by the Trustee, shall be held by the Trustee or
the Remarketing Agent, as the case may be, in trust, and such moneys (other than moneys held
pursuant to Section 4.6(b) or Section 5.8 hereof) shall, while so held, constitute part of the
Trust Estate and be subject to the lien hereof.

     SECTION 5.10. Redemption of All Outstanding Bonds. Except as set forth in Section 5.12
hereof, in the event that all Outstanding Bonds are to be redeemed, the Trustee shall, without
further authorization, withdraw from the Facility Fund and the Net Proceeds Escrow Fund and deposit
within the Principal Account of the Bond Fund amounts in the aggregate not exceeding the principal
of and accrued interest on the Bonds so to be redeemed, with notice to the Issuer, the Credit
Facility Provider and the Borrower of such action, such withdrawals and deposits to be made on the
date specified for such redemption.

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     SECTION 5.11. Acceleration of Maturity of Bonds. In the event that the
principal of the Bonds shall have become due and payable pursuant to Section 9.2(a) hereof, the
Trustee shall, upon the obtaining or the entry of a judgment or decree for the payment of moneys
due as provided in Article IX hereof, or at the direction of the Credit Facility Provider, deposit
into the Principal Account of the Bond Fund all amounts remaining in the Facility Fund and the Net
Proceeds Escrow Fund with notice to the Issuer, the Credit Facility Provider and the Borrower of
such action.

     SECTION 5.12. Refunding of Bonds. In the event that all Outstanding Bonds are paid,
redeemed or deemed to have been paid within the meaning of Article VIII hereof by reason of the
application of the proceeds of the sale of any obligations issued by the Issuer or by any other
duly authorized issuer under an indenture other than this Indenture, the Trustee, upon written
direction of the Issuer, shall withdraw all amounts remaining in the Facility Fund and the Net
Proceeds Escrow Fund and deposit such amounts into corresponding accounts in the construction and
debt service funds or other similar funds created under the indenture under which such refunding
obligations are issued, with notice to the Borrower and the Credit Facility Provider of such
action, such withdrawals and deposits to be made, in accordance with the provisions of such
indenture, on the date on which the Bonds are so paid, redeemed or deemed to have been paid.

     SECTION 5.13. Payment to the Borrower. After the lien of this Indenture shall have
been discharged in accordance with Article VIII hereof, and the Trustee shall have received
written evidence that all fees, expenses and other amounts payable to the Issuer, the Paying
Agent, the Registrar, the Remarketing Agent, the Trustee and the Credit Facility Provider pursuant
to any provision hereof or of the Loan Agreement or of the Credit Facility Documents or of the
Remarketing Agreement or of the Credit Facility, shall have been paid in full, any moneys
remaining in the Bond Fund, the Facility Fund and the Net Proceeds Escrow Fund shall be paid to
the Borrower upon its written request.

     SECTION
5.14. Procedure For Making Disbursements from Issuer’s Fee
Fund. (a) The
Trustee is hereby authorized and directed to make payments out of the Issuer’s Fee Fund for all
amounts required for payment of the Issuer’s Fee to the Issuer in the amounts and at the time
required by Section 7.2 of the Loan Agreement. Thirty days prior to each anniversary date of the
Closing, the Trustee shall calculate the Issuer’s Fee in accordance with the provisions of Section
7.2 of the Loan Agreement and promptly deliver an invoice to the Borrower with a copy to the
Issuer.

          (b) Moneys on deposit in the Issuer’s Fee Fund shall not be invested without the prior
written consent of the Issuer.

ARTICLE VI

INVESTMENTS

     SECTION
6.1. Investment of Facility Fund and Net Proceeds Escrow Fund. Any moneys held
as a part of the Facility Fund and not required for immediate disbursement and withdrawal

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shall be invested or reinvested by the Trustee, to the extent such investments are permitted by
law, in any of the following (collectively, “Permitted Investments”):

                    (a) direct obligations of, or obligations the full and timely payment of the
principal of and interest on which are unconditionally guaranteed by, the United States of
America and which are not redeemable prior to their maturity at the option of the issuer
thereof
(“Government Obligations”);

                    (b) direct obligations (including bonds, notes or participation certificates) of,
or obligations the principal of and interest on which are unconditionally guaranteed by, any
agency or instrumentality of the United States of America, including, without limitation, (i)
Federal Home Loan Banks, Federal National Mortgage Association, Government National
Mortgage Association, the Export-Import Bank of the United States, the Tennessee Valley
Authority, the Federal Financing Bank, the United States Postal Service, and the Farmers Home
Administration and (ii) either on a consolidated or system-wide basis, Federal Land Banks,
Federal Intermediate Credit Banks or Federal Banks for Cooperatives (“Agency Obligations”);

                    (c) direct obligations or revenue obligations (including bonds, notes or
participation certificates) of, or private activity bonds (within the meaning of the Code)
issued
by, or obligations the principal of and interest on which are unconditionally guaranteed by,
any
state of the United States of America or any agency or instrumentality of any state of the
United
States of America, which obligations or bonds are rated at least as high as the ratings given
to the
Bonds by Moody’s (if the Bonds are then rated by Moody’s) or by S&P (if the Bonds are then
rated by S&P);

                    (d) certificates of deposit or other obligations maturing not more than one year
after the date of acquisition thereof, issued by any bank or trust company incorporated under
the
laws of the United States of America or any state thereof, and which is owned by a holding
company whose long term debt or commercial paper is rated at least as high as the ratings
given
to the Bonds by S&P (if the Bonds are then rated by S&P) and Moody’s (if the Bonds are then
rated by Moody’s);

                    (e) open market commercial paper with a maturity not in excess of one year
from the date of acquisition thereof which on the date of acquisition has the highest credit
rating
by either S&P or Moody’s;

                    (f) repurchase agreements with any bank, trust company or government bond
dealer (including the Trustee), reporting to, trading with and recognized as a primary dealer
by a
Federal Reserve Bank, and which is owned by a holding company whose long term debt or
commercial paper is rated at least as high as the ratings given to the Bonds by S&P (if the
Bonds
are then rated by S&P) and Moody’s (if the Bonds are then rated by Moody’s), selected by the
Borrower, acting as principal or agent for Government Obligations and Agency Obligations, if
such Government Obligations and Agency Obligations are delivered to the Trustee; provided,
however, that the Borrower shall cause the underlying Government Obligations and Agency
Obligations to be maintained at a current market value of not less than the repurchase price
as
determined on a monthly basis; and

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          (g) any money market or short term investment fund investing in or consisting solely of
and secured by Government Obligations and/or Agency Obligations, including any such fund
maintained by the Trustee or the Credit Facility Provider, which fund is rated at least as high as
the ratings given to the Bonds by Moody’s (if the Bonds are then rated by Moody’s) and S&P (if the
Bonds are then rated by S&P), including any such fund maintained by the Trustee (including any
proprietary mutual fund of the Trustee for which the Trustee or an affiliate of the Trustee serves
as investment advisor or provides other services to such mutual fund and receives reasonable
compensation therefor) or the Credit Facility Provider.

          The Borrower shall, by written direction from the Authorized Borrower Representative to the
Trustee, direct the investment of amounts held in the Facility Fund, and such investments shall
have maturities consonant with the need for funds as estimated by the Borrower. Such direction
shall certify that such investments are permitted by law and this Indenture and shall specify the
maturity date, interest rate (if any), principal amount and nature of such investments. Absent
written instructions from the Borrower, the Trustee may invest moneys in the Facility Fund in
Government Obligations or in any money market or short term investment firm investing in or
consisting solely of and secured by Government Obligations that would be permitted under clause
(g) above.

     Any moneys held as part of the Net Proceeds Escrow Fund shall be invested only in obligations
issued by the United States Treasury or in any other kind of investment approved in writing by the
Credit Facility Provider. The Borrower shall, by written direction from the Authorized Borrower
Representative to the Trustee, direct the investment of amounts held in the Net Proceeds Escrow
Fund, and such investments shall have maturities consonant with the need for funds as estimated by
the Borrower. Such direction shall certify that such investments are permitted by this Indenture
and shall specify the maturity date, interest rate (if any), principal amount and nature of such
investments. Absent written instructions from the Borrower, the Trustee may invest Net Proceeds in
obligations issued by the United States Treasury or in any money market or short term investment
fund investing solely in or consisting solely of and secured by obligations issued by the United
States Treasury that otherwise would be permitted under clause (g) above or in any other kind of
investments approved by the Credit Facility Provider.

     SECTION 6.2. Investment of Bond Fund. Any moneys held as part of the Bond Fund (other
than moneys realized under the Credit Facility, except for draws under the Letter of Credit made
pursuant to the last sentence of Section 3.6 hereof, which moneys shall be invested in accordance
with clause (g) of Section 6.1 hereof, the proceeds of the remarketing and sale of Bonds Tendered
or Deemed Tendered for Purchase, and any unclaimed moneys held under Section 4.6(b) or Section 5.6
hereof, which shall be held by the Trustee but not invested), and not immediately required for the
purposes of the Bond Fund shall be invested or reinvested by the Trustee, at the written direction
of the Authorized Borrower Representative, in Government Obligations having maturities consonant
with the need for funds to make payments on the Bonds or in any money market or short term
investment funds investing in or consisting solely of and secured by Government Obligations that
would be permitted under clause (g) of Section 6.1 hereof. Such direction shall state that such
investments are permitted by this Indenture and shall

53

 

specify the maturity date, interest rate (if any), principal amount and nature of such
investments. Absent written instructions from the Borrower, the Trustee may invest moneys in the
Bond Fund in Government Obligations having maturities consonant with the need for funds to make
payments on the Bonds or in any money market or short term investment fund investing in or
consisting solely of and secured by Government Obligations that would be permitted under clause
(g) of Section 6.1 hereof.

     SECTION
6.3. Accounting for and Sale of Investments; Losses. The Trustee shall, to
the extent required for payments or transfers from the Facility Fund or Bond Fund or Net Proceeds
Escrow Fund, or as directed by the Borrower in accordance with the provisions of Section 6.1
hereof, sell any such investment at any time, and the proceeds of such sale, and of all payments
at maturity and upon redemption of such investments, shall be credited to the fund in which such
investments were held and any loss resulting from such investment shall be charged to such fund.
Interest or other income received on moneys or securities in any such fund shall be credited to
such fund. The Trustee shall have no liability for any loss incurred by reason of any such
investment or any liquidation or disposition thereof, except in the case of the Trustee’s willful
misconduct or gross negligence. As long as no Event of Default shall have occurred and be
continuing, the Borrower shall designate the investments to be sold and shall otherwise direct the
Trustee in the sale or conversion to cash of the investments made with the moneys in the Facility
Fund, the Bond Fund and the Net Proceeds Escrow Fund; provided that the Trustee shall be entitled
to conclusively assume the absence of any such Event of Default unless it has notice thereof
within the meaning of Section 10.5 hereof.

     The Trustee shall not be responsible for determining whether any investment made by it in
accordance with this Article VI is authorized under any applicable law.

     SECTION 6.4. Trustee’s Own Bond or Investment Department. The Trustee may make any
and all investments permitted under Sections 6.1 and 6.2 through its own bond or investment
department and in any mutual fund (including any proprietary mutual fund of the Trustee or an
affiliate of the Trustee for which the Trustee or an affiliate of the Trustee serves as investment
advisor or provides other services to such mutual fund and receives reasonable compensation
therefor).

ARTICLE VII

GENERAL COVENANTS

     SECTION
7.1. Payment of Principal and Interest; No General Obligations. (a) The Issuer
covenants that it will (i) promptly pay the principal of and interest on every Bond issued under
this Indenture at the place, on the dates and in the manner provided herein and in the Bonds,
provided that the principal and interest are payable by the Issuer solely from the Trust Estate,
and (ii) cause to be paid, solely from the sources described in Section 4.4 hereof, the purchase
price of Bonds Tendered or Deemed Tendered for Purchase as set forth in Section 4.1 and Section 4.2
hereof. Nothing in the Bonds or this Indenture shall be considered as assigning or pledging any
other funds or assets of the Issuer other than the Trust Estate.

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          (b) Each and every covenant made herein by the Issuer is predicated upon the condition that
neither the Issuer nor the State nor any political subdivision thereof nor any public body shall
in any event by liable for the payment of the principal of or interest on the Bonds, or for the
payment of the purchase price of the Bonds, or the performance of any pledge, mortgage, obligation
or agreement created by or arising under this Indenture or the Bonds from any property other than
the Trust Estate or the sources described in Section 4.4 hereof, and, further, that neither the
Bonds nor any such obligation or agreement of the Issuer shall be construed to constitute a debt
of the Issuer, the Department, the State, or any other public body within the meaning of any
constitutional or statutory provision whatsoever, or as a pledge of the general credit, full faith
or taxing power of the State, any political subdivision thereof, the Department, the Issuer, or
any other public body thereof.

     SECTION
7.2. Performance of Covenants by Issuer; Authority; Due Execution. The Issuer
covenants that it will faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture, in any and every Bond executed,
authenticated and delivered hereunder and in all of its proceedings pertaining hereto. The Issuer
covenants that it is duly authorized under the constitution and laws of the State, including
particularly the Acts, to issue the Bonds and to execute this Indenture, to execute and deliver
the Loan Agreement, to assign the Loan Agreement and amounts payable thereunder, and to pledge the
amounts hereby pledged in the manner and to the extent herein set forth. The Issuer further
covenants that all action on its part for the issuance of the Bonds and the execution and delivery
of this Indenture has been duly and effectively taken, and that the Bonds in the hands of the
Owners thereof are and will be valid and enforceable limited obligations of the Issuer according
to the terms thereof and hereof (subject to customary exceptions as to bankruptcy, insolvency or
other laws affecting creditors’ rights generally, and customary exceptions as to principles of
equity).

     SECTION 7.3. Instruments of Further Assurance. The Issuer agrees that the Trustee may
defend the Issuer’s rights to the payments and other amounts due under the Loan Agreement, for the
benefit of the Owners of the Bonds, against the claims and demands of all persons whomsoever. The
Issuer covenants that, at the expense of the Borrower, it will do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, such indentures supplemental
hereto and such further acts, instruments and transfers as the Trustee may reasonably require for
the better assuring, transferring, pledging, assigning and confirming to the Trustee all and
singular the rights assigned hereby and the amounts pledged hereby to the payment of the principal
of and interest on the Bonds.

     SECTION 7.4. Recording and Filing.

          (a) The security interests created by this Indenture shall be perfected by the filing of
financing statements which fully comply with the Uniform Commercial Code. All necessary
continuation statements shall be filed by the Credit Facility Provider, at the expense of the
Borrower, within the time prescribed by the Uniform Commercial Code in order to continue the
perfection of the security interests created by the Bond Documents and the Credit Facility
Documents, respectively; provided, however, the Trustee shall complete such filing if the Credit
Facility no longer exists.

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          (b) The Issuer shall, upon the reasonable request of the Trustee and at the expense of the
Borrower, from time to time execute and deliver such further instruments and take such further
action as may be reasonable and as may be required to effectuate the purposes of this Indenture or
any provision hereof; provided, however, that no such instruments or actions shall pledge the
general credit, the full faith, or the taxing power of the State, any political subdivision
thereof, the Department, the Issuer, or any other public body thereof.

     SECTION 7.5. Rights Under Loan Agreement. The Loan Agreement, a duly executed
counterpart of which has been filed with the Trustee, sets forth the covenants and obligations of
the Issuer and the Borrower, including provisions that, subsequent to the issuance of the Bonds
and prior to the payment in full or provision for payment thereof in accordance with the
provisions thereof, the Loan Agreement (except as expressly provided therein) may not be
effectively amended, changed, modified, altered or terminated without the concurring written
consent of the Trustee and the Credit Facility Provider, as provided in Article XII hereof, and
reference is hereby made to the Loan Agreement for a detailed statement of such covenants and
obligations of the Borrower, and the Issuer agrees that the Trustee in its name or (to the extent
required by law) in the name of the Issuer, shall enforce all rights of the Issuer and all
obligations of the Borrower under and pursuant to the Loan Agreement for and on behalf of the
Owners of Bonds, whether or not the Issuer is in default hereunder. The Issuer shall cooperate
with the Trustee in enforcing the obligations of the Borrower to pay or cause to be paid all
amounts payable by the Borrower under the Loan Agreement.

     SECTION 7.6. No Disposition of Trust Estate. Except as permitted by this Indenture,
the Issuer shall not sell, convey, lease, pledge, assign or otherwise encumber or dispose of any
part of its interest in the Trust Estate and will promptly pay or cause to be discharged, or make
adequate provision to discharge, any lien or charge created by the Issuer on the Trust Estate or
any part thereof not permitted hereby.

     SECTION 7.7. Access to Books. All books and documents in the possession of the Issuer
relating to the financing of the Facility, the Revenues, and the Trust Estate shall at all
reasonable times and as permitted under law be open to inspection by such accountants or other
agents as the Trustee or the Credit Facility Provider may from time to time designate.

     SECTION 7.8. Source of Payment of Bonds. The Bonds are not general obligations of the
Issuer but are limited obligations payable solely and only from the Trust Estate. The Trust Estate
has been pledged and assigned as security for the equal and ratable payment of the Bonds and for
the benefit of the Credit Facility Provider, and shall be used for no other purpose than to pay
the principal of and interest on, and the purchase price of, the Bonds, except as may be otherwise
expressly authorized in this Indenture or the Loan Agreement.

     SECTION 7.9 Report Concerning Outstanding Bonds. The Trustee shall furnish, or cause
to be furnished, to the Issuer on or before January 31 in each year, commencing January 31, 2004,
a statement of the outstanding principal amount of the Bonds as of the preceding December 31. Such
statement shall be sent to the Issuer at the address set forth in Section 13.8 hereof, or to any
other person hereafter designated by the Issuer.

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ARTICLE VIII

DEFEASANCE

     SECTION 8.1. Defeasance. If the Issuer pays or causes to be paid (solely from the
Trust Estate) to the Owner of any Bond secured hereby the principal and interest due and payable
upon such Bond, or any portion of such Bond equal to an Authorized Denomination, such Bond or
portion thereof shall cease to be entitled to any lien, benefit or security under this Indenture.
If the Issuer pays or causes to be paid (solely from the Trust Estate) the principal and interest
due and payable on all Outstanding Bonds and pays or causes to be paid (solely from the Trust
Estate) all other sums payable hereunder by the Issuer, including all necessary and proper fees,
compensation and expenses of the Issuer and all Administration Expenses then, and in that case,
the right, title and interest of the Trustee in and to the Trust Estate shall thereupon cease,
terminate and become void. In such event, the Trustee shall assign,
transfer and turn over to the
Credit Facility Provider the Trust Estate, including, without limitation, any surplus in the Bond
Fund and any balance remaining in any other fund created under this Indenture; provided, that if
the Trustee shall have received written certification from the Credit Facility Provider that all
obligations of the Borrower under the Credit Facility Documents have been satisfied and that the
Credit Facility Agreement has been terminated, or if no Credit Facility Provider shall then exist,
the Trust Estate shall be assigned, transferred and turned over to the Borrower. Upon the
Trustee’s assignment, transfer and turning over to the Credit Facility Provider or the Borrower,
as appropriate, of the Trust Estate pursuant to this Section 8.1, the Trustee shall have no
further duties, responsibilities or obligations under and pursuant to this Indenture.

     Any Bond shall be deemed to be paid within the meaning of this Article VIII and for all
purposes of this Indenture when:

          (a) payment of the principal of such Bond, plus interest thereon to the due date thereof
(whether such due date is by reason of maturity or upon redemption as provided herein), either

         
      (i) shall have been made or caused to be made in accordance with the terms thereof, or

         
      (ii) shall have been provided for by irrevocably depositing with the Trustee in trust and
irrevocably setting aside exclusively for such payment,

          (A) moneys (including, without limitation, interest at the
Maximum Rate unless the Variable Rate borne by such Bond is not subject to
change prior to the date of payment) sufficient to make such payment, which, if
there is then a Credit Facility in effect, must constitute Available Moneys,
and/or

          (B) Government Obligations, not subject to prepayment or call,
which, if there is then a Credit Facility in effect, must be purchased by the
Trustee with Available Moneys, maturing as to principal and interest in such amounts and
at such times as will insure the availability of sufficient moneys to make such

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payment as certified in a verification report by an Independent Accountant, which
report shall be acceptable to each rating agency having a rating on the Bonds, and

          (b) all necessary and proper fees, compensation and expenses of the Issuer and all
Administration Expenses with respect to which such deposit is made shall have been paid or the
payment thereof provided for to the satisfaction of the Trustee in case of payments due the
Trustee and in all other cases as evidenced by a certificate from the person to whom payment is
due.

     At such times as a Bond shall be deemed to be paid hereunder, as aforesaid, such Bond shall
no longer be secured by or entitled to the benefits of this Indenture, except for the purposes of
any such payment from such moneys, Available Moneys or Government Obligations, as the case may be.

     Any Bond for which payment shall have been made or caused to be made in accordance with the
terms thereof shall be deemed to have been paid within the meaning of this Article VIII.

     Notwithstanding the foregoing paragraph, no deposit under clause (a)(ii) of the second full
paragraph in this Section 8.1 shall be deemed a payment of such Bonds as aforesaid until: (A)(l)
if such Bonds are to be redeemed, proper notice of redemption of such Bonds shall have been
previously given in accordance with Section 3.3 hereof or provision satisfactory to the Trustee
shall have been made for the giving of such notice, (2) in the event such Bonds are not to be paid
or redeemed within the next succeeding 60 days, until the Borrower shall have given the Trustee,
on behalf of the Issuer, in form satisfactory to the Trustee, irrevocable instructions to notify,
as soon as practicable, the Owners of the Bonds in accordance with Section 3.3 hereof, that the
deposit required by (a)(ii) above has been made with the Trustee and that such Bonds are deemed to
have been paid in accordance with this Article VIII and stating the maturity or redemption date
upon which moneys are to be available for the payment of the principal of such Bonds, plus
interest thereon to the due date thereof, and (3) written confirmation from Moody’s (if the Bonds
are then rated by Moody’s) and S&P (if the Bonds are then rated by S&P) that the ratings on the
Bonds will not be reduced or withdrawn, or (B) the maturity of such Bonds.

     Notwithstanding any acceleration of the maturity of the Bonds for any reason, the Trustee
shall retain, in trust, for a period of at least one year beyond the final maturity of the Bonds
(or any advance refunding date, if applicable), any amounts held by the Trustee due to the failure
of any Owners to present their Bonds for redemption. With respect to such amounts, the Trustee
shall follow the provisions of Section 5.8 hereof.

ARTICLE IX

DEFAULTS AND REMEDIES

     SECTION
9.1. Events of Default. Each of the following events shall constitute and is
referred to in this Indenture as an “Event of Default”:

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          (a) a failure to pay the principal of any of the Bonds when the same becomes
due and payable at maturity or upon redemption or otherwise; or

          (b) a failure to pay an installment of interest on any of the Bonds when due
and payable; or

          (c) a failure to pay an amount due in respect of the purchase price of any Bond
Tendered or Deemed Tendered for Purchase on a Tender Date when due and payable; or

          (d) the Trustee’s receipt of written notice from the Credit Facility Provider
that an “Event of Default” (as that term is defined in the Credit Facility Agreement) has
occurred under the Credit Facility Agreement and written request that the Bonds and all accrued and
unpaid interest thereon become immediately due and payable; or

          (e) an Act of Bankruptcy occurs with respect to the Borrower; provided,
however, in the case of an involuntary filing or the commencement of a proceeding against the
Borrower, the filing or commencement of the same shall not constitute an Event of Default if
such proceeding is dismissed within 60 days from the date thereof; or

          (f) an “Event of Default” (as that term is defined in the Loan Agreement)
occurs under Section 11.1(j) of the Loan Agreement; provided, however, that such occurrence
shall not constitute an Event of Default, unless the Issuer declares the same to be an Event
of Default hereunder by notice given in writing and delivered to the Trustee, the Credit Facility
Provider and the Borrower accompanied by a written request that the Bonds and all accrued and
unpaid interest thereon become immediately due and payable; or

          (g) an “Event of Default” (as that term is defined in the Loan Agreement)
(other than an Event of Default described in Section 11.1(j) of the Loan Agreement) occurs
under the Loan Agreement; provided, however, that such occurrence shall not constitute an Event of
Default hereunder if (i) there is then a Credit Facility in effect and (ii) the Credit
Facility Provider
has not failed to honor any drawing (which drawing strictly complies with, and conforms to,
the terms and conditions of the Credit Facility) presented under the Credit Facility, unless the
Credit Facility Provider declares the same to be an Event of Default hereunder by notice given in
writing and delivered to the Trustee and the Borrower accompanied by a written request that
the Bonds and all accrued and unpaid interest thereon become immediately due and payable; or

          (h) a failure by the Issuer to observe and perform any covenant, condition, agreement or
provision (other than as specified in clauses (a), (b) or (c) of this Section 9.1) contained in the
Bonds or in this Indenture on the part of the Issuer to be observed or performed, which failure
continues for a period of 60 days after written notice, specifying such failure and requesting that
it be remedied, shall have been given to the Issuer and the Borrower by the Trustee, which may give
such notice in its discretion and shall give such notice at the written request of the Credit
Facility Provider or the Owners of not less than 25% in aggregate principal amount of the Bonds
then Outstanding, unless the Trustee, or the Trustee and the Credit Facility Provider (if the
Credit Facility Provider requests such notice) or the Owners of an aggregate principal amount of
Bonds not less than the aggregate principal amount of Bonds the Owners of

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which requested such notice, as the case may be, agree in writing to an extension of such
period prior to its expiration and so notify the Trustee in writing; provided, however, that the
Trustee, or the Trustee and the Credit Facility Provider (if the Credit Facility Provider requests
such notice) or the Owners of such aggregate principal amount of Bonds, as the case may be, shall
be deemed to have agreed to an extension of such period if corrective action is initiated by the
Issuer or the Borrower on behalf of the Issuer, within such period and is being diligently
pursued, and the Borrower certifies to the Trustee that the conditions to such extension contained
in this paragraph (k) have been complied with; provided further, however, that such failure shall
not constitute an Event of Default hereunder if (i) there is then a Credit Facility in effect and
(ii) the Credit Facility Provider has not failed to honor any drawing (which drawing strictly
complies with, and conforms to, the terms and conditions of the Credit Facility) presented under
the Credit Facility, unless the Credit Facility Provider declares the same to be an Event of
Default hereunder by notice given in writing and delivered to the Trustee and the Borrower
accompanied by a written request that the Bonds and all accrued and unpaid interest thereon become
immediately due and payable.

     If on the date payment of principal of or interest on the Bonds is due, or if on the date on
which payment of the purchase price of Bonds is to be made by the Trustee, sufficient moneys are
not available to make such payment, the Trustee shall give telephonic or telegraphic notice
(promptly confirmed in writing) of such insufficiency to the Borrower, the Remarketing Agent and
the Credit Facility Provider.

     SECTION
9.2. Acceleration; Other Remedies.

          (a)(i) Upon the occurrence and continuance of an Event of Default described in paragraph (a),
(b), (c) or (f) of Section 9.1 hereof the Trustee shall, by written notice to the Issuer, the
Borrower, the Remarketing Agent and the Credit Facility Provider, declare the Bonds to be
immediately due and payable, whereupon the Bonds and all accrued and unpaid interest thereon
shall, without further action, become and be immediately due and payable, anything in this
Indenture or in the Bonds to the contrary notwithstanding.

               (ii) Upon the occurrence and continuance of an Event of Default described in paragraph (g) or
(h) of Section 9.1 hereof the Trustee may and, at the written request of either the Credit Facility
Provider or the Owners of not less than 25% in aggregate principal amount of the Bonds then
Outstanding, shall, by written notice to the Issuer, the Borrower, the Remarketing Agent and the
Credit Facility Provider, declare the Bonds to be immediately due and payable, whereupon the Bonds
and all accrued and unpaid interest thereon shall, without further action, become and be
immediately due and payable, anything in this Indenture or in the Bonds to the contrary
notwithstanding; provided, however, that, at any time during which there is a Credit Facility in
effect, unless the Credit Facility Provider has failed to honor a drawing (which drawing strictly
complies with, and conforms to, the terms and conditions of the Credit Facility) under the Credit
Facility, the Trustee shall not declare the Bonds to be immediately due and payable pursuant to
this clause (ii) by reason of an Event of Default referred to in this clause (ii) unless instructed
to do so by the Credit Facility Provider in writing.

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               (iii) Upon the occurrence of an Event of Default described in paragraph (d) and (e) of
Section 9.1 hereof, the Bonds and all accrued and unpaid interest thereon shall automatically
become immediately due and payable without the necessity of any declaration or other action by the
Trustee or any other person.

               (iv) Upon any such acceleration of maturity of the Bonds as described in clause (i), (ii) or
(iii) of this paragraph, the Trustee shall give written notice thereof to the Issuer, the
Borrower, the Remarketing Agent and the Credit Facility Provider and, by Mail, to all Owners of
Outstanding Bonds, which notice shall contain all relevant information concerning the date on
which the Trustee expects to receive the proceeds of a drawing under the Credit Facility then in
effect. The date on which the Trustee expects to receive the proceeds from a drawing under the
Credit Facility then in effect will be the date on which interest will cease to accrue on all
Bonds, the principal amount of which is covered by the Credit Facility, unless the Credit Facility
Provider fails to honor a draft drawn in strict compliance with its terms. The Trustee shall draw
moneys under the Credit Facility to the extent available thereunder, in an amount equal to the
aggregate principal amount of the Outstanding Bonds and the interest accrued and accruing thereon
to the date on which such drawing is required to be honored (such drawing to be made by the
Trustee no later than two Business Days after acceleration of maturity of the Bonds as described
in clause (i), (ii), or (iii) of this paragraph), and, immediately upon receipt of the proceeds of
such drawing, the Trustee will apply such proceeds to make applicable payments on the Bonds.

          (b) The provisions of the preceding paragraph (a) are subject to the condition that if, after
the principal of the Bonds shall have become due and payable, and before any judgment or decree for
the payment of the moneys due shall have been obtained or entered as hereinafter provided, the
Issuer causes to be deposited with the Trustee a sum of moneys, which must be Available Moneys if,
at the time, there is a Credit Facility in effect, sufficient to pay all accrued interest upon all
Bonds to the date of accelerated maturity and the principal of any and all Bonds which shall have
become due otherwise than by reason of such acceleration of maturity and such amount as shall be
sufficient to cover all Administration Expenses then due and payable, and all Events of Default
hereunder other than nonpayment of the principal of Bonds which shall have become due solely by
such acceleration of maturity shall have been remedied, then, in every such case, such Event of
Default shall be deemed waived and such acceleration of maturity and its consequences rescinded and
annulled, and the Trustee shall promptly give written notice of such waiver, rescission or
annulment to the Issuer, the Borrower, the Paying Agent, the Remarketing Agent and the Credit
Facility Provider, and shall give notice thereof by Mail to all Owners of Outstanding Bonds;
provided, that there can be no such waiver following a draw under the Credit Facility pursuant to
Section 9.2(a)(iv) hereof, and, provided further, except as set forth in the following paragraph,
there can be no waiver of an Event of Default under clauses (d) or (e) of Section 9.1 hereof. No
such waiver, rescission and annulment shall extend to or affect any subsequent Event of Default or
impair any right or remedy consequent thereon.

     The provisions of paragraph (a) above are further subject to the condition that any waiver of
any “Event of Default” (as that term is defined in the Credit Facility Agreement) under the Credit
Facility Agreement and a rescission and annulment of its consequences shall constitute a

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waiver of the corresponding Event of Default under paragraph (d) of Section 9.1 hereof and a
rescission and annulment of the consequences thereof. If notice of an Event of Default (as that
term is defined in the Credit Facility Agreement) under the Credit Facility Agreement shall have
been given as provided herein and if, prior to any drawing under the Credit Facility in accordance
with Section 9.2(a)(iv) hereof, the Trustee shall thereafter have received written notice from the
Credit Facility Provider that such Event of Default (as that term is defined in the Credit
Facility Agreement) shall have been waived and the Stated Amount of the Credit Facility, if
reduced, has been reinstated to the extent of Bonds Outstanding, the Trustee shall promptly give
written notice of such waiver, rescission or annulment to the Issuer, the Borrower, the Paying
Agent, the Remarketing Agent and the Credit Facility Provider and shall give notice thereof by
Mail to all Owners of Outstanding Bonds; but no such waiver, rescission and annulment shall extend
to or affect any subsequent Event of Default or impair any right or remedy consequent thereon.

          (c) Upon the occurrence and continuance of any Event of Default, then and in every such case
the Trustee in its discretion may, and upon the written direction of the Credit Facility Provider,
or Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding and
receipt of indemnity to its satisfaction, shall, in its own name and as the Trustee of an express
trust:

     (i) by mandamus, or other suit, action or proceeding at law or in equity,
enforce all rights of the Owners, and require the Issuer, the Credit Facility
Provider or the Borrower to carry out any agreements with or for the benefit of the
Owners of Bonds and to perform its or their duties under the Acts, the Bond
Documents and the Credit Facility, provided that any such remedy may be taken only
to the extent permitted under the applicable provisions of the Bond Documents;

     (ii) bring suit upon the Bonds;

     (iii) by action or suit in equity require the Issuer to account as if it were
the trustee of an express trust for the Owners of Bonds; or

     (iv) by action or suit in equity enjoin any acts or things which may be
unlawful or in violation of the rights of the Owners of Bonds.

          Notwithstanding the foregoing, during any period in which there is a Credit Facility in
effect, so long as the Credit Facility Provider has not failed to honor a drawing (which drawing
strictly complies with, and conforms to, the terms and conditions of the Credit Facility) under
the Credit Facility, no action shall be taken as set forth in this paragraph (c) without the prior
written consent of the Credit Facility Provider, unless such action is to be taken to enforce
payment by the Credit Facility Provider under the Credit Facility.

     SECTION 9.3. Restoration to Former Position. In the event that any proceeding taken by
the Trustee to enforce any right under this Indenture shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the Trustee, then the Issuer, the Trustee
and the Owners of Bonds shall be restored to their former positions and rights hereunder,

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respectively, and all rights, remedies and powers of the Trustee shall continue as though no such
proceeding had been taken.

     SECTION 9.4. Owners’ or Credit Facility Provider’s Right to Direct Proceedings.
Subject to the provisions of Section 9.2(a)(iii) hereof, anything in this Indenture to the
contrary notwithstanding, the Credit Facility Provider or Owners of a majority in aggregate
principal amount of the Bonds then Outstanding hereunder shall have the right, by an instrument in
writing executed and delivered to the Trustee, to direct the time, method and place of conducting
all remedial proceedings available to the Trustee under this Indenture or exercising any trust or
power conferred on the Trustee by this Indenture; provided, that the Trustee shall have received
satisfactory indemnity and such direction shall be consistent with this Indenture and applicable
law and shall not involve the Trustee in any personal liability; provided further, however, that
the Credit Facility Provider shall have no such rights in respect of remedies against the Credit
Facility Provider. In the event of a conflict between the directions of the Credit Facility
Provider and those of the Owners of Bonds, so long as the Credit Facility Provider has not failed
to honor a drawing under the Credit Facility (which drawing strictly complies with, and conforms
to, the terms and conditions of the Credit Facility), the directions of the Credit Facility
Provider shall prevail.

     SECTION 9.5. Limitation on Owners’ Right to Institute Proceedings. During any period
in which there is a Credit Facility in effect, no Owners shall have any right to institute any
suit, action or proceeding in equity or at law for the execution of any trust or power hereunder,
or any other remedy hereunder or on the Bonds so long as the Credit Facility Provider has not
failed to honor a drawing (which drawing strictly complies with, and conforms to, the terms and
conditions of the Credit Facility) under the Credit Facility. Otherwise, such suits, actions or
proceedings may only be initiated by Owners if (a) such Owners previously shall have given to the
Trustee written notice of an Event of Default as hereinabove provided, (b) Owners of not less than
25% in aggregate principal amount of the Bonds then Outstanding shall have made written request of
the Trustee to take action hereunder, after the right to institute such suit, action or proceeding
under Section 9.2 hereof shall have accrued, (c) such Owners shall have afforded the Trustee a
reasonable opportunity to proceed to institute the same in either its name or in the name of the
Owners, (d) there also shall have been offered to the Trustee security and indemnity satisfactory
to it against the costs, expenses and liabilities to be incurred therein or thereby, and (e) the
Trustee shall not have complied with such request within 60 days from the date such request is
made. Such notification, request and offer of indemnity are hereby declared in every such case, at
the option of the Trustee, to be conditions precedent to the institution of such suit, action or
proceeding by Owners of not less than 25% in aggregate principal amount of the Bonds then
Outstanding; it being understood and intended that no one or more of the Owners shall have any
right in any manner whatsoever by his or their action to affect, disturb or prejudice the security
of this Indenture, or to enforce any right hereunder or under the Bonds, except in the manner
herein provided, and that all suits, actions and proceedings at law or in equity shall be
instituted, had and maintained in the manner herein provided for the equal benefit of all Owners.

     SECTION 9.6. No Impairment of Right to Enforce Payment. Notwithstanding any other
provision in this Indenture, the right of any Owner to receive payment of the principal of and

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interest on any Bond, on or after the respective due dates expressed therein, or to receive
payment of the purchase price of Bonds when due, or to institute suit for the enforcement of any
such payment on or after such respective date, shall not be impaired or affected without the
consent of such Owner.

     SECTION 9.7. Proceedings by Trustee Without Possession of Bonds. All rights of action
under this Indenture or under any of the Bonds secured hereby which are enforceable by the Trustee
may be enforced by it without the possession of any of the Bonds, or the production thereof at the
trial or other proceedings relative thereto, and any such suit, action or proceeding instituted by
the Trustee shall be brought in its name for the equal and ratable benefit of all Owners, subject
to the provisions of this Indenture.

     SECTION 9.8. No Remedy Exclusive. No remedy herein conferred upon or reserved to the
Trustee or to Owners is intended to be exclusive of any other remedy or remedies, and each and
every such remedy shall be cumulative, and shall be in addition to every other remedy given
hereunder or under the Loan Agreement, or now or hereafter existing at law or in equity or by
statute; provided, however, that any conditions set forth herein to the taking of any remedy to
enforce the provisions of this Indenture, the Bonds or the Loan Agreement, shall also be
conditions to seeking any remedies under any of the foregoing pursuant to this Section 9.8.

     SECTION 9.9. No Waiver of Remedies. No delay or omission of the Trustee or of any
Owner to exercise any right or power accruing upon any Event of Default shall impair any such
right or power or shall be construed to be a waiver of any such Event of Default, or an
acquiescence therein; and every power and remedy given by this
Article IX to the Trustee and to
the Owners, respectively, may be exercised from time to time and as often as may be deemed
expedient.

     SECTION 9.10. Application of Moneys. Any moneys received by the Trustee, by any
receiver or by any Owner pursuant to any right given or action taken under the provisions of this
Article IX or pursuant to Section 5.11 hereof, after payment of the costs and expenses of the
proceedings resulting in the collection of such moneys and of the fees, expenses, liabilities and
advances incurred or made by the Trustee and the Administration Expenses of the Issuer (provided
that moneys received under the Credit Facility and remarketing proceeds shall not be used for
purposes other than payment of the Bonds), shall be deposited in the Bond Fund and all moneys so
deposited in the Bond Fund during the continuance of an Event of Default (other than moneys for
the payment of Bonds which had matured or otherwise become payable prior to such Event of Default
or for the payment of interest due prior to such Event of Default) shall be applied (from the
sources and in the order of priority indicated in Sections 5.6(d), 5.6(e) and Section 5.6(f)
hereof) as follows:

          (a) Unless the principal of all the Bonds shall have been declared due and payable, all such
moneys shall be applied (i) first, to the payment to the persons entitled thereto of all
installments of interest then due on the Bonds, at the rate per annum borne by the Bonds, in the
order of maturity of the installments of such interest and, if the amount available shall not be
sufficient to pay in full any particular installment of interest, then to the payment ratably,
according to the amounts due on such installment, and (ii) second, to the payment to the persons

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entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other
than Bonds called for redemption for the payment of which money is held pursuant to the provisions
of this Indenture) with interest on such Bonds at their rate from the respective dates upon which
they became due and, if the amount available shall not be sufficient to pay in full Bonds due on
any particular date, together with such interest, then to the payment ratably, according to the
amount of principal and interest due on such date, in each case to the persons entitled thereto
without any discrimination or privilege.

          (b) If the principal of all the Bonds shall have been declared due and payable,
all such moneys shall be applied to the payment of the principal and interest then due and
unpaid upon the Bonds, with interest on overdue interest and principal, as aforesaid, without
preference or priority of principal over interest or interest over principal, or of any installment of
interest over any other installment of interest, or of any Bond over any other Bond, ratably, according
to the amounts due respectively for principal and interest, to the persons entitled thereto
without any discrimination or privilege.

          (c) If the principal of all the Bonds shall have been declared due and payable,
and if such declaration shall thereafter have been rescinded and annulled under the provisions
of this Article IX, then, subject to the provisions of clause (b) of this Section 9.10 which
shall be applicable in the event that the principal of all the Bonds shall later become due and
payable, the moneys shall be applied in accordance with the provisions of clause (a) of this Section 9.10.

          (d) The excess of such moneys (if any), after application as set forth in (a), (b)
and (c) above, shall be paid over by the Trustee to the Credit Facility Provider; provided,
that if the Trustee shall have received written evidence from the Credit Facility Provider that all
obligations of the Borrower under the Credit Facility Documents have been satisfied and that
the Credit Facility Agreement has been terminated, or if no Credit Facility shall then exist, such
excess of such moneys shall be applied to the payment of any unpaid Administration Expenses,
with first priority being given to the Issuer’s Administration Expenses, and any excess,
following such application, shall be paid over by the Trustee to the Borrower.

     Whenever moneys are to be applied pursuant to the provisions of this Section 9.10, such moneys
shall be applied at such times, and from time to time, as the Trustee shall determine, having due
regard to the amount of such moneys available for application and the likelihood of additional
moneys becoming available for such application in the future. Whenever the Trustee applies such
funds, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another
date more suitable) upon which such application is to be made and upon such date interest on the
amounts of principal to be paid on such date shall cease to accrue. The Trustee shall give notice
of the deposit with it of any such moneys and of the fixing of any such date by Mail to all Owners
of Outstanding Bonds and shall not be required to make payment to any Owner until such Bond shall
be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.

     SECTION 9.11. Severability of Remedies. It is the purpose and intention of this
Article IX to provide rights and remedies to the Trustee and the Owners which may be lawfully
granted under the provisions of the Acts, but should any right or remedy herein granted be held to
be

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unlawful, the Trustee and the Owners shall be entitled, as above set forth, to every other right
and remedy provided in this Indenture and by law.

     SECTION 9.12. Notice of Event of Default. If an Event of Default described in Section
9.1 hereof occurs and after the Trustee has notice of the same as provided in Section 10.5 hereof,
then the Trustee shall promptly give notice thereof by Mail to the Credit Facility Provider, the
Remarketing Agent and the Owners of Outstanding Bonds.

     SECTION 9.13. Assignment to Credit Facility Provider. It is expressly understood and
agreed by the Trustee that the Issuer does hereby pledge and assign to the Credit Facility
Provider, in consideration of the Credit Facility Provider’s issuance of the Credit Facility, all
of the Trust Estate herein assigned to the Trustee as security for the payment of the Bonds, which
assignment to the Credit Facility Provider is subordinate to the simultaneous assignment thereof
to the Trustee pursuant to this Indenture. Accordingly, anything in this Indenture to the contrary
notwithstanding, in the event, in connection with the payment of the Bonds in full in accordance
with Article VIII hereof, the Trustee draws under the Credit Facility for the purpose of paying
all or any portion thereof, then, in such event, the Trustee shall, promptly following the Credit
Facility Provider’s honor of the draft so drawn by the Trustee, transfer and assign to the Credit
Facility Provider all collateral pledged and assigned by the Issuer to the Trustee pursuant to
this Indenture, including, without limitation, all rights of the Trustee under the Bond Documents,
and, in addition, shall remit to the Credit Facility Provider all amounts in any of the funds
created by this Indenture which remain after the payment in full of the Bonds (except amounts held
for the payment of the principal of and interest on, or the purchase price of, any Bonds and any
accrued and unpaid Administration Expenses and other amounts held by the Trustee in accordance
with Section 10.4 hereof).

     SECTION 9.14. Recognition of Credit Facility Provider or its Assignee as Borrower.
The Trustee hereby acknowledges that following receipt of notice from the Credit Facility Provider
of the Credit Facility Provider’s election to exercise its right to cure an “Event of Default”
under Section 11.2(f) of the Loan Agreement, the Trustee shall recognize that so long as the
conditions of Section 11.2(f) of the Loan Agreement have been satisfied, the Credit Facility
Provider or its assignees, as the case may be, constitutes the Borrower, and possesses all the
rights, and owes all the obligations of the Borrower, in accordance with the Loan Agreement;
provided, however, that the Trustee shall not recognize any assignee’s assumption of the
Borrower’s rights and obligations unless the Trustee has received (a) evidence in writing from an
Authorized Issuer Representative that such assignee has been approved by the Issuer and (b) an
instrument or instruments evidencing the assignee’s assumption of the Borrower’s rights and
obligations.

ARTICLE X

TRUSTEE; PAYING AGENT; REGISTRAR; REMARKETING AGENT

     SECTION 10.1. Acceptance of Trusts. The Trustee hereby accepts and agrees to execute
the trusts hereby created, but only upon the additional terms set forth in this Article X, to all
of

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which the Issuer agrees and the respective Owners agree by their acceptance of delivery of any of
the Bonds. All rights, exculpations and immunities set forth herein shall be equally applicable to
any acts of the Trustee under any of the Bond Documents.

     SECTION 10.2. No Responsibility for Recitals. The recitals, statements and
representations contained in this Indenture or in the Bonds, save only the Trustee’s or
authenticating agent’s authentication upon the Bonds, shall be taken and construed as made by and
on the part of the Issuer, and not by the Trustee, and the Trustee does not assume, and shall not
have, any responsibility or obligation for the correctness of any such recitals, statements or
representations and makes no representations as to the validity or sufficiency of this Indenture
or the Bonds or in respect of the security afforded by this Indenture.

     SECTION 10.3. Limitations on Liability. The Trustee may execute any of the trusts or
powers hereof and perform the duties required of it hereunder by or through attorneys, agents,
receivers or employees, and shall be entitled to advice of counsel concerning all matters of trust
and its duty hereunder, and the Trustee shall not be answerable for the negligence or misconduct
of any such attorney, agent or receiver selected by it with reasonable care. Without limitation,
the Trustee shall be entitled to the benefit of the foregoing sentence with respect to the
delegation to the Paying Agent of any or all of the Trustee’s duties hereunder, including its
duties with respect to payment of principal of or interest on, or redemption or remarketing of,
the Bonds, the authentication and delivery thereof, and exchange and transfer thereof. The Trustee
shall not be answerable for the exercise of any discretion or power under this Indenture or for
anything whatsoever in connection with the trust created hereby, except only for its own gross
negligence or willful misconduct.

     The Trustee shall not be responsible for the recording, re-recording, filing or re-filing of
any instrument required to secure the Bonds or any financing statement or continuation statement
(except as provided in Section 7.4(a) hereof), for insuring the Trust Estate or any property
securing the Bonds, for making any determinations with respect to any insurance or insurance
companies or for collecting any insurance moneys.

     With respect to the Credit Facility Provider, the Trustee undertakes to perform or observe
only such of its covenants and obligations as are specifically set forth in this Indenture, and no
implied covenants or obligations with respect to the Credit Facility Provider shall be read into
this Indenture against the Trustee.

     The Trustee shall not be liable for any error of judgment made in good faith by any of its
directors, officers, employees or agents, unless it shall be established that the Trustee was
grossly negligent in ascertaining the pertinent facts.

     The Trustee shall not be liable with respect to any action taken or omitted to be taken by it
in good faith in accordance with the direction of the Credit Facility Provider or the Owners of not
less than a majority in principal amount of the Bonds then Outstanding relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee or exercising any
trust or power conferred upon the Trustee under the provisions of this Indenture.

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     No provision of this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers.

     Notwithstanding anything elsewhere herein contained, the Trustee shall have the right, but
shall not be required, to demand, in respect of the authentication of any Bonds or any other
action contemplated by this Indenture or the Bond Documents, any showings, certificates, opinions,
appraisals or other information, or corporate action or evidence thereof, in addition to that
required by the terms hereof or the Bond Documents as a condition of such action by the Trustee,
which the Trustee deems desirable for the purpose of establishing the right of the Issuer to the
authentication of any Bonds, or the taking of any other action by the Trustee.

     SECTION 10.4. Compensation, Expenses and Advances. The Trustee, the Paying Agent, the
Remarketing Agent and the Registrar under this Indenture shall be entitled to reasonable
compensation for their services rendered hereunder (not limited by any provision of law in regard
to the compensation of the trustee of an express trust) and to reimbursement for their actual
out-of-pocket expenses (including counsel fees) reasonably incurred in connection therewith except
as a result of their gross negligence or willful misconduct and to indemnity as provided in the
Loan Agreement, provided, that the compensation, fees and expenses of the Remarketing Agent and
its counsel are to be paid as set forth in the Placement and Remarketing Agreement. If the Issuer
fails to perform any of the covenants or agreements contained in this Indenture, other than the
covenants or agreements in respect of the payment of the principal of and interest on or the
purchase price of the Bonds, the Trustee may, in its uncontrolled discretion and without notice to
the Owners, at any time and from time to time, make advances to effect performance of the same on
behalf of the Issuer, but the Trustee shall be under no obligation so to do; and any and all such
advances shall bear interest at the Penalty Rate; but no such advance shall operate to relieve the
Issuer from any default hereunder. In the Loan Agreement, the Borrower has agreed that it will pay
to the Trustee, the Paying Agent, the Remarketing Agent and the Registrar such compensation and
reimbursement of expenses and advances and indemnities, but the Borrower may, without creating a
default hereunder, contest in good faith the reasonableness of any such services, expenses and
advances. The Trustee, the Registrar, and the Paying Agent shall each have, in addition to any
other rights hereunder, a claim, prior to the claim of the Owners, for the payment of their
compensation and the reimbursement of their expenses and indemnities and any advances made by
them, as provided in this Section 10.4, upon the moneys and obligations in the Bond Fund and the
Facility Fund, except for moneys representing the proceeds of any drawings under the Credit
Facility and amounts received from the remarketing of Bonds and except for moneys or obligations
deposited with or paid to the Trustee for the purchase, redemption or payment of Bonds which are
deemed to have been paid or purchased in accordance with Article VIII hereof, Section 4.1 hereof,
Section 4.2 hereof or Section 5.8 hereof. Except as provided in Section 10.6 of this Indenture,
the Trustee shall not be required to take any action hereunder unless its fees and expenses are
paid.

     SECTION 10.5. Notice of Events of Default. The Trustee and the Remarketing Agent shall
not be required to take notice, or be deemed to have notice, of any default or Event of Default
under this Indenture or any other of the Bond Documents, other than an Event of Default

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under clause (a), (b), (c), (d) or (e) of Section 9.1 hereof, unless an officer, agent or employee
responsible for matters relating to the Bonds shall have actual knowledge of such default or Event
of Default, or the Trustee shall have been specifically notified in writing of such default or
Event of Default by Owners of at least 25% in aggregate principal amount of the Bonds then
Outstanding, by the Remarketing Agent or by the Credit Facility Provider.

     SECTION 10.6. Action by Trustee. Except as provided in Sections 5.6, 5.7 and 9.2
hereof with respect to drawings under the Credit Facility and the acceleration of the maturity of
the Bonds for which no written request shall be required and no indemnity shall be sought, the
Trustee shall be under no obligation to take any action in respect of any default or Event of
Default hereunder or toward the execution or enforcement of any of the trusts hereby created, or
to institute, appear in or defend any suit or other proceeding in connection therewith, unless
requested so to do (a) by the Credit Facility Provider, or (b) in writing, by Owners of at least
25% in aggregate principal amount of the Bonds then Outstanding and, if in its opinion such action
may tend to involve it in expense or liability, unless furnished, from time to time as often as it
may require, with security and indemnity satisfactory to it; provided, however, that the receipt
of indemnity shall not be a condition to the Trustee’s obligations under Sections 5.6, 5.7 and 9.2
hereof with respect to drawings under the Credit Facility and the acceleration of the maturity of
the Bonds, and provided further that the foregoing provisions are intended only for the protection
of the Trustee, and shall not affect any discretion or power given by any provisions of this
Indenture to the Trustee to take action in respect of any default or Event of Default without such
notice or request from the Owners, or without such security or indemnity.

     SECTION 10.7. Good Faith Reliance. The Trustee, the Registrar, the Remarketing Agent,
the Credit Facility Provider and the Paying Agent shall be protected and shall incur no liability
in acting or proceeding, or in not proceeding or acting, in good faith upon any resolution, notice
(including telephonic notice), telegram, telex or facsimile transmission, request, consent, waiver,
certificate, statement, affidavit, voucher, bond, requisition or other paper or document which it
shall in good faith believe to be genuine and to have been passed or signed by the proper board,
body or person or to have been prepared and furnished pursuant to any of the provisions of this
Indenture, the Credit Facility or the Loan Agreement, or upon the written opinion of any attorney,
engineer, accountant or other expert believed by the Trustee, the Registrar, the Remarketing Agent,
the Credit Facility Provider or the Paying Agent, as the case may be, to be qualified in relation
to the subject matter, and the Trustee, the Registrar, the Remarketing Agent, the Credit Facility
Provider or the Paying Agent shall be under no duty to make any investigation or inquiry as to any
statements contained or matters referred to in any such instrument, but may accept and rely upon
the same as conclusive evidence of the truth and accuracy of such statements. Neither the Trustee,
the Registrar, the Paying Agent, the Remarketing Agent nor the Credit Facility Provider shall be
bound to recognize any person as an Owner or to take any action at such person’s request unless the
Bond owned by such person shall be deposited with such entity or satisfactory evidence of the
ownership of such Bond shall be furnished to such entity.

     SECTION 10.8. Dealings in Bonds and with Issuer and Borrower. The Trustee, the Paying
Agent, the Registrar, the Remarketing Agent or the Credit Facility Provider, in its individual
capacity, may in good faith buy, sell, own, hold and deal in any of the Bonds issued

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hereunder and may join in any action which any Owner may be entitled to take with like effect as
if it did not act in any capacity hereunder. The Trustee, the Paying Agent, the Registrar, the
Remarketing Agent or the Credit Facility Provider, in its individual capacity, either as principal
or agent, may also engage in or be interested in any financial or other transaction with the
Issuer or the Borrower and may act as depositary, trustee or agent for any committee or body of
owners secured hereby or other obligations of the Issuer or the Borrower as freely as if it did
not act in any capacity hereunder.

     SECTION 10.9. Allowance of Interest. The Trustee may, but shall not be obligated to,
allow and credit interest upon any moneys which it may at any time receive under any of the
provisions of this Indenture, at such rate, if any, as it customarily allows upon similar funds of
similar size and under similar conditions. All interest allowed on any such moneys shall be
credited to the appropriate Fund as provided in Article VI with respect to interest on
investments.

     SECTION 10.10. Construction of Indenture. The Trustee may construe any of the
provisions of this Indenture insofar as the same may appear to be ambiguous or inconsistent with
any other provision hereof, and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the Owners of the Bonds.

     SECTION 10.11. Resignation of Trustee. The Trustee may resign and be discharged of
the trusts created by this Indenture by executing an instrument in writing resigning such trust
and specifying the date when such resignation shall take effect and filing the same with the
Issuer and with the Borrower, the Registrar, the Paying Agent, the Remarketing Agent and the
Credit Facility Provider, not less than 45 days before the date specified in such instrument when
such resignation shall take effect, and by giving notice of such resignation by Mail, not less
than three weeks prior to such resignation date, to all Owners of Bonds. Such resignation shall
take effect on the day specified in such instrument and notice, unless previously a successor
Trustee shall have been appointed as hereinafter provided, in which event such resignation shall
take effect immediately upon the appointment of such successor Trustee. Notwithstanding the above,
during any period in which the Credit Facility is in effect, such resignation shall not be
effective until a successor Trustee has assumed the Trustee’s duties hereunder and the Credit
Facility has been transferred to the successor Trustee.

     SECTION 10.12. Removal of Trustee. The Trustee may be removed by the Issuer or by
Owners of not less than 25% in aggregate principal amount of Bonds Outstanding at any time by
filing with the Trustee to be removed, and with the Issuer (if removed by such Owners), the
Borrower, the Registrar, the Paying Agent, the Remarketing Agent and the Credit Facility Provider,
an instrument or instruments in writing, approved in writing by the Issuer, appointing a successor,
or an instrument or instruments in writing, consenting to the appointment by the Issuer (if removed
by such Owners) of a successor and accompanied by an instrument of appointment of such successor by
the Issuer, and in any event executed by Owners of not less than 25% in aggregate principal amount
of the Bonds then Outstanding. Notwithstanding the above, during any period in which the Credit
Facility is in effect, such removal shall not be effective until a successor Trustee has assumed
the Trustee’s duties hereunder and the Credit Facility has been transferred to the successor
Trustee. Upon removal of the Trustee, the successor Trustee shall notify all of the Owners of such
removal and appointment.

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     SECTION 10.13. Appointment of Successor Trustee. In case at any time the
Trustee is removed, or is dissolved, or if its property or affairs are taken under the control of
any state or federal court or administrative body because of insolvency or bankruptcy, or for any
other reason, then a vacancy shall forthwith and ipso facto exist in the office of Trustee and a
successor may be appointed, and in case at any time the Trustee resigns, then a successor may be
appointed, by filing with the Issuer, the Borrower, the Registrar, the Paying Agent, the
Remarketing Agent and the Credit Facility Provider an instrument in writing, executed by Owners of
not less than a majority in aggregate principal amount of Bonds then Outstanding. Any successor
Trustee must be approved by the Issuer. Unless an Event of Default shall have occurred and be
continuing, any successor Trustee must be approved by the Borrower, which approval will not be
unreasonably withheld. Copies of such instrument shall be promptly delivered by the Issuer to the
predecessor Trustee and to the Trustee so appointed.

     Until a successor Trustee is appointed by the Owners as herein authorized, the Issuer, by an
instrument signed by the Authorized Issuer Representative, shall appoint a successor Trustee
acceptable to the Borrower. After any appointment by the Issuer, it shall cause notice of such
appointment to be given to the Registrar, the Paying Agent, the Remarketing Agent and the Credit
Facility Provider and to be given by Mail by the successor Trustee to all Owners of Bonds. Any new
Trustee so appointed by the Issuer shall immediately and without further act be superseded by a
Trustee appointed by the Owners in the manner above provided.

     SECTION 10.14. Qualifications of Successor Trustee. Every successor Trustee (a) shall
be a bank or trust company duly organized under the laws of the United States or any state or
territory thereof authorized by law to perform all the duties imposed upon it by this Indenture,
(b) shall have a combined capital stock, surplus and undivided profits (together with its parent
company) of at least $50,000,000, and (c) shall be permitted under the Acts to perform the duties
of the Trustee, if there can be located, with reasonable effort, such an institution willing and
able to accept the Trust on reasonable and customary terms.

     SECTION 10.15. Judicial Appointment of Successor Trustee. In case at any time the
Trustee resigns and no appointment of a successor Trustee is made pursuant to the foregoing
provisions of this Article X prior to the date specified in the notice of resignation as the date
when such resignation is to take effect, the resigning Trustee may apply to a court of competent
jurisdiction for the appointment of a successor Trustee. If no appointment of a successor Trustee
is made pursuant to the foregoing provisions of this Article X within 45 days after a vacancy
shall have occurred in the office of Trustee, any Owner may apply to any court of competent
jurisdiction to appoint a successor Trustee. Such court may thereupon, after such notice, if any,
as it may deem proper and prescribe, appoint a successor Trustee.

     SECTION 10.16. Acceptance of Trusts by Successor Trustee. Any successor Trustee
appointed hereunder shall execute, acknowledge and deliver to the Issuer an instrument accepting
such appointment hereunder, and thereupon such successor Trustee, without any further act, deed or
conveyance, shall become duly vested with all the estates, property, rights, powers, trusts, duties
and obligations of its predecessor in the trust hereunder, with like effect as if originally named
Trustee herein. Upon request of such Trustee, such predecessor Trustee and the Issuer shall execute
and deliver an instrument transferring to such successor Trustee all the estates,

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property, rights, powers and trusts hereunder of such predecessor Trustee and, subject to the
payment of amounts due the Trustee under Section 10.4 hereof, such predecessor Trustee shall pay
over to the successor Trustee all moneys and other assets at the time held by it hereunder. During
any period in which the Credit Facility is in effect, no successor Trustee shall become Trustee
until the Credit Facility and all rights thereunder have been transferred to the successor
Trustee.

     SECTION 10.17. Successor by Merger or Consolidation. Any corporation into which any
Trustee hereunder may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which any Trustee hereunder shall be a
party or any corporation succeeding to the corporate trust business of the Trustee, shall be the
successor Trustee under this Indenture, without the execution or filing of any paper or any
further act on the part of the parties hereto, anything in this Indenture to the contrary
notwithstanding; provided, that, during any period in which the Credit Facility is in effect, such
corporation shall not become the successor Trustee until the Credit Facility and any rights
thereunder have been transferred to such corporation.

     SECTION
10.18. Standard of Care. (a) The Trustee shall have no obligation to, but may
require of the Issuer or the Borrower full information and advice as to performance of the
covenants, conditions and agreements contained herein or in the Loan Agreement. Except for the
Trustee’s gross negligence or willful misconduct, the Trustee shall not be responsible or liable
for any loss suffered in connection with any investment of funds made by it in accordance with
this Indenture.

          (b) The Trustee, prior to the occurrence of an Event of Default and after the
waiver or curing of all Events of Default which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture and no implied
covenants shall be read into this Indenture against the Trustee. The permissive right of the Trustee to
do things enumerated in this Indenture and the Loan Agreement shall not be construed as a duty
and the Trustee shall not be answerable for other than its gross negligence or willful misconduct.
In case an Event of Default has occurred (which has not been cured or waived), the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use the same degree
of care and skill in their exercise as a prudent person would exercise under the circumstances in
the conduct of such prudent person’s own affairs.

          (c) The Trustee shall be entitled to act on the opinion or advice of counsel
concerning all matters of trust hereof and the duties hereunder and may in all cases pay
reasonable compensation to all attorneys, agents and receivers as may reasonably be employed
in connection with the trust hereof. The Trustee may act on an opinion of counsel and shall not
be responsible for any loss or damage resulting from any action or nonaction by it taken or
omitted to be taken in good faith in reliance on such opinion of counsel.

          (d) In the event it shall become necessary or desirable for the Trustee to make
any investigation as to the existence or nonexistence of any fact or as to the sufficiency or
validity of any instrument, paper or proceeding preparatory to taking or not taking any
action, or doing or not doing anything, as such Trustee, and in any case in which this Indenture provides
for

          

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permitting or taking any action, it may rely on any certificate required or permitted to be filed
with it under the provisions of this Indenture or the Loan Agreement, and any such certificate
shall be sufficient evidence of such fact, or the sufficiency or validity of such instrument,
paper or proceeding to protect it in any action that it may or may not take, or in respect of
anything it may or may not do, in good faith, by reason of the supposed existence of such fact,
instrument, paper or proceeding.

     SECTION
10.19. Intervention in Litigation of the Issuer. In any judicial proceeding
to which the Issuer is a party and which in the opinion of the Trustee and its counsel has a
substantial bearing on the interests of the Owners, the Trustee may and shall, upon receipt of
indemnity satisfactory to it and at the written request of Owners of at least 25% in aggregate
principal amount of the Bonds then Outstanding and if permitted by the court having jurisdiction
in the premises, intervene on behalf of the Owners of the Bonds.

     SECTION
10.20. Paving Agent. The Issuer shall, with the approval of the Borrower,
appoint or remove the Paying Agent for the Bonds. The Paying Agent, if the Paying Agent is not
also the Trustee, shall designate to the Issuer and the Credit Facility Provider its Principal
Office and signify its acceptance of the duties and obligations imposed upon it hereunder by a
written instrument of acceptance delivered to the Issuer under which such Paying Agent will agree,
particularly:

          (a) to hold all sums held by it for the payment of the principal of or interest on
Bonds in trust for the benefit of the Owners until such sums shall be paid to such Owners or
otherwise disposed of as herein provided;

          (b) to keep such books and records as shall be consistent with prudent industry
practice and to make such books and records available for inspection by the Issuer, the
Trustee, the Borrower and the Credit Facility Provider at all reasonable times; and

          (c) upon the request of the Trustee, to forthwith deliver to the Trustee all sums
so held in trust by the Paying Agent.

     The Issuer shall cooperate with the Trustee, the Bank and the Borrower to cause the necessary
arrangements to be made and to be thereafter continued whereby funds derived from the sources
specified in Section 5.6 hereof will be made available for the payment when due of the principal
of and interest on the Bonds presented at the Principal Office of the Paying Agent.

     SECTION
10.21. Qualifications of Paying Agent; Resignation; Removal. The Paying Agent
shall (i) be a bank or trust company, duly organized under the laws of the United States of America
or any state or territory thereof, having a combined capital stock, surplus and undivided profits
(together with the parent company) of at least $50,000,000, (ii) if the Bonds are rated by Moody’s,
carry a Moody’s rating of Baa3 or better or be otherwise acceptable to Moody’s, (iii) if the Bonds
are rated by S&P, carry an S&P rating of BBB- or better or be otherwise acceptable to S&P and (iv)
be authorized by law to perform all the duties imposed upon it by this Indenture. The Paying Agent
may at any time resign and be discharged of the duties and obligations created by this Indenture by
giving at least 60 days’ notice to the Issuer, the Borrower, the Remarketing

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Agent, the Credit Facility Provider and the Trustee. The Paying Agent may be removed at any
time, at the direction of the Borrower, by an instrument, signed by the Issuer, filed with the
Paying Agent and the Trustee, notice of which is given to the Borrower, the Remarketing Agent and
the Credit Facility Provider.

     In the event of the resignation or removal of the Paying Agent, the Paying Agent shall pay
over, assign and deliver any moneys held by it in such capacity to its successor (which shall be
appointed by the Issuer and approved by the Borrower) or, if there be no successor, to the
Trustee.

     In the event that the Issuer fails to appoint a Paying Agent hereunder, or in the event that
the Paying Agent resigns or is removed, or is dissolved, or if the property or affairs of the
Paying Agent are taken under the control of any state or federal court or administrative body
because of bankruptcy or insolvency, or for any other reason, such that no Paying Agent exists
under this Indenture, and the Issuer shall not have appointed any successor as Paying Agent, the
Trustee shall ipso facto be deemed to be the Paying Agent for all purposes of this Indenture until
the appointment by the Issuer of the Paying Agent or successor Paying Agent, as the case may be.

     SECTION 10.22. Remarketing Agent. The Issuer shall, with the approval of the Borrower
and the Credit Facility Provider, appoint or remove the Remarketing Agent for the Bonds, subject
to the conditions set forth in Section 10.23 hereof. The Remarketing Agent shall designate its
Principal Office to the Paying Agent, the Trustee and the Credit Facility Provider and signify its
acceptance of the duties and obligations imposed upon it hereunder by a written instrument of
acceptance delivered to the Issuer and the Trustee under which the Remarketing Agent will agree,
particularly:

          (a) to hold, and deliver to the Trustee, any Bonds delivered to it in trust for the
benefit of the respective Owners which shall have so delivered such Bonds for purchase;

          (b) to deliver to the Trustee all moneys received by it hereunder in connection
with the remarketing of the Bonds; and

          (c) to keep such books and records as shall be consistent with prudent industry
practice.

     The Issuer shall cooperate with the Trustee, the Registrar, the Credit Facility Provider and
the Borrower to cause the necessary arrangements to be made and to be thereafter continued whereby
funds from the sources specified herein and in the Loan Agreement will be made available for the
purchase of Bonds presented at the Principal Office of the Trustee and whereby Bonds, executed by
the Issuer and authenticated by the Trustee or its authenticating agent, shall be made available
to the Remarketing Agent to the extent necessary for delivery pursuant to Section 4.5 hereof.

     SECTION
10.23. Qualifications of Remarketing Agent; Resignation; Removal. The
Remarketing Agent shall be a national banking association, a bank organized and existing under the
laws of any state of the United States of America, or a member of the National Association of

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Securities Dealers, Inc., and authorized by law to perform all the duties imposed upon it
by this Indenture. The Remarketing Agent may at any time resign and be discharged of the duties
and obligations created by this Indenture by giving at least 30 days’ notice to the Issuer, the
Credit Facility Provider, the Borrower and the Trustee Prior to the effective date of the
Remarketing Agent’s resignation, the Borrower shall direct the Issuer to appoint a successor
Remarketing Agent, which meets all of the requirements of this Indenture and has been approved by
the Credit Facility Provider and the Borrower.

     The Remarketing Agent may be removed at any time at the direction of the Borrower, by an
instrument signed by the Issuer and the Borrower and filed with the Remarketing Agent, the Credit
Facility Provider and the Trustee; provided, however, that the removal of the Remarketing Agent
shall not be effective until the Issuer, at the Borrower’s direction, has appointed a successor
Remarketing Agent, which meets all of the requirements of this Indenture and has been approved by
the Credit Facility Provider.

     In the event of the resignation or removal of the Remarketing Agent, the Remarketing Agent
shall pay over, assign and deliver any moneys and Bonds held by it in such capacity to its
successor or, if there shall be no successor to the Trustee (provided that any such resignation or
removal shall not become effective until the appointment of a successor Remarketing Agent).

     SECTION 10.24. Registrar. The Issuer shall, with the approval of the Borrower,
appoint or remove the Registrar for the Bonds, subject to the conditions set forth in Section
10.25 hereof. The Registrar, if the Registrar is not also the Trustee, shall designate to the
Trustee, the Paying Agent, the Remarketing Agent and the Credit Facility Provider its Principal
Office and signify its acceptance of the duties imposed upon it hereunder by a written instrument
of acceptance delivered to the Issuer and the Trustee under which the Registrar will agree,
particularly, to keep such books and records as shall be consistent with prudent industry practice
and to make such books and records available for inspection by the Issuer, the Trustee, the
Borrower, the Remarketing Agent, the Credit Facility Provider and the Paying Agent at all
reasonable times.

     The Issuer shall cooperate with the Trustee, the Remarketing Agent and the Borrower to cause
the necessary arrangements to be made and to be thereafter continued whereby Bonds, executed by
the Issuer and authenticated by the Trustee or its authenticating agent, shall be made available
for exchange, registration and registration of transfer at the Principal Office of the Registrar.
The Issuer shall cooperate with the Trustee, the Registrar, the Remarketing Agent and the Borrower
to cause the necessary agreements to be made and thereafter continued whereby the Paying Agent
shall be furnished such records and other information, at such times as shall be required to
enable the Paying Agent and the Remarketing Agent to perform the duties and obligations imposed
upon them hereunder.

     SECTION
10.25. Qualifications of Registrar; Resignation; Removal. The Registrar shall
be a corporation duly organized under the laws of the United States of America or any state or
territory thereof, having a combined capital, surplus and retained earnings (together with the
parent company) of at least $15,000,000 and authorized by law to perform all the duties imposed
upon it by this Indenture. The Registrar may at any time resign and be discharged of the duties and
obligations created by this Indenture by giving at least 60 days’ notice to the Issuer, the

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Trustee, the Paying Agent, the Remarketing Agent, the Credit Facility Provider and the
Borrower. The Registrar may be removed at any time, at the direction of the Borrower, by an
instrument, signed by the Issuer, filed with the Registrar, the Trustee, the Remarketing Agent,
the Credit Facility Provider and the Paying Agent.

     In the event of the resignation or removal of the Registrar, the Registrar shall deliver any
Bonds held by it in such capacity to its successor or, if there be no successor, to the Trustee.

     In the event that the Issuer fails to appoint a Registrar hereunder, or in the event that the
Registrar resigns or is removed, or is dissolved, or if the property or affairs of the Registrar
are taken under the control of any state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, such that no Registrar exists under this
Indenture, and the Issuer shall not have appointed any successor as Registrar, the Trustee shall
ipso facto be deemed to be the Registrar for all purposes of this Indenture until the appointment
by the Issuer of the Registrar or successor Registrar, as the case may be.

     SECTION 10.26. Several Capacities. Anything in this Indenture to the contrary
notwithstanding, the same entity may serve hereunder as the Trustee, the Paying Agent, the
Remarketing Agent, the Registrar and authenticating agent and in any other combination of such
capacities, to the extent permitted by law.

     SECTION 10.27. Initial Appointments. The Trustee is initially appointed as Registrar
and Paying Agent hereunder, and hereby accepts such appointment. Manufacturers and Traders Trust
Company is initially appointed as Remarketing Agent and has accepted such appointment pursuant to
the Placement and Remarketing Agreement.

     SECTION
10.28. Co-Paying Agents, Co-Registrars and Authenticating Agent. The Issuer
shall, at the direction of the Borrower, appoint such Co-Paying Agents and Co-Registrars as the
Borrower may direct, any such appointments and acceptances of appointments to be upon the same
conditions as set forth above for the appointment of the Paying Agent and the Registrar,
respectively. The Trustee, by a written instrument delivered to the Issuer, the Paying Agent, the
Remarketing Agent, the Credit Facility Provider and the Registrar, may appoint and designate an
authenticating agent to authenticate Bonds on behalf of the Trustee.

     SECTION 10.29. Co-Trustees. It is the purpose hereof that there shall be no violation
of any law of any jurisdiction (including particularly the laws of the State) denying or
restricting the right of banking corporations or associations to transact business as trustee in
such jurisdiction. It is recognized that in case of litigation hereunder and in particular in case
of the enforcement of this Indenture upon the occurrence of an Event of Default, it may be
necessary that the Trustee and the Issuer enter into a supplemental indenture to appoint an
additional individual or institution as a separate Trustee or Co-Trustee. The following provisions
of this Section are adapted to these ends.

     Upon the incapacity or lack of authority of the Trustee, by reason of any present or future
law of any jurisdiction, to exercise any of the rights, powers and trusts herein granted to the
Trustee or to hold a security interest in the Trust Estate or to take any other action which may
be

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necessary or desirable in connection therewith, each and every remedy, power, right,
claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended
to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be
exercisable by and vest in a separate Trustee or Co-Trustee appointed by the Trustee (such
appointment not to be unreasonably withheld or delayed) but only to the extent necessary to
enable the separate Trustee or Co-Trustee to exercise such rights, powers and trusts, and every
agreement and obligation necessary to the exercise thereof by such separate Trustee or Co-Trustee
shall run to and be enforceable by either of them.

     Should any deed, conveyance or instrument in writing from the Issuer be required by the
separate Trustee or Co-Trustee so appointed by the Trustee in order to more fully and certainly
vest in and confirm to him or it such properties, rights, powers, trusts, duties and obligations,
any and all such deeds, conveyances and instruments shall, on request, be executed, acknowledged
and delivered by the Issuer. In case any separate Trustee or Co-Trustee, or a successor to either,
shall die, become incapable of acting, resign or be removed, all the estates, properties, rights,
powers, trusts, duties and obligations of such separate Trustee or Co-Trustee, so far as permitted
by law, shall vest in and be exercised by the Trustee until the appointment of a new Trustee or
successor to such separate Trustee or Co-Trustee.

ARTICLE XI

REFERENCES TO CREDIT FACILITY PROVIDER; EXECUTION OF

INSTRUMENTS BY OWNERS AND PROOF OF OWNERSHIP OF BONDS

     SECTION 11.1. References to Credit Facility Provider. Upon the expiration of the
Credit Facility and the payment of all amounts payable to the Credit Facility Provider under the
Credit Facility Documents, as evidenced by a certificate from the Credit Facility Provider, all
references to the Credit Facility Provider shall be ineffective; provided, that, if a Substitute
Credit Facility has been delivered in accordance with the Loan Agreement and this Indenture,
references to the Credit Facility Provider herein shall, unless the context clearly requires
otherwise, refer to the issuer of such Substitute Credit Facility.

     If the Credit Facility Provider shall have wrongfully failed to honor any draft drawn under
the Credit Facility made in accordance with the terms of the Credit Facility (which drawing
strictly complies with, and conforms to, the terms and conditions of the Credit Facility) by the
Trustee under the Credit Facility, the rights of the Credit Facility Provider under Article IX
hereof, except for the continuing right of the Credit Facility Provider to give the written notice
referred to in Section 9.1 (d) hereof, shall be void.

     SECTION 11.2. Execution of Instruments; Proof of Ownership. Any request, direction,
consent or other instrument in writing required or permitted by this Indenture to be signed or
executed by Owners or on their behalf by an attorney-in-fact may be in any number of concurrent
instruments of similar tenor and may be signed or executed by Owners in person or by an agent or
attorney-in-fact appointed by an instrument in writing or as provided in the Bonds. Proof of the
execution of any such instrument and of the ownership of Bonds shall be sufficient for any

77

 

purpose of this Indenture and shall be conclusive in favor of the Trustee with regard to
any action taken by it under such instrument if made in the following manner:

          (a) The fact and date of the execution by any person of any such instrument
may be proved by the certificate of any officer in any jurisdiction who, by the laws thereof,
has power to take acknowledgements within such jurisdiction, to the effect that the person signing
such instrument acknowledged before him the execution thereof, or by an affidavit of a witness
to such execution.

          (b) The ownership of Bonds shall be proved by the registration books kept
under the provisions of Section 2.11 hereof.

     Nothing contained in this Article XI shall be construed as limiting the Trustee to such
proof, it being intended that the Trustee may accept any other evidence of matters herein stated
which it may deem sufficient. Any request, consent of, or assignment by any Owner shall bind every
future Owner of the same Bond or any Bond or Bonds issued in lieu thereof or on registration of
transfer thereof in respect of anything done by the Trustee or the Issuer in pursuance of such
request, consent or assignment.

     Any other provision of this Indenture to the contrary notwithstanding, so long as the Credit
Facility Provider has not wrongfully failed to honor any draft drawn under the Credit Facility in
accordance with the terms thereof, the Credit Facility Provider shall be deemed to be the holder of
all of the Outstanding Bonds of the Series secured thereby for the purposes of giving or
withholding any consent, vote or direction required or permitted to be given under this Indenture
by holders of the Bonds, including (without limitation) any consent to any amendment of the
Indenture or any of the other Bond Documents or any other agreement executed and delivered in
connection with the issuance of the Bonds, provided that no amendment described in Section
12.3(a)(i), (ii) or (iii) shall be effected without the consent of the Bondholders required
thereby. If, however, the Credit Facility Provider has wrongfully failed to honor a draft drawn
under the Credit Facility in accordance with the terms thereof, then the Credit Facility Provider
may still vote those Bonds which it then holds for its own account for purposes of giving or
withholding any consent, vote or direction required or permitted to be given under this Indenture
by holders of the Bonds, including (without limitation) any consent to any amendment of the
Indenture or any of the other Bond Documents or any other agreement executed and delivered in
connection with the issuance of the Bonds.

ARTICLE XII

MODIFICATION OF THIS INDENTURE AND

THE LOAN AGREEMENT

     SECTION 12.1. Limitations. Neither this Indenture nor the Loan Agreement shall be
modified or amended in any respect subsequent to the first delivery of fully executed and
authenticated Bonds except as provided in and in accordance with and subject to the provisions of
this Article XII and Section 7.5 hereof.

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     SECTION 12.2. Supplemental Indentures Without Owner Consent. Subject to
Section 12.7 hereof, the Issuer and the Trustee may, from time to time and at any time, without
the consent of or notice to the Owners, enter into Supplemental Indentures as follows:

          (a) to cure any formal defect, omission, inconsistency or ambiguity in this
Indenture, provided that no such action shall adversely affect the interests of the Owners of
the
Bonds;

          (b) to add to the covenants and agreements of the Issuer in this Indenture other
covenants or agreements, or to surrender any right or power reserved or conferred upon the
Issuer, and which shall not adversely affect the interests of the Owners of the Bonds;

          (c) to confirm, as further assurance, any pledge of or lien on the Trust Estate
or on any other moneys, securities or funds subject to the lien of this Indenture;

          (d) to comply with the requirements of the Trust Indenture Act of 1939, as
from time to time amended;

          (e) to modify, alter, amend or supplement this Indenture in any other respect
which is not materially adverse to the Owners of the Bonds;

          (f) to implement the provisions of Section 2.15 hereof, which provide for the
issuance of Additional Bonds;

          (g) to evidence or give effect to the delivery of a Substitute Credit Facility or
the delivery of an Initial Credit Facility to secure the payment of, and provide payment for,
any Series of Additional Bonds, including the delivery of a confirmation of any Credit Facility;

          (h) to change the terms for the payment of interest on Bonds purchased with a drawing under
the Credit Facility;

          (i) to implement the provisions of Section 2.6 of this Indenture, which provide for
registration of the Bonds in Book-Entry Form;

          (j) to make any change herein which is required by a rating agency as a condition precedent
to obtaining a rating for the Bonds; and

          (k) to make any other change in this Indenture, provided that such change shall not become
effective with respect to any Bond until the immediately succeeding Tender Date applicable to such
Bond and provision shall have been made for the giving of notice of such change to the Person who
is the Owner of the Bond immediately prior to the Tender Date and to subsequent purchasers of such
Bond.

     Subject to Section 12.7 hereof, the Issuer and the Trustee may without the consent of the
Owners but only after the Trustee has given 30 days’ prior written notice by Mail to the Owners,
provide for an increase in the Maximum Rate, if approved by the Issuer, the Borrower and the Credit
Facility Provider. So that the Trustee can give such notice to the Owners, the Borrower

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shall notify the Trustee in writing of the Maximum Rate increase approved by the Issuer, the
Borrower, and the Credit Facility Provider.

     Before the Issuer and the Trustee enter into any Supplemental Indenture pursuant to this
Section 12.2, there shall have been delivered to the Issuer, the Trustee, the Borrower, the
Remarketing Agent and the Credit Facility Provider an opinion of Bond Counsel stating that such
Supplemental Indenture is authorized or permitted by this Indenture and the Acts, complies with
their respective terms and will, upon the execution and delivery thereof, be valid and binding
upon the Issuer in accordance with its terms.

     SECTION 12.3. Supplemental Indentures Requiring Owner Consent.

          (a) Except for any Supplemental Indenture entered into pursuant to Section
12.2 hereof, subject to the terms and provisions contained in this Section 12.3 and not
otherwise,
Owners of not less than 60% in aggregate principal amount of the Bonds then Outstanding shall
have the right from time to time to consent to and approve the execution and delivery by the
Issuer and the Trustee of any Supplemental Indenture deemed necessary or desirable by the
Issuer
for the purposes of modifying, altering, amending, supplementing or rescinding, in any
particular,
any of the terms or provisions contained in this Indenture; provided, however, that, unless
approved in writing by the Owners of all the Bonds then Outstanding, nothing herein contained
shall permit, or be construed as permitting, (i) a change in the times, amounts or currency of
payment of the principal of or interest on any Outstanding Bond, a change in the terms of the
purchase of any Outstanding Bond, or a reduction in the principal amount or redemption price
of any Outstanding Bond or the rate of interest thereon or a change in the manner of determining
the rate of interest thereon, or (ii) the creation of a claim or lien upon, or a pledge of, the
Trust Estate
ranking prior to or on a parity with the claim, lien or pledge created by this Indenture
(except as
referred to in Section 10.4 hereof), or (iii) a reduction in the aggregate principal amount of
Bonds
the consent of the Owners of which is required for any such Supplemental Indenture or which is
required, under Section 12.6 hereof, for any Supplement to the Loan Agreement.

          (b) If at any time the Issuer requests the Trustee to enter into any
Supplemental Indenture for any of the purposes of this Section 12.3, the Trustee shall cause
notice of the proposed Supplemental Indenture to be given by Mail to the Remarketing Agent,
the Credit Facility Provider and all Owners of Outstanding Bonds. Such notice shall briefly
set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is
on file at the Principal Office of the Trustee for inspection by all Owners.

          (c) The Issuer and the Trustee may enter into such Supplemental Indenture in
substantially the form described in such notice, after receipt by the Trustee of (i) the
required consents, in writing, of Owners and of the Credit Facility Provider and the Remarketing Agent
as required by Section 12.7 hereof and of the Borrower, to the extent required pursuant to
Section 12.7 hereof, and (ii) an opinion of Bond Counsel stating that such Supplemental Indenture is
authorized or permitted by this Indenture and the Acts, complies with their respective terms
and, upon the execution and delivery thereof, will be valid and binding upon the Issuer in
accordance with its terms.

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          (d) If Owners of not less than the percentage of the aggregate principal amount of Bonds
required by this Section 12.3 shall have consented to and approved the execution and delivery
thereof as herein provided, no Owner shall have any right to object to the execution and delivery
of such Supplemental Indenture, or to object to any of the terms and provisions contained therein
or the operation thereof, or in any manner to question the propriety of the execution and delivery
thereof, or to enjoin or restrain the Issuer or the Trustee from executing and delivering the same
or from taking any action pursuant to the provisions thereof.

     SECTION 12.4. Effect of Supplemental Indenture. Upon the execution and delivery of
any Supplemental Indenture pursuant to the provisions of this Article XII, this Indenture shall
be, and be deemed to be, modified and amended in accordance therewith, and the respective rights,
duties and obligations under this Indenture of the Issuer, the Trustee and all Owners of
Outstanding Bonds shall thereafter be determined, exercised and enforced under this Indenture
subject in all respects to such modifications and amendments.

     SECTION 12.5. Amendment of Loan Agreement Without Owner Consent. Without the consent
of or notice to the Owners, the Issuer may modify, alter, amend or supplement the Loan Agreement,
and the Trustee may consent thereto, (a) as may be required or permitted by the provisions of the
Loan Agreement and this Indenture, or (b) for the purpose of curing any formal defect, omission,
inconsistency or ambiguity therein or in connection with any other change therein, provided no
such action is adverse to the Owners or the Borrower.

     Before the Issuer enters into, and the Trustee consents to, any Supplement to the Loan
Agreement pursuant to this Section 12.5, there shall have been delivered to the Issuer, the
Remarketing Agent, the Credit Facility Provider and the Trustee an opinion of Bond Counsel stating
that such Supplement is authorized or permitted by this Indenture and the Acts, complies with
their respective terms and will, upon the execution and delivery thereof, be valid and binding
upon the Issuer and the Borrower in accordance with its terms.

     SECTION 12.6. Amendment of Loan Agreement Requiring Owner Consent. Except in the case
of Supplements referred to in Section 12.5 hereof, the Issuer shall not enter into, and the Trustee
shall not consent to, any amendment, change or modification of the Loan Agreement without the
written approval or consent of the Owners of not less than 60% in aggregate principal amount of the
Bonds then Outstanding, given and procured as provided in Section 12.3 hereof, provided, however,
that, unless approved in writing by the Owners of all Bonds then Outstanding, nothing herein
contained shall permit, or be construed as permitting, a change in the obligations of the Borrower
under Sections 3.3 or 3.4 of the Loan Agreement. If at any time the Issuer or the Borrower shall
request the consent of the Trustee to any such proposed Supplement, the Trustee shall cause notice
thereof to be given in the same manner as provided by Section 12.3 hereof with respect to
Supplemental Indentures. Such notice shall briefly set forth the nature of such proposed Supplement
and shall state that copies of the instrument embodying the same are on file at the Principal
Office of the Trustee for inspection by all Owners. The Issuer may enter into, and the Trustee may
consent to, any such proposed Supplement subject to the same conditions and with the same effect as
provided in Section 12.3 hereof with respect to Supplemental Indentures.

81

 

     Before the Issuer enters into, and the Trustee consents to, any modification,
alteration, amendment or supplement to the Loan Agreement pursuant to this Section 12.6, there
shall have been delivered to the Issuer, the Remarketing Agent, the Credit Facility Provider and
the Trustee an opinion of Bond Counsel stating that such Supplement is authorized or permitted by
this Indenture and the Acts, complies with their respective terms and will, upon the execution and
delivery thereof, be valid and binding upon the Issuer and the Borrower in accordance with its
terms.

     SECTION
12.7. Consent of Credit Facility Provider, Remarketing Agent and Borrower
Required. Notwithstanding any other provision of this Indenture, no Supplemental Indenture
under this Article XII and no amendment of the Loan Agreement and no waiver of any of the
provisions of this Indenture or of the Loan Agreement shall become effective unless the Credit
Facility Provider and the Remarketing Agent shall have consented thereto in writing.

     Notwithstanding any other provision of this Indenture, no Supplemental Indenture which
affects any rights, powers, agreements or obligations of the Borrower under the Loan Agreement, or
requires a revision of the Loan Agreement, shall become effective unless and until the Borrower in
its sole discretion shall have consented to such Supplemental Indenture in writing.

     SECTION 12.8. Action of Trustee. The Trustee may, but shall not be obligated to,
execute any Supplemental Indenture or consent to any amendment of the Loan Agreement or any of the
other Bond Documents that affects its rights, duties or immunities under this Indenture or
otherwise.

     SECTION 12.9. Certain Notices to Rating Agencies and Remarketing Agent. The Trustee
hereby agrees to inform the Remarketing Agent, Moody’s (if the Bonds are then rated by Moody’s)
and S&P (if the Bonds are then rated by S&P) in writing of (a) any Supplement to the Bond
Documents to which it is a party or of which it has actual knowledge, (b) any redemption or
payment of the Bonds in whole pursuant to this Indenture, (c) any expiration, termination or
extension of the Credit Facility, (d) any change in the identity of the Trustee and (e) any change
in the identity of the Remarketing Agent. Notwithstanding the foregoing provisions of this Section
12.9, it is expressly understood and agreed that the Trustee agrees to give the notices described
above and to forward to Moody’s and S&P copies of such notices that the Trustee specifically
agrees herein to forward as a matter of courtesy and accommodation, but shall not be liable or
have any legal or contractual obligation to Moody’s or S&P to provide the notices described above
or elsewhere in this Indenture.

ARTICLE XIII

MISCELLANEOUS

     SECTION 13.1. Successors of Issuer. In the event of the dissolution of the Issuer, all
the covenants, stipulations, promises and agreements in this Indenture contained, by or on behalf
of, or for the benefit of, the Issuer, shall bind or inure to the benefit of the successors of the
Issuer from time to time and any entity, officer, board, commission, agency or instrumentality to
whom or to which any power or duty of the Issuer shall be transferred.

82

 

     SECTION 13.2. Parties in Interest. Except as herein otherwise specifically provided,
nothing in this Indenture expressed or implied is intended or shall be construed to confer upon
any person, firm or corporation, other than the Issuer, the Paying Agent, the Registrar, the
Borrower, the Remarketing Agent, the Credit Facility Provider and the Trustee and the Owners of
Bonds issued hereunder, any right, remedy or claim under or by reason of this Indenture, this
Indenture being intended to be for the sole and exclusive benefit of the Issuer, the Paying Agent,
the Registrar, the Borrower, the Remarketing Agent, the Credit Facility Provider and the Trustee
and the Owners of Bonds issued hereunder.

     SECTION
13.3. Severability. In case any one or more of the provisions of this
Indenture or of the Loan Agreement or of the Bonds issued hereunder shall, for any reason, be held
to be illegal or invalid, such illegality or invalidity shall not affect any other provisions of
this Indenture, the Loan Agreement, or such Bonds, and this Indenture, the Loan Agreement and such
Bonds shall be construed and enforced as if such illegal or invalid provisions had not been
contained herein or therein.

     SECTION 13.4. No Personal Liability of Issuer Officials. No covenant or agreement
contained in the Bonds or in this Indenture shall be deemed to be the covenant or agreement of any
official, officer, agent or employee of the Issuer, the Department or the State in his individual
capacity, and neither the officers or employees of the Issuer, the Department or the State nor any
official executing the Bonds shall be liable personally on the Bonds or be subject to any personal
liability or accountability by reason of the issuance thereof.

     SECTION 13.5. Bonds Owned by Issuer or Borrower. In determining whether Owners of the
requisite aggregate principal amount of the Bonds have concurred in any direction, consent or
waiver under this Indenture, Bonds which are owned by the Issuer or the Borrower or by any person
directly or indirectly controlling or controlled by or under direct or indirect common control
with the Borrower (unless the Issuer, the Borrower or such person own all Bonds which are then
Outstanding, determined without regard to this Section 13.5) shall be disregarded and deemed not
to be Outstanding for the purpose of any such determination, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such direction, consent or
waiver, only Bonds which the Trustee knows are so owned shall be so disregarded. Bonds so owned
which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to
the satisfaction of the Trustee the pledgee’s right so to act with respect to such Bonds and that
the pledgee is not the Issuer or the Borrower or any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuer or the Borrower. For
purposes of this Section 13.5, Bonds purchased with a drawing under the Credit Facility and
registered in the name of the Credit Facility Provider as pledgee or otherwise at the direction of
the Credit Facility Provider, shall be regarded as Outstanding, In case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall be full protection to
the Trustee.

     SECTION 13.6. Counterparts. This Indenture may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be an original; but such
counterparts shall together constitute but one and the same Indenture.

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     SECTION 13.7. Governing Law. The laws of the State shall govern the construction
and enforcement of this Indenture and of all Bonds issued hereunder.

     SECTION 13.8. Notices. Except as otherwise provided in this Indenture, all notices,
demands, requests, consents, approvals, certificates or other communications required under this
Indenture to be in writing shall be sufficiently given and shall be deemed to have been properly
given three days after the same is mailed by certified mail, postage prepaid, return receipt
requested, addressed to the person to whom any such notice, demand, request, approval, certificate
or other communication is to be given, at the appropriate address for the Principal Office of such
person designated below:

		 	 	 
	 	Issuer:

	 	Maryland Industrial Development Financing Authority
	 	

	 	217 East Redwood Street, 22nd Floor
		

	 	Baltimore, Maryland 21202
		

	 	Attention: Executive Director
		 
	 	 
		Borrower:

	 	Avalon Pharmaceuticals, Inc.
		

	 	20358 Seneca Meadows Parkway
	 	

	 	Germantown, Maryland 20876
		

	 	Attention: Chief Financial Officer and General Counsel
		 
	 	 
		

	 	with a copy to:
		 
	 	 
		

	 	Mark I. Gruhin, Esq.
	 	

	 	Schmeltzer, Aptaker & Shepard, P.C.
		

	 	Suite 1000
		

	 	2600 Virginia Avenue, N.W.
		

	 	Washington, DC 20037-1922
		 
	 	 
		Trustee,
Paying Agent and
Registrar:

	 	Allfirst Trust Company National Association

25 South Charles Street, 16th Floor

Mail Code 101-951

Baltimore, Maryland 21201

Attention: Corporate Trust Department
	 	 
	 	 
		

	 	with a copy to:
		 
	 	 
		

	 	Alan S. Mark, Esq.
		

	 	Paley, Rothman, Goldstein,
		

	 	Rosenberg & Cooper, Chartered

4800 Hampden Lane
		

	 	7th Floor
		

	 	Bethesda, Maryland 20814
		 
	 	 
		Credit Facility

Provider:

	 	Manufacturers and Traders Trust Company

1410 Spring Hill Road, Suite 125

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	 	McLean, Virginia 22101
	

	 	Attention: Dave DiLuigi
	 
	 	 
	

	 	and
	 
	 	 
	

	 	Manufacturers and Traders Trust Company
	

	 	25 South Charles Street, 15th Floor
	

	 	Baltimore, Maryland 21202
	

	 	Attention: Letter of Credit Department
	 
	 	 
	

	 	with a copy to:
	 
	 	 
	

	 	Fred Levy, Esq.
	

	 	Sonnenschein, Nath & Rosenthal
	

	 	1301 K Street, N.W.
	

	 	Suite 600, East Tower
	

	 	Washington, DC 20005
	 
	 	 
	Remarketing

	 	Manufacturers and Traders Trust Company
	Agent:

	 	Mail Code 101–343 
	

	 	25 South Charles Street, 12th  Floor
	 
	 	Baltimore, Maryland 21201

Attention: Treasury and Securities Markets Division
	 
	 	 
	

	 	with a copy to:
	 
	 	 
	

	 	Alan S. Mark, Esq.
	

	 	Paley, Rothman, Goldstein,
	

	 	Rosenberg & Cooper, Chartered
	

	 	4800 Hampden Lane
	

	 	7th Floor
	

	 	Bethesda, Maryland 20814

Any of the foregoing may, by notice given hereunder to each of the others, designate any
further or different addresses to which subsequent notices, demands, requests, consents,
approvals, certificates or other communications shall be sent hereunder. During any period in
which the Registrar and the Paying Agent are the same and have the same address, any notice
required to be given to either the Registrar or the Paying Agent, or both, may be given by one
notice to the address for the Registrar and Paying Agent set forth above.

     Copies of notices furnished in accordance with this Section are for convenience only and the
failure to furnish any such copy shall not affect the sufficiency of any notice hereunder.

     SECTION
13.9. Holidays. If the date for making any payment or the last date for
performance of any act or the exercising of any right, as provided in this Indenture, shall not be
a Business Day, such payment may, unless otherwise provided in this Indenture or the Loan

85

 

Agreement, be made or act performed or right exercised on the next succeeding Business Day
with the same force and effect as if done on the nominal date provided in this Indenture, and in
the case of payment no interest shall accrue for the period after such nominal date.

     SECTION 13.10. Effective Date. This Indenture has been dated as of the date first
above written solely for the purpose of convenience of reference and shall become effective upon
its execution and delivery, on the Closing Date, by the parties hereto. All representations and
warranties set forth herein shall be deemed to have been made on the Closing Date.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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     IN WITNESS WHEREOF, the Issuer has caused this Indenture to be executed by its Chairman
and its official seal to be impressed hereon and attested by its Executive Director, and the
Trustee has caused this Indenture to be executed on its behalf by one of its duly authorized
officers and its corporate seal to be impressed hereon, all as of the date first above written.

	 	 	 	 	 	 	 
	ATTEST:	 	 	 	MARYLAND INDUSTRIAL DEVELOPMENT
	 	 	 	 	FINANCING AUTHORITY,
	 	 	 	 	     as Issuer
	 
	 	 	 	 	 	 
	/s/ Dr. Gregory Cole

	 	 	 	By:
	 	/s/ Bernard Koman
	 

	 	 	 	 	 	 
	Name: Dr. Gregory Cole

	 	 	 	 	 	Name: Bernard Koman
	Title: Executive Director

	 	 	 	 	 	Title: Chairman
	[SEAL]
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	 	 	ALL FIRST TRUST COMPANY NATIONAL
	 	 	 	 	     ASSOCIATION, as Trustee
	 
	 	 	 	 	 	 
	/s/
Ronald J. Kruppa

	 	 	 	By:
	 	/s/ Sharon A. Surguy
	 

	 	 	 	 	 	 
	Name: Ronald J. Kruppa

	 	 	 	 	 	Name: SHARON A. SURGUY
	Title: Authorized Officer

	 	 	 	 	 	Title: Authorized Officer
	 
	 	 	 	 	 	 
	[SEAL]
	 	 	 	 	 	 

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EXHIBIT A

FORM OF SERIES 2003 BOND

THIS BOND IS ISSUED UNDER
THE PROVISIONS OF THE MARYLAND ECONOMIC DEVELOPMENT REVENUE BOND
ACT, AS AMENDED, AND THE MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY ACT, AS AMENDED, AND
DOES NOT CONSTITUTE AN INDEBTEDNESS TO WHICH THE FAITH AND CREDIT OF THE STATE OF MARYLAND, THE
MARYLAND DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT, THE MARYLAND INDUSTRIAL DEVELOPMENT
FINANCING AUTHORITY OR ANY OTHER PUBLIC INSTRUMENTALITY OR PUBLIC BODY IS PLEDGED.

	 	 	 
	REGISTERED

	 	REGISTERED
	No. R- ___

	 	$                    

MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY

TAXABLE VARIABLE RATE DEMAND REVENUE BOND

(AVALON PHARMACEUTICALS, INC. FACILITY)

SERIES 2003

	 	 	 	 	 	 	 
	INTEREST RATE	 	REFERENCE DATE	 	MATURITY DATE	 	CUSIP
	(as described herein)

	 	as of April 1, 2003
	 	First Business Day of
	 	 
	

	 	 	 	April, 2013	 	 

	 	 	 
	Registered Owner: CEDE & CO.
	 	 
	 
	 	 
	Principal Sum:

	 	($                    )

     MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY, a body politic and corporate and a public
instrumentality of the State of Maryland (the “Issuer”), for value received, hereby promises to pay
(solely from the Trust Estate (as defined herein), and other moneys pledged therefor) to the
Registered Owner shown above, or registered assigns or legal representative, on the Maturity Date
shown above (or earlier as provided herein), the Principal Sum shown above, and to pay (solely from
the Trust Estate, and other moneys pledged therefor) interest on such Principal Sum from and
including the most recent date to which interest shall have been paid hereon, or if no interest has
been paid hereon, from the date of initial issuance and delivery of the Series 2003 Bonds (as
defined herein), until payment of such Principal Sum has been made or duly provided for in
accordance with the Indenture (as defined herein), which interest shall be payable at the Variable
Rate (as defined in the Indenture and described herein) and on the Interest Payment Date (as
defined in the Indenture and described herein).

     The principal of this Bond, and interest accrued hereon prior to an Interest Payment Date,
are payable at the corporate trust office of Allfirst Trust Company, National Association, in
Baltimore, Maryland, the Trustee (the “Trustee” which term includes any successor Trustee

1

 

EXHIBIT A

FORM OF SERIES 2003 BOND

appointed in accordance with the Indenture), acting as Paying Agent (the “Paying Agent”)
under the Indenture, or at the principal office of any Co-Paying Agent or successor Paying Agent
appointed in accordance with the Indenture, upon presentation and surrender hereof as the same
become due. The interest so payable on any Interest Payment Date shall be paid to the Owner (as
defined herein) in whose name this Bond is registered at the close of business on the Record Date
(as defined herein) by check mailed to such Owner at such Owner’s address as it appears on the
registration books maintained by the Registrar (as defined herein) or at such other address as is
furnished to the Paying Agent in writing by such Owner.

     At the option of any Owner of at least 25% in aggregate principal amount of Series 2003 Bonds
Outstanding, any payment due on the Series 2003 Bonds owned by such Owner may be transmitted by
wire transfer to such Owner, at such Owner’s written request, to the bank account number on file
with the Registrar on the fifth day before the Record Date or, if any such day is not a Business
Day (as defined herein), the Business Day immediately preceding such day. Such instructions shall
remain in effect until revoked in writing by such Owner. Furthermore, at the option of the Credit
Facility Provider (as defined herein), the principal of and interest on all Pledged Bonds (as
defined in the Indenture) may be transmitted by wire transfer to the Credit Facility Provider at
the Credit Facility Provider’s written request, to the bank account number on file with the
Registrar on the fifth day before the Record Date or, if any such day is not a Business Day, the
Business Day immediately preceding such day. Payment of the principal of and interest on, and the
purchase price of, this Bond shall be in any coin or currency of the United States of America
which, at the respective times of payment, is legal tender for the payment of public and private
debts, but only from the Revenues and from any other moneys made available to the Issuer for such
purpose.

     If any payment of the principal of or interest on, or purchase price of, this Bond is due on
a day that is not a Business Day, such payment will be made on the next succeeding Business Day,
and no interest will accrue on the amount of such payment during the intervening period.

     IN CERTAIN CIRCUMSTANCES THIS BOND MAY BE DEEMED TO HAVE BEEN TENDERED AND PURCHASED OR PAID
PRIOR TO THE MATURITY DATE HEREOF, AS DESCRIBED HEREIN.

     This Bond shall not be entitled to any right or benefit under the Indenture, or be valid or
become obligatory for any purpose, until this Bond shall have been authenticated by the Trustee or
a duly authorized authenticating agent, by execution of the certificate of authentication inscribed
hereon.

     THIS BOND AND THE PREMIUM (IF ANY) AND INTEREST HEREON, AND THE PURCHASE PRICE HEREOF,
ARE LIMITED OBLIGATIONS OF THE ISSUER, THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON, AND THE
PURCHASE PRICE OF, WHICH ARE PAYABLE SOLELY FROM THE REVENUES TO BE RECEIVED IN CONNECTION WITH THE
FINANCING AND REFINANCING OF THE 2003 FACILITY AND ANY ADDITIONAL FACILITIES AND FROM ANY

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OTHER MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE. NEITHER THIS BOND NOR ANY
PREMIUM OR INTEREST HEREON, NOR THE PURCHASE PRICE HEREOF, SHALL EVER CONSTITUTE AN INDEBTEDNESS
OR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE STATE OF MARYLAND, THE MARYLAND
DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT (THE “DEPARTMENT”), THE ISSUER OR ANY OTHER PUBLIC
BODY WITHIN THE MEANING OF ANY CONSTITUTIONAL OR CHARTER PROVISION OR STATUTORY LIMITATION AND
NONE OF THE ABOVE SHALL EVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF THE STATE OF
MARYLAND, THE DEPARTMENT, THE ISSUER OR ANY OTHER PUBLIC BODY. THE BONDS DO NOT CONSTITUTE AN
INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE OF MARYLAND, THE DEPARTMENT, THE ISSUER OR
ANY OTHER PUBLIC BODY IS PLEDGED. THE ISSUER HAS NO TAXING POWER.

     1. The
Series 2003 Bonds; Indenture; Loan Agreement. This Bond is one of a duly
authorized series of bonds designated “Maryland Industrial Development Financing Authority Taxable
Variable Rate Demand Revenue Bonds (Avalon Pharmaceuticals, Inc. Facility), Series 2003,” in the
original aggregate principal amount of $12,000,000 (the “Series 2003 Bonds”), issued under and
pursuant to the Maryland Industrial Development Financing Authority Act, as amended, and the
Maryland Economic Development Revenue Bond Act, as amended (collectively, the “Acts”), and the
Trust Indenture dated as of April 1, 2003 (the “Indenture”), between the Issuer and the Trustee.
Pursuant to the Loan Agreement dated as of April 1, 2003 (the “Loan Agreement”) between the Issuer
and Avalon Pharmaceuticals, Inc., a Delaware corporation (the “Borrower”), the Issuer shall make a
loan of the proceeds of the Series 2003 Bonds (the “Series 2003 Loan”) to the Borrower to be
applied to the costs of financing certain capital projects.

     2. Credit
Facility. Concurrently with the issuance of the Series 2003 Bonds, in order
to secure the timely payment of the principal of and interest on, and the purchase price of, the
Series 2003 Bonds, the Borrower has caused to be delivered to the Trustee an irrevocable
transferable letter of credit (the “2003 Letter of Credit”) issued by Manufacturers and Traders
Trust Company, a New York banking corporation (the “Bank”). The Trustee shall be entitled under the
2003 Letter of Credit to draw up to (a) an amount sufficient to pay (i) the principal of the
Outstanding Series 2003 Bonds when due, or (ii) the portion of the purchase price of Outstanding
Bonds Tendered or Deemed Tendered for Purchase (as defined herein), and not remarketed,
corresponding to the principal amount of such Series 2003 Bonds, plus (b) an amount equal to 50
days’ accrued interest on the Outstanding Series 2003 Bonds, at the Maximum Rate (as defined
herein) to pay (i) interest on the Outstanding Series 2003 Bonds when due, or (ii) the portion of
the purchase price of Outstanding Bonds Tendered or Deemed Tendered for Purchase, and not
remarketed, corresponding to accrued interest on such Series 2003 Bonds.

     BY ACCEPTANCE OF THIS BOND, THE OWNER HEREOF ACKNOWLEDGES AND CONSENTS TO THE FACT THAT THE
BANK IS PROVIDING THE 2003 LETTER OF CREDIT AND IS ACTING AS PLACEMENT AND REMARKETING AGENT FOR
THE

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SERIES 2003 BONDS AND ITS
SUBSIDIARY, ALL FIRST TRUST COMPANY, NATIONAL ASSOCIATION, IS ACTING AS
TRUSTEE AND AS REGISTRAR AND PAYING AGENT WITH RESPECT TO THE SERIES 2003 BONDS.

     The 2003 Letter of Credit, unless it expires earlier as provided therein or is previously
extended by the Bank, will expire at 2:00 P.M., prevailing Baltimore, Maryland time, on April 8,
2008. PRIOR TO THE EXPIRATION OF THE 2003 LETTER OF CREDIT OR ANY OTHER CREDIT FACILITY (AS
DEFINED HEREIN) THEN IN EFFECT, THE BORROWER, UPON THE CONDITIONS SPECIFIED IN THE INDENTURE AND
THE LOAN AGREEMENT, MAY, BUT IS NOT OBLIGATED TO, PROVIDE FOR THE DELIVERY TO THE TRUSTEE OF A
SUBSTITUTE CREDIT FACILITY (AS DEFINED IN THE INDENTURE), IN SUBSTITUTION FOR THE 2003 LETTER OF
CREDIT OR FOR SUCH OTHER CREDIT FACILITY THEN IN EFFECT. The effective date of any Substitute
Credit Facility constitutes a Termination Date (as defined herein) and a Mandatory Tender Date (as
defined herein) on which the Bonds are subject to mandatory tender and purchase.

     3. Additional Bonds. The Indenture provides that Additional Bonds may be issued
within the limitations and provisions of the Indenture. The Series 2003 Bonds and any Additional
Bonds are referred to herein collectively as the “Bonds.” All Bonds issued pursuant to the
Indenture shall be secured equally and ratably by the Trust Estate to the extent provided in the
Indenture; provided, however, that a Credit Facility securing a Series (as defined in the
Indenture) of Bonds shall secure only that particular Series of Bonds and no other and shall not be
available to pay the principal of, interest on, or the purchase price of, any other Series of
Bonds.

     4. Definitions. Each of the following terms, as used herein, shall have the meaning
given to such term by the language employed in this paragraph defining such term, unless the
context clearly indicates otherwise. Any other term used herein as a defined term, but which is not
defined in this paragraph or elsewhere herein, shall have the meaning given to such term by the
Indenture, unless the context clearly indicates otherwise.

     “Adjustment Date” means each of (a) April 11, 2003, (b) the Friday of each week thereafter
or, if any such Friday is not a Business Day, the immediately succeeding Business Day, and (c)
each Mandatory Tender Date.

     “Authorized Denomination” means $100,000 or any integral multiple of $5,000 in excess of
$100,000.

     “Bonds Tendered or Deemed Tendered for Purchase” means Bonds tendered, or deemed to have been
tendered, to the Trustee for purchase on an Optional Tender Date or on a Mandatory Tender Date, in
accordance with the Indenture.

     “Business Day” or “business day” means any day other than a day on which either (a) banks
located in any of the cities in which the Principal Office of the Trustee, the Credit Facility
Provider, the Paying Agent and the Remarketing Agent is located are required or

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authorized by law or executive order to close for business, or (b) The New York Stock
Exchange is closed.

     “Credit Facility” means (a) the 2003 Letter of Credit, (b) any Substitute Credit Facility and
(c) any Initial Credit Facility (as defined in the Indenture).

     “Credit Facility Provider” means (a) the Bank and (b) the issuer of any Credit Facility, if
any, other than the 2003 Letter of Credit, then in effect.

     “Letter of Credit” means either the 2003 Letter of Credit or any Additional Letter of Credit.

     “Loans” means, collectively, the Series 2003 Loan and the loan by the Issuer to the Borrower
of the proceeds of any Series of Additional Bonds.

     “Mandatory Tender Notice” means a notice of a Mandatory Tender Date given by the Trustee in
accordance with Section 4.2 of the Indenture, which notice shall state the matters set forth in
the Indenture and shall be given by the Trustee to the Owners at least 35 days prior to each
Mandatory Tender Date.

     “Maximum Rate” means 12% per annum, or such higher or lower rate per annum to which the
Maximum Rate may be changed in accordance with Section 2.4 of the Indenture.

     “Owner” or “Owners” or “Owner of Bonds” or “Owners of Bonds” means the person or persons in
whose name any Bond is registered on the books of the Issuer maintained by the Registrar.

     “Record Date” means (a) the last day before each Interest Payment Date, and (b) in the case
of the payment of any defaulted interest, the fifth day before such payment; provided, however,
that if any such day is not a Business Day, the Record Date will be the Business Day immediately
preceding such day.

     “Registrar” or “Bond Registrar” means the Trustee, or any successor Registrar appointed under
the Indenture.

     “Remarketing Agent” means Manufacturers and Traders Trust Company, a New York banking
corporation, or any successor Remarketing Agent appointed under the Indenture, its successors and
assigns.

     “Revenues” means (a) all moneys paid or payable to the Trustee for the account of the Issuer
pursuant to the Loan Agreement and all revenues of the Issuer attributable to the financing and
refinancing of the 2003 Facility and any Additional Facilities (as defined in the Indenture) with
the proceeds of the Bonds, including (without limitation) any moneys realized from the liquidation
and sale of any security for the Loans, (b) any moneys received under any of the other Bond
Documents (as defined in the Indenture), (c) all moneys drawn under the Credit

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Facility and deposited in the Bond Fund to pay principal of the Bonds (whether at maturity
or upon acceleration of maturity or after notice of redemption or prepayment or otherwise), or to
pay interest on, or the purchase price of, the Bonds when due, and (d) all other receipts of the
Trustee credited under the provisions of the Indenture against such payments; provided that the
term “Revenues” does not include Reserved Rights of the Issuer (as defined in the Indenture).

     “Tender Date” means (a) an Optional Tender Date, or (b) a Mandatory Tender Date.

     “Trust Estate” means and includes:

          (a) the Revenues;

          (b) all of the Issuer’s right, title and interest in and to and remedies under the Loan
Agreement and all other Bond Documents, including (without limitation) any and all security for the
Loan referred to therein;

          (c) all moneys which are at any time or from time to time on deposit in the Bond Fund, the
Facility Fund and the Net Proceeds Escrow Fund (each as defined in the Indenture); and

          (d) all right, title and interest in and to and all remedies with respect to any and all other
property of every description and nature from time to time hereafter by delivery or by writing of
any kind conveyed, pledged, assigned or transferred, as and for additional security hereunder, by
the Issuer or by anyone on its behalf or with its written consent, to the Trustee; provided,
however, that the term “Trust Estate” does not include Reserved Rights of the Issuer.

     “2003 Letter of Credit” means the Letter of Credit that provides payment for and secures the
payment of the Series 2003 Bonds.

     5. Trust
Estate; Security. The Bonds are equally and ratably secured, to the extent
provided in the Indenture, by the pledge thereunder of the Trust Estate. The Borrower’s Letter of
Credit Obligations are secured by, among other things, a Security Agreement dated as of April 1,
2003 in favor of the Bank. The Issuer, pursuant to the Indenture, has pledged and assigned to the
Credit Facility Provider, as security for the Borrower’s Credit Facility Obligations, all of the
Trust Estate assigned in the Indenture to the Trustee as security for the payment of the Bonds,
which assignment to the Credit Facility Provider is subordinate to the simultaneous assignment
thereof to the Trustee (except as otherwise provided in Section 9.13 of the Indenture).

     6. Reference to Documents. Reference is hereby made to the Indenture, the Loan
Agreement and all of the other Bond Documents, copies of which are on file with the Trustee, and
the 2003 Letter of Credit, which is held by the Trustee, for the provisions, among others, with
respect to (a) the nature and extent of the rights, duties and obligations of the Issuer, the
Borrower, the Trustee, the Registrar, the Paying Agent, the Remarketing Agent and the Owners of the
Bonds, and certain rights of the Credit Facility Provider, (b) the provisions under which the Bonds

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Outstanding under the Indenture, and all accrued and unpaid interest thereon, may become or
may be declared due and payable before the stated maturity thereof, (c) provisions under which
Additional Bonds may be issued, (d) provisions under which the lien of the Indenture may be
discharged, and (d) provisions relating to the modification and amendment of the Indenture and the
Loan Agreement. The Owner of this Bond, by the acceptance hereof, is deemed to have agreed and
consented to the terms and provisions of the Indenture, the Loan Agreement and all of the other
Bond Documents, and the 2003 Letter of Credit, all of which are incorporated herein by reference.

     7. Interest
Rate on the Series 2003 Bonds. (a) Variable Rate; Interest Payment
Dates. The Series 2003 Bonds shall bear interest at the Variable Rate. From and including the
date of initial authentication and delivery of the Series 2003 Bonds to and including April 11,
2003, the Series 2003 Bonds shall bear interest at the rate set forth in Section 2.4 of the
Indenture. Thereafter, the Variable Rate shall be determined as provided in subsection (b) below.
The interest payable on the Series 2003 Bonds will be computed on the basis of a year of 365 days
(366 days in leap years) for the actual number of days elapsed and shall be payable on each
Interest Payment Date which shall be (i) the first Business Day of each month, commencing as of
May 1, 2003, (ii) each Mandatory Tender Date, and (iii) the maturity date of the Series 2003
Bonds.

          (b) Determination of the Variable Rate. The Variable Rate shall be determined by
the Remarketing Agent on each Adjustment Date in accordance with the terms and conditions of the
Placement and Remarketing Agreement. The Variable Rate determined by the Remarketing Agent on each
Adjustment Date shall be and remain in effect from and including such Adjustment Date, to but
excluding, the earlier of (i) the immediately succeeding Adjustment Date and (ii) the immediately
succeeding Mandatory Tender Date.

          (c) Maximum Rate. Notwithstanding the foregoing provisions of this paragraph 7,
so long as a Credit Facility is in effect with respect to the Series 2003 Bonds, the interest rate
payable on the Series 2003 Bonds may not exceed the Maximum Rate. The Issuer may from time to time,
upon the written request of the Borrower, change the Maximum Rate upon the terms and conditions as
provided in Section 2.4 of the Indenture.

          (d) Interest Rates Conclusive and Binding. The determination by the Remarketing
Agent of the Variable Rate as provided herein and in the Indenture shall be conclusive and binding
upon the Issuer, the Trustee, the Borrower, the Paying Agent, the Registrar, the Remarketing Agent,
the Credit Facility Provider, the Owners of the Series 2003 Bonds and all other persons.

     8.   Redemption.

          (a) Redemption of Bonds Prior to Maturity, In the manner and with the effect provided
in the Indenture, the Series 2003 Bonds are subject to redemption prior to maturity as follows:

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     (i)
Mandatory Redemption in the Amount of Excess Bond Proceeds .
The Series 2003 Bonds shall be redeemed by the Issuer (solely from the Trust Estate), in whole or
in part, on any Interest Payment Date, at a redemption price equal to the principal amount
thereof, in the amount of Excess Bond Proceeds transferred to the Principal Account from the
Facility Fund pursuant to Section 5.5 of the Indenture, such redemption to be made on the first
Interest Payment Date that is at least 45 days following receipt by the Trustee of the Completion
Certificate (as defined in the Indenture).

     (ii) Mandatory Redemption in the Amount of Net Proceeds and Proceeds
from the Disposition of Certain Equipment. The Series 2003 Bonds shall be redeemed by the
Issuer (solely from the Trust Estate) in whole or in part, on any Interest Payment Date, at a
redemption price equal to the principal amount thereof, in the amount of moneys in the Principal
Account furnished by the Borrower, or by the Credit Facility Provider on behalf of the Borrower,
representing Net Proceeds or proceeds from the disposition of certain equipment pursuant to
Section 9.9 of the Letter of Credit Agreement, such redemption to be made on the next Interest
Payment Date that is at least 45 days after receipt of such Net Proceeds or proceeds from the
disposition of certain equipment pursuant to Section 9.9 of the Letter of Credit Agreement.

     (iii) Mandatory Redemption in Amount of Annual Reduction of
Principal Portion of Stated Amount of the Letter of Credit. The Series 2003 Bonds shall be
redeemed by the Issuer, in whole or in part, on any Interest Payment Date, at a redemption price
equal to the principal amount of the Series 2003 Bonds being redeemed, in an amount equal to any
annual reduction of the Principal Portion of the Stated Amount of the Letter of Credit made in
accordance with the provisions of Section 4.9 and Schedule A of the Letter of Credit Agreement, as
the same may be amended from time to time (plus accrued interest through the date of redemption).
Such redemption shall be made at the written direction of the Borrower to the Trustee (such
direction to be given by the Borrower at least 45 days prior to the date fixed for redemption in
the Letter of Credit Agreement), and upon notice by the Trustee, in the name of the Issuer, to the
Owners as set forth in Section 3.3 hereof.

     (iv) Optional Redemption on Interest Payment Dates. The Series 2003
Bonds shall be subject to optional redemption by the Issuer (solely from the Trust Estate), at the
written direction of the Borrower to the Trustee (such direction to be given by the Borrower at
least 45 days prior to the date fixed for redemption), upon notice to the Owners as set forth in
subparagraph (c) below, in whole or in part (but in part only if the aggregate principal amount of
the Outstanding Series 2003 Bonds immediately following such redemption will be at least
$500,000), on any Interest Payment Date, at a redemption price equal to the principal amount of
the Series 2003 Bonds to be redeemed.

     (v) Redemption on Mandatory Tender Dates. The Series 2003 Bonds
shall be subject to redemption by the Issuer (solely from the Trust Estate), at the written
direction of the Borrower to the Trustee (such direction to be given by the Borrower at least

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45 days prior to the date fixed for redemption), upon notice to the Owners of the
Series 2003 Bonds as set forth in subparagraph (c) below, in whole or in part on any
Mandatory Tender Date, at a redemption price equal to the principal amount of the Series
2003 Bonds to be redeemed.

     Series 2003 Bonds, or portions of Series 2003 Bonds, redeemed as described above shall be
redeemed in Authorized Denominations; provided, however, that no partial redemption shall be
permitted if such redemption would result in a Series 2003 Bond in a denomination of less than
$100,000.

          (b) Selection of Bonds To Be Redeemed. If fewer than all the Series 2003 Bonds are
called for redemption, the particular Series 2003 Bonds or portions thereof to be redeemed shall be
selected by the Trustee, in such manner as the Trustee, in its discretion, may deem appropriate and
fair, in the principal amounts required by the Indenture.

          (c) Notice of Redemption. In the event any of the Series 2003 Bonds are called for
redemption, the Trustee shall give notice, in the name of the Issuer, of the redemption of such
Bonds, which notice shall (i) state the matters required by Section 3.3 of the Indenture, and (ii)
be given by Mail by first-class postage, not more than 45 days and not less than 30 days prior to
the date fixed for redemption, to the Owners of Series 2003 Bonds or portions of Series 2003 Bonds
to be redeemed, at the addresses shown on the registration books of the Registrar as of the third
day immediately preceding the date on which notice by Mail is given, or, if any such day is not a
Business Day, the Business Day immediately preceding such day. The failure to give notice by Mail
to any Owner of any Series 2003 Bonds to be redeemed, or any defect therein, shall not affect the
validity of the proceedings for redemption of any other Series 2003 Bonds. Upon presentation and
surrender of Series 2003 Bonds so called for redemption at the place or places of payment, such
Bonds or such portions thereof shall be redeemed.

          (d) Effect of Notice of Redemption. Series 2003 Bonds or portions thereof called for
redemption shall become due and payable on the date fixed for redemption at the redemption price
provided for herein. ANY SERIES 2003 BOND OR PORTION THEREOF CALLED FOR REDEMPTION WHICH IS NOT
DELIVERED TO THE TRUSTEE ON THE DATE FIXED FOR REDEMPTION SHALL NONETHELESS BE DEEMED TO HAVE BEEN
REDEEMED AND PAID IF MONEYS FOR ITS REDEMPTION HAVE BEEN DEPOSITED WITH THE TRUSTEE ON OR BEFORE
SUCH DATE FIXED FOR REDEMPTION IN ACCORDANCE WITH THE INDENTURE; AND (I) INTEREST ON SUCH BOND OR
PORTION THEREOF CALLED FOR REDEMPTION SHALL CEASE TO ACCRUE TO THE OWNER THEREOF AS OF SUCH DATE
FIXED FOR REDEMPTION, AND (II) THE OWNER OF SUCH BOND OR PORTION THEREOF SHALL CEASE TO BE ENTITLED
TO THE BENEFITS AND SECURITY OF THE INDENTURE AS OF SUCH DATE FIXED FOR REDEMPTION, EXCEPT TO
RECEIVE THE MONEYS REPRESENTING THE REDEMPTION PRICE OF SUCH BOND AGAINST DELIVERY
THEREOF AT THE PRINCIPAL OFFICE OF THE TRUSTEE.

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          (e) Payment of Redemption Price. The redemption price to be paid for Series
2003 Bonds redeemed pursuant to this paragraph 8 and the Indenture shall be accompanied by all
interest accrued on the Series 2003 Bonds to be redeemed to the date fixed for redemption. Bonds,
or portions thereof, redeemed pursuant to this paragraph 8 and the Indenture shall be redeemed in
Authorized Denominations.

          (f) Provisions Applicable to Book-Entry Bonds. Whenever this Bond shall be maintained
in Book-Entry Form with a Depository in accordance with Section 2.6 of the Indenture, in the event
that part, but not all, of this Bond shall be called for redemption, the holder of this Bond may
elect not to surrender this Bond in exchange for a new Series 2003 Bond in accordance with
paragraph (c) above and in such event shall make a notation indicating the principal amount of such
redemption and the date thereof on the Payment Grid attached hereto. For all purposes, the
principal amount of this Bond outstanding at any time shall be equal to the lesser of (A) the
Principal Sum shown on the face hereof and (B) such Principal Sum reduced by the principal amount
of any partial redemption of this Bond following which the holder of this Bond has elected not to
surrender this Bond in accordance with paragraph (c) above. The failure of the holder hereof to
note the principal amount of any partial redemption on the Payment Grid attached hereto, or any
inaccuracy therein, shall not affect the payment obligation of the Issuer hereunder. THEREFORE, IT
CANNOT BE DETERMINED FROM THE FACE OF THIS BOND WHETHER A PART OF THE PRINCIPAL OF THIS BOND HAS
BEEN PAID.

     9. Purchase of Bonds on Tender Dates.

          (a) Purchase of Bonds on Optional Tender Dates.

               (i) The Issuer will purchase or cause to be purchased (but solely from the Revenues and
proceeds of the remarketing of such Series 2003 Bond by the Remarketing Agent and amounts realized
from a drawing under the Credit Facility) any Series 2003 Bond (or portion thereof in an Authorized
Denomination, provided such tender does not result in a Series 2003 Bond in a denomination of less
than $100,000), other than a Pledged Bond, at a price equal to the principal amount thereof plus
accrued interest (if any) thereon to the date of purchase, payable by check or wire transfer in
immediately available funds, upon:

     (A) delivery to the Trustee at its Principal Office of an irrevocable written notice
(an “Optional Tender Notice”), which Optional Tender Notice shall state (1) the principal
amount of such Bond or such portion thereof in an Authorized Denomination to be purchased,
(2) the number of each Bond of which all or a portion is to be purchased, and (3) the
Business Day on which such Bond or such portion thereof is to be purchased (an “Optional
Tender Date”) which Optional Tender Date shall be a Business Day not fewer than 7 calendar
days after the date of receipt of such Optional Tender Notice by the Trustee; and

     (B) delivery of such Bond (with an appropriate instrument of transfer satisfactory to
the Trustee executed in blank by the Owner with the signature

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FORM OF SERIES 2003 BOND

guaranteed by a bank, trust company or member firm of the New York Stock
Exchange) to the Trustee, not later than 10:00 a.m., prevailing Baltimore, Maryland
time, on the Optional Tender Date.

               (ii) Notwithstanding anything to the contrary herein contained, no optional tender of Series
2003 Bonds shall be permitted if such tender would result in a Series 2003 Bond in a denomination
of less than $100,000.

               (iii) Accrued interest payable on any Bond Tendered or Deemed Tendered for Purchase on any
Interest Payment Date as provided in subparagraph (i) above shall be paid to the Owner as of the
Record Date immediately preceding such Interest Payment Date in the same manner as if such Series
2003 Bond had not been purchased or deemed to have been purchased pursuant to subparagraph (i)
above.

          (b) Purchase of Bonds on Mandatory Tender Dates. The Series 2003 Bonds (other than any
Pledged Bonds) are subject to mandatory tender and purchase, and the Issuer will purchase or cause
to be purchased (but solely from the Revenues and proceeds of the remarketing of the Series 2003
Bonds by the Remarketing Agent and amounts realized from a drawing under the Credit Facility) the
Series 2003 Bonds (other than any Pledged Bonds), on each Mandatory Tender Date at a price equal to
the principal amount thereof plus accrued interest (if any) thereon to the date of purchase,
payable by check or wire transfer in immediately available funds. A Mandatory Tender Date is any
Termination Date. A Termination Date is (i) the fifth Business Day before the expiration date of
any Credit Facility securing the Series 2003 Bonds then in effect occurs, and (ii) the effective
date of any Substitute Credit Facility that replaces any such Credit Facility. At least 35 days
prior to each Mandatory Tender Date, the Trustee shall mail a Mandatory Tender Notice to the Owners
of the Series 2003 Bonds.

          (c) Agreement to Sell Bonds on Tender Dates. The Owner of this Bond, by acceptance
of this Bond, agrees (i) that this Bond may be sold on any Tender Date to any person obtained by
the Remarketing Agent or otherwise, and (ii) to tender this Bond to the Trustee for purchase (from
any of the sources described in subparagraphs (a) and (b) above) on each Tender Date at a price
equal to the principal amount hereof plus accrued interest (if any) hereon to such Tender Date and
to surrender this Bond to the Trustee on such Tender Date.

          (d) Bonds Deemed Tendered and Purchased on Tender Dates. ANY OPTIONAL
TENDER NOTICE GIVEN BY AN OWNER SHALL BE IRREVOCABLE. ANY SERIES 2003 BOND DESCRIBED IN AN
OPTIONAL TENDER NOTICE AS A BOND TO BE PURCHASED ON AN OPTIONAL TENDER DATE WHICH IS NOT TENDERED
BY THE OWNER THEREOF TO THE TRUSTEE ON SUCH OPTIONAL TENDER DATE, AND ANY SERIES 2003 BOND TO BE
PURCHASED ON A MANDATORY TENDER DATE WHICH IS NOT DELIVERED BY THE OWNER THEREOF TO
THE TRUSTEE ON SUCH MANDATORY TENDER DATE SHALL NONETHELESS BE DEEMED TO HAVE BEEN TENDERED
BY THE OWNER THEREOF FOR PURCHASE AND TO HAVE BEEN PURCHASED, IF MONEYS FOR SUCH PURCHASE HAVE
BEEN DEPOSITED WITH THE

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TRUSTEE ON OR BEFORE ANY SUCH TENDER DATE IN ACCORDANCE WITH THE INDENTURE. THEREAFTER, (I) SUCH
BOND DEEMED TO HAVE BEEN TENDERED AND PURCHASED SHALL NO LONGER BE OUTSTANDING UNDER THE
INDENTURE; (II) INTEREST ON SUCH BOND DEEMED TO HAVE BEEN TENDERED AND PURCHASED SHALL CEASE TO
ACCRUE TO THE FORMER OWNER THEREOF AS OF THE APPLICABLE TENDER DATE; (III) THE FORMER OWNER OF
SUCH BOND SHALL CEASE TO BE ENTITLED TO THE BENEFITS AND SECURITY OF THE INDENTURE AS OF THE DATE
ON WHICH SUCH BOND IS DEEMED TO HAVE BEEN TENDERED AND PURCHASED, EXCEPT TO RECEIVE THE MONEYS
REPRESENTING THE PURCHASE PRICE OF SUCH BOND AGAINST DELIVERY THEREOF AT THE PRINCIPAL OFFICE OF
THE TRUSTEE; AND (IV) THE REGISTRAR WILL NOT REGISTER, AND THE TRUSTEE WILL NOT RECOGNIZE, ANY
FURTHER TRANSFERS BY THE FORMER OWNER OF SUCH BOND DEEMED TO HAVE BEEN TENDERED AND PURCHASED.

     10. Unclaimed Moneys. Under certain circumstances set forth in the Indenture,
moneys held by the Trustee for the payment of Series 2003 Bonds deemed to have been purchased or
paid as set forth in the Indenture, and which remain unclaimed for a period of one year after the
date on which such Series 2003 Bonds are deemed to have been tendered and purchased, may be paid by
the Trustee to the Borrower.

     11. Authorized
Denominations; Transfer: Exchange. The transfer of this Bond shall be
registered upon the books maintained at the Principal Office of the Registrar, at the written
request of the registered owner hereof or his attorney duly authorized in writing, upon surrender
of this Bond at such Principal Office, together with a written instrument of transfer satisfactory
to the Registrar duly executed by the registered owner or his duly authorized attorney. The Series
2003 Bonds are issuable only as fully registered bonds in Authorized Denominations. Upon payment of
any required tax or other governmental charge, and subject to such payment, upon surrender at the
Principal Office of the Registrar, Series 2003 Bonds in an aggregate principal amount equal to an
Authorized Denomination may, at the option of the registered owner thereof, be exchanged for an
equal aggregate principal amount of Series 2003 Bonds of other Authorized Denominations. The
Issuer and the Registrar shall not be required to issue, exchange or register the transfer of any
Bond or any portion thereof (A) for a period of 15 days prior to the date on which Series 2003
Bonds are selected for redemption, or (B) after such Series 2003 Bond or portion thereof is called
for redemption, unless the transferee of such Series 2003 Bond or portion thereof delivers to the
Trustee and to the Registrar a written acknowledgment of such call for redemption and agrees in
writing to be bound by such call for redemption, In addition, the Issuer and the Registrar shall
not be required to issue, exchange or register the transfer of any Series 2003 Bond or any portion
thereof: (i) prior to the Optional Tender Date for any Series 2003 Bond or any portion thereof with
respect to which an Optional Tender Notice has been received by the Trustee; or (ii) prior to the
Mandatory Tender Date after a Mandatory Tender Notice has been Mailed; unless, in each such case,
the transferee of such Series 2003 Bond or portion thereof delivers to the Trustee and to the
Registrar a written acknowledgment of such Optional Tender Notice or Mandatory Tender Notice and
agrees in writing to be bound by such Optional Tender Notice or Mandatory Tender Notice.

12

 

EXHIBIT A

FORM OF SERIES 2003 BOND

     12. Enforcement of Indenture. The Owner of this Bond shall have no right to
enforce the provisions of the Indenture, or to institute action to enforce the covenants therein,

or to take any action with respect to any default under the Indenture, or to institute, appear in
or defend any suit or other proceeding with respect thereto, except as provided in the Indenture.

     13. Persons Deemed Owners. The Issuer, the Trustee, the Borrower, the Paying Agent,
the Registrar, the Remarketing Agent and the Credit Facility Provider may deem and treat the person
in whose name this Bond is registered as the absolute Owner hereof for all purposes, whether or not
this Bond is overdue, and neither the Issuer, the Trustee, the Borrower, the Paying Agent, the
Registrar, the Remarketing Agent nor the Credit Facility Provider shall be affected by any notice
to the contrary.

     14. Notices. When the Trustee is required to give notice to the Owner of this Bond,
such notice shall be given by Mail to the Owner of this Bond at such Owner’s address as it appears
on the registration books maintained by the Registrar. Any notice given by Mail as provided herein
shall be deemed given and received when deposited by the Trustee into the United States Mail,
postage prepaid, whether or not actually received by the addressee.

     It is hereby certified, recited and declared that all acts, conditions and things required by
the Constitution and laws of the State of Maryland, including the Acts, to exist, to have happened
and to have been performed, precedent to and in the execution and delivery of the Indenture and
the issuance of this Bond, do exist, have happened and have been performed in regular and due form
as required by law.

     No covenant or agreement contained in this Bond or the Indenture shall be deemed to be a
covenant or agreement of any member, director, official, officer, agent or employee of the Issuer,
the Department, or the State in his or her individual capacity, and neither the members, directors,
officers or employees of the Issuer, the Department, or the State nor any official or officer
executing this Bond, shall be liable personally on this Bond or be subject to any personal
liability or accountability by reason of the issuance or sale of this Bond.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE.]

13

 

EXHIBIT A

FORM OF SERIES 2003 BOND

     IN WITNESS WHEREOF, the MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY has caused
this Bond to be executed in its name and on its behalf by its Chairman, by his manual or facsimile
signature, and has caused its corporate seal or a facsimile thereof to be reproduced hereon.

	 	 	 	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	MARYLAND INDUSTRIAL DEVELOPMENT

FINANCING AUTHORITY
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	

	 	

	 	 	 	 	 	

	 	(SEAL)
	Name:

	 	D. Gregory Cole
	 	 	 	Name:
	 	Bernard Koman	 	 
	Its:

	 	Executive Director
	 	 	 	Its:
	 	Chairman	 	 

14

 

EXHIBIT A

FORM OF SERIES 2003 BOND

Authentication Date:                     

CERTIFICATE OF AUTHENTICATION

     This is to certify that this Bond is one of the Bonds described in the within-mentioned
Indenture.

	 	 	 	 	 
	 	 	ALLFIRST TRUST COMPANY, NATIONAL

   ASSOCIATION, as Trustee
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	 	 	Authorized Officer

15

 

PAYMENT GRID

	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Principal	 	 	 	 
	 	Date of	 	 	Principal	 	 	Amount	 	 	Holder	 
	 	Payment	 	 	Amount Paid	 	 	Outstanding	 	 	Signature	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 
	 

16

 

[FORM OF ASSIGNMENT]

     FOR VALUE RECEIVED,                                         , the undersigned, hereby
sells, assigns and transfers unto                      (Tax Identification or Social
Security No.                      ) the within Bond and all rights thereunder, and hereby
irrevocably constitutes and appoints                                          attorney to
transfer the within Bond on the books kept for registration thereof, with full power of
substitution in the premises.

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	

	 	 
	 	 	 	 
	

	 	 	 	 	 	NOTICE: The signature to this assignment must
correspond with the name as it appears upon the face
of the within Bond in every particular, without
alteration or enlargement or any change whatsoever.
	 
	 	 	 	 	 	 
	SIGNATURE GUARANTEED:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	NOTICE: Signature(s) must be guaranteed
by a member firm of the STAMP, SEMP or
MSP signature guaranty medallion program.

148245	 	 

17

 

EXHIBIT B

$12,000,000

Maryland Industrial Development Financing Authority

Taxable Variable Rate Demand Revenue Bonds

(Avalon Pharmaceuticals, Inc. Facility)

Series 2003

FORM OF

REQUISITION FROM FACILITY FUND

	 	 	 	 	 
	TO:

	 	Allfirst Trust Company
	 	Requisition No:                    
	

	 	National Association,
	 	Date:
                    , ___
	

	 	as Trustee	 	 
	

	 	25 South Charles Street	 	 
	

	 	Mail Code 101-951	 	 
	

	 	Baltimore, Maryland 21201	 	 
	

	 	Attention: Corporate Trust Department	 	 

     Pursuant to the Trust Indenture dated as of April 1, 2003 (the “Indenture”) by and between
Maryland Industrial Development Financing Authority, a body politic and corporate and a public
instrumentality of the State of Maryland (the “Issuer”), and Allfirst Trust Company National
Association, as Trustee (the “Trustee”), and pursuant to the Loan Agreement dated as of April
1, 2003 (the “Loan Agreement”) by and between the Issuer and Avalon Pharmaceuticals, Inc., a
Delaware corporation (the “Borrower”), we request that you, or your agent, make disbursement
of funds from the Facility Fund (as defined in Section 1.1 of the Indenture) held by you, or your
agent, as Trustee under the Indenture to the following payee in the following amount:

	 	 	 	 	 	 	 	 	 
	

	 	Payee:
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Payee’s Address:	 	 
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Amount:	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Purpose of Requisition:	 	 
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 

E-1

 

     We hereby certify that:

          (a) none of the items for which funds are being requisitioned has formed the basis for any
disbursement heretofore made from the Facility Fund;

          (b) each item for which funds are being requisitioned is a proper item to be paid from the
Facility Fund and is necessary in connection with the acquisition of the 2003 Facility (as defined
in Section 1.1 of the Indenture);

          (c) all of such funds are being used for the payment of 2003 Facility Costs (as defined in
Section 1.1 of the Indenture);

          (d) no written notice of any lien on, right to lien or attachment upon, or claim affecting the
right to receive payment of, any of the moneys payable under this requisition to any of the persons
named herein has been received, or if any notice of any such lien, attachment or claim has been
received, such lien, attachment or claim has been released or discharged, or will be released or
discharged upon the payment of this requisition;

          (e) this requisition contains no items representing payment on account of any retained
percentages which are entitled to be retained as of the date hereof;

          (f) with respect to each item for payment for labor or materials and equipment, the labor for
which payment is requested was actually performed or the materials and equipment were actually
furnished to or installed in or about the 2003 Facility;

          (g) such materials and equipment are not subject to any lien or security interest created by
us or, to our knowledge, by any other person, or the funds requested by this requisition are to be
used to satisfy any such lien or security interest;

          (h) all construction work which has been completed on the 2003 Facility is substantially in
conformity with the Plans and Specifications (as defined in Section 1.1 of the Indenture); and

          (i) the moneys now on deposit in the Facility Fund are sufficient to complete the acquisition
of the 2003 Facility or the 2003 Facility has been so completed.

     We further hereby certify that this requisition is not for materials which are not, as of the
date hereof, physically incorporated into the 2003 Facility, unless approved by the Bank (as
defined in Section 1.1 of the Indenture).

     We further hereby certify that no Event of Default (as defined in Section 11.1 of the Loan
Agreement and as defined in Section 13.1 of the Letter of Credit Agreement (as defined in the
Indenture) has occurred and is continuing as of the date hereof.

E-2

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