Document:

Exhibit
10.3

GENERAL SECURITY
AGREEMENT

          THIS
GENERAL SECURITY AGREEMENT, dated as of February 23, 2004, is made by NEOSE
TECHNOLOGIES, INC., a Delaware corporation (“Obligor”), to BROWN BROTHERS HARRIMAN &
CO., a private bank organized as a partnership (the “Secured Party”).

          SECTION
1.  Grant of Security Interest.

          Obligor
hereby grants to Secured Party a security interest in all of Obligor’s right,
title and interest in and to the following property of Obligor, whether now
owned or hereafter arising or acquired (collectively, the “Collateral”):

          (a)     accounts,
general intangibles, chattel paper, and instruments (collectively, the “Receivables”);

          (b)     inventory;

          (c)     documents;

          (d)     equipment
(whether or not constituting fixtures);

          (e)     letter
of credit rights;

          (f)     supporting
obligations; and

          (g)     to
the extent not otherwise included in the original collateral described above,
all proceeds and products of any of the foregoing.

          Notwithstanding
the foregoing, the Collateral shall not include:  (a) Obligor’s Intellectual Property or Liquidity, as such terms
are defined in that certain Credit Agreement (the “Credit Agreement”), dated January
30, 2004 by and between Obligor and Secured Party, except as otherwise provided
in the Credit Agreement; and (b) any equipment financed by any third party
which constitutes Permitted Indebtedness under the Credit Agreement, to the
extent such financing arrangements preclude liens in favor of any other person
or entity.

          Obligor
represents and warrants that it is the sole owner of the Collateral and has the
legal right to grant to Secured Party a security interest therein, and that the
Collateral is free and clear of all other liens, security interests and
encumbrances, other than the Permitted Liens (as such term is defined in the
Credit Agreement).

          SECTION
2.  Security for Liabilities.

          This
Agreement secures the payment and performance of all indebtedness, obligations,
and liabilities of every kind and nature (whether primary or secondary, direct
or indirect, absolute or contingent, sole, joint, or several, secured or
unsecured, similar or dissimilar, or

related or unrelated),
heretofore, now, or hereafter contracted or acquired, of Obligor to Secured
Party under the Financing Agreement (as defined below) and the Bond (as defined
in the Financing Agreement)(collectively, the “Liabilities”).

          SECTION
3.  Obligor Remains Liable.

          Anything
herein to the contrary notwithstanding, (a) Obligor shall remain liable under
its contracts and agreements included in the Collateral to the extent set forth
therein to perform all of Obligor’s duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (b) the exercise by
Secured Party of any of the rights hereunder shall not release Obligor from any
of its duties or obligations under its contracts and agreements included in the
Collateral, and (c) Secured Party shall not have any obligation or liability
under the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of Obligor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.

          SECTION
4.  Further Assurances.

          (a)     Obligor
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that Secured Party may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.  Without limiting the generality of the
foregoing, Obligor will:  (i) upon request
by Secured Party, mark conspicuously each item of chattel paper included in its
Receivables and each of its records pertaining to any of the Collateral, with a
legend, in form and substance satisfactory to Secured Party, indicating that
such chattel paper or Collateral is subject to the security interest granted
hereby; (ii) if any of its Receivables shall be evidenced by a promissory note
or other instrument, deliver and pledge to Secured Party hereunder such note or
instrument duly indorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Secured
Party; (iii) authorize Secured Party to file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as
may be necessary or desirable, or as Secured Party may request, in order to
perfect and preserve the security interests granted hereby; (iv) to the extent
that any Collateral consists of letter-of-credit rights, cause the issuer of
each underlying letter of credit to consent to the assignment to Secured Party;
(v) to the extent that any Collateral is in the possession of a third party,
join with Secured Party in notifying the third party of Secured Party’s
security interest and in obtaining an acknowledgement from the third party that
it is holding such Collateral for the benefit of Secured Party; and (vi) at any
time that Secured Party so reasonably requests, work with Secured Party to set
up such lock boxes and segregated accounts as Secured Party may request in
order to better perfect the security interest created hereunder in proceeds.

          (b)     Obligor
hereby authorizes Secured Party to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the Collateral
without the signature of Obligor where permitted by law.  A carbon, photographic, or other
reproduction of this Agreement or any part thereof shall be sufficient as a
financing statement where permitted by law.

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          (c)     Obligor
will furnish to Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as Secured Party may request, all in reasonable
detail.

          (d)     Obligor
shall not reincorporate or reorganize itself under the laws of any jurisdiction
other than the jurisdiction in which it is incorporated or organized as of the
date hereof, and shall not change its organizational structure under such
jurisdiction if such action would, in the judgment of Secured Party, require
filing under the Uniform Commercial Code, as adopted, in a different
jurisdiction in order to maintain perfection of the security interest granted
hereby, without the prior written consent of Secured Party.

          (e)     Obligor
shall not change its corporate name without providing Secured Party at least
thirty (30) days’ prior written notice.

          SECTION
5.  Insurance.

          Obligor
shall, at its own expense, (i) keep its property and business insured against
fire and other hazards (so-called “all risk” coverage) in amounts and with
companies reasonably satisfactory to Secured Party, or the amount necessary to
avoid any co-insurance penalty, which policy shall name Secured Party as loss
payee as its interest may appear, (ii) maintain public liability coverage
against claims for personal injuries, death or property damage in an amount
deemed reasonable by Secured Party, which policy shall name Secured Party as an
additional insured as its interest may appear, and (iii) maintain all worker’s
compensation, employment or similar insurance as may be required by applicable
law.  All such property insurance shall
contain an endorsement identifying Secured Party as lienholder, lender loss
payee and mortgagee, and providing for a minimum of thirty (30) days’ written
cancellation notice to Secured Party. 
In any event, Obligor’s obligation to carry such insurance may only be
brought within the coverage of a so-called blanket or umbrella policy or
policies of insurance carried and maintained by Obligor if and only if the
coverage afforded Secured Party will not be limited, reduced or diminished by
reason of the use of a blanket or umbrella policy of insurance.  Obligor shall deliver to Secured Party
original or duplicate policies of insurance maintained pursuant hereto and, as
often as Secured Party may reasonably request, a report of a reputable
insurance broker with respect to such insurance.

          SECTION
6.  Representations and Warranties.

          Obligor
represents and warrants to Secured Party that:

          (a)     Obligor
has all requisite rights, powers and authority to execute and deliver this
Agreement and to carry out the transactions contemplated hereby, including, but
not limited to, rights in and the power to transfer the Collateral free and
clear of all claims, liens, security interests and other encumbrances or
restrictions, other than the Permitted Liens. 
The execution, delivery and performance of this Agreement by Obligor has
been duly authorized by all requisite corporate action, and this Agreement has
been duly executed and delivered by Obligor and constitutes its valid and
binding obligation, enforceable against Obligor in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
moratorium, reorganization and other similar laws relating to or affecting the
enforcement of creditors’ rights

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generally, and except
that the availability of specific performance, injunctive relief or other
equitable remedies is subject to the discretion of the court before which any
such proceeding may be brought.

          (b)     The
execution, delivery and performance of this Agreement by Obligor will not
violate any provision of law, any rule or regulation of any governmental
authority, or any judgment, decree or order of any court binding on Obligor,
and will not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or, except as
expressly provided herein, result in the creation of any lien, security interest,
charge or encumbrance upon any of its properties, assets or outstanding stock
under its Certificate of Incorporation or By-Laws or any indenture, mortgage,
lease, agreement or other instrument to which Obligor is a party or by which it
or any of its properties is bound.

          (c)     Obligor’s
chief executive office is located at the place indicated on Schedule 1
hereto and Obligor’s books and records are and will be maintained at such
location.  Schedule 1 hereto
lists each other location where Obligor maintains a place of business.  All of the Collateral constituting goods is
located at the places indicated on Schedule 1 hereto.  Obligor is the record owner or lessee (as
indicated on Schedule 1) of the real property where such Collateral is
located, with the exception of the storage and warehouse facility of Pierce
Leahy Archives located at 2500 Henderson Drive, Sharon Hill, PA.  Obligor’s exact legal name and place of
incorporation or legal formation is as indicated in the heading to this Agreement.  Obligor has no trade names and has not used
any name other than its actual corporate name for the preceding five
years.  No entity has merged into
Obligor or been acquired by Obligor within the past five years.  The federal tax identification number and
state organizational identification number, if any, of Obligor is as set forth
on Schedule 1 hereto.

          SECTION
7.  Certain Covenants as to Inventory and Equipment.

          Obligor
shall:

          (a)     Cause
its equipment to be maintained and preserved in the same condition, repair, and
working order as when new, ordinary wear and tear excepted, and, in the case of
any material loss or damage to any of its equipment, as quickly as practicable
after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are
necessary or desirable to such end, in the reasonable business judgment of
Obligor.

          (b)     Pay
promptly when due all property and other taxes, assessments, and governmental
charges or levies imposed upon it or any of its inventory or equipment, and all
claims (including claims for labor, services, materials and supplies) for sums
which by law have or might become a lien upon any of its inventory and equipment.

          (c)     After
the occurrence and during the continuance of an Event of Default (as
hereinafter defined), receive in trust for the benefit of Secured Party all
amounts and proceeds received or collected by such Obligor in respect of its
inventory and equipment, segregate such amounts and proceeds from other funds
of such Obligor, and forthwith pay such amounts and

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proceeds over to Secured
Party in the same form as so received (with any necessary endorsement) to be
held as cash collateral and applied as provided in Section 15(b).

          (d)     Notify
Secured Party in the event of material loss or damage to the Collateral or of
any material adverse change in Obligor’s business, financial condition or the
Collateral, or of any other occurrences which could materially and adversely
affect the security of Secured Party.  

          SECTION
8.  Certain Covenants as to Receivables.

          (a)     Upon
the occurrence and during the continuance of an Event of Default, from time to
time upon request, Obligor shall provide Secured Party with (i) schedules
describing all accounts, (ii) additional schedules describing other
Receivables, and (iii) specific written assignments to Secured Party of any of
its Receivables.  Any failure to execute
or deliver any schedule or assignment shall not, however, affect or limit any
security interest or other right of Secured Party in and to any
Receivable.  Upon the occurrence and
during the continuance of an Event of Default, at Secured Party’s request, Obligor
shall also furnish to Secured Party copies of invoices to customers and
shipping and delivery receipts or warehouse receipts relating thereto, as well
as such other documents and instruments as Secured Party may reasonably request
in connection with any Receivable.

          (b)     Upon
the occurrence and during the continuance of an Event of Default, Obligor shall
promptly notify Secured Party of all returns, repossessions and recoveries of
goods covered by the Receivables and of all claims asserted with respect
thereto.  Each such notification shall
be accompanied by a statement describing the relevant goods and the location
thereof.  Upon the occurrence and during
the continuance of an Event of Default, Obligor shall not settle or adjust any
dispute or claim, grant any discount, credit or allowance, or accept any return
of merchandise except in the ordinary course of business.  Upon the occurrence and during the
continuance of an Event of Default, when Obligor receives collateral of any
kind by reason of transactions between itself and its customers or account
debtors, it will hold the same on Secured Party’s behalf, subject to Secured
Party’s instructions, as property forming part of the Receivables.

          (c)     Upon
the occurrence and during the continuance of an Event of Default, Secured Party
shall have the right from time to time to communicate directly with account
debtors and obligors on the Receivables and to do test verifications of the
Receivables.

          (d)     Obligor
shall promptly notify Secured Party if any of its accounts arise out of
contracts with the United States or any agency or instrumentality thereof, and
execute any instruments and take any steps required by Secured Party in order
that all moneys due and to become due under such contracts shall be assigned to
Secured Party in accordance with the requirements of, and notice given to the
Government under the Federal Assignment of Claims Act.

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          SECTION
9.  Transfers and Other Liens.

          Obligor
shall not:

          (a)     Sell,
assign (by operation of law or otherwise), or otherwise dispose of any of the
Collateral except (1) in the ordinary course of business or (2) if outside the
ordinary course of business, where the cost of such Collateral does not exceed
$100,000.

          (b)     Create,
permit or suffer to exist any lien, security interest, or other charge or
encumbrance upon or with respect to any of the Collateral, other than Permitted
Liens as provided for in the Credit Agreement.

          SECTION
10.  Secured Party Appointed Attorney-in-Fact.

          Obligor
hereby irrevocably appoints Secured Party as its attorney-in-fact, with full
authority in the place and stead of Obligor and in the name of Obligor, Secured
Party, or otherwise, from time to time in Secured Party’s discretion to take
any action and to execute any instrument which Secured Party may deem necessary
or advisable to accomplish the purposes of this Agreement, including, without
limitation:

          (a)     to
authorize the filing of and/or sign in the name and on behalf of Obligor any
financing statements or other papers required under Section 4;

          (b)     subject
to the terms of the Financing Agreement (the “Financing Agreement”) dated
the date hereof by and among Obligor, Secured Party and the Montgomery County
Industrial Development Authority (the “Authority”)
a municipal authority incorporated, organized and duly existing under the
Economic Development Financing Law, 73 P.S. 371, et seq., as amended and
supplemented, of the Commonwealth of Pennsylvania and that certain open-end
mortgage and security agreement (the “Mortgage”),
dated as of the date hereof, by and between Obligor and Secured Party, to
obtain and adjust insurance required to be paid to Secured Party pursuant to
Section 5;

          (c)     following
the occurrence and during the continuance of an Event of Default;

	
   

	
          1.     to
  ask, demand, collect, sue for, recover, compound, receive, and give
  acquittance and receipts for moneys due and to become due under or in respect
  of any of the Collateral; 

	
   

	
   

	
   

	
          2.     to
  receive, indorse, and collect any drafts or other instruments, documents, and
  chattel paper in connection with subsection (b) or (c) above; and 

	
   

	
   

	
   

	
          3.     to
  file any claims or take any action or institute any proceedings which Secured
  Party may deem necessary or desirable for the collection of any of the
  Collateral or otherwise to enforce the rights of Secured Party with respect
  to any of the Collateral.

          Obligor
hereby ratifies and approves all acts of Secured Party as such attorney-in-fact
taken in compliance with this Section 10. 
Secured Party shall not, in its capacity as such attorney-in-fact, be
liable for any acts or omissions, nor for any error in judgment or mistake of

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fact or law, but only for
gross negligence or willful misconduct as determined by a court of competent
jurisdiction in a final, nonappealable judgment.  This power, being coupled with an interest, is irrevocable until
all Liabilities have been fully satisfied and until Secured Party is no longer
committed to allow additional Liabilities to be incurred.  Any amounts received or collected by Secured
Party in its capacity as such attorney-in-fact and in compliance with this
Section 10 shall be held as cash collateral and applied as provided in Section
15(b).

          SECTION
11.  Secured Party May Perform.

          If
Obligor fails to perform any agreement contained herein, Secured Party may
itself perform, or cause performance of, such agreement, and the expenses of
Secured Party incurred in connection therewith shall be payable by Obligor
under Section 16(b).

          SECTION
12.  Secured Party’s Duties.

          The
powers conferred on Secured Party hereunder are solely to protect its interest
in the Collateral and shall not impose any duty to exercise any such
powers.  Except for the safe custody of
any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Secured Party shall not have any duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral.  Without limiting the generality of the
foregoing, Secured Party has no obligation to clean-up or otherwise prepare the
Collateral for sale.

          SECTION
13.  Inspection Rights.

          Secured
Party at all times shall have access to inspect, audit, and make extracts from
all of Obligor’s records, files, and books of account relating to the Collateral
and to examine and inspect inventory and other Collateral owned by Obligor;
provided, prior to an Event of Default, such access, examination and inspection
shall be limited to four (4) times in any calendar year, shall be during
regular business hours, and shall be upon five (5) days’ prior notice to
Obligor.  Obligor shall, at Secured
Party’s request, take all steps necessary to facilitate such inspection.  Obligor shall deliver any document or
instrument necessary for Secured Party to obtain records from any service
bureau maintaining records for Obligor.  

          SECTION
14.  Default.

          “Event of Default” means subject to any
applicable period of grace or cure, (i) nonpayment of any of the Liabilities
when due (whether at stated maturity or upon demand, acceleration of maturity
or otherwise), (ii) any other default with respect to the Liabilities, (iii)
any other failure by Obligor to perform any of its obligations under this
Agreement, the Financing Agreement or any other Loan Document evidencing or
securing any of the Liabilities, or (iv) any breach of any representation or
warranty made by Obligor in connection with the transactions contemplated by
this Agreement, the Financing Agreement or any other Loan Document evidencing
or securing any of the Liabilities.

          SECTION
15.  Remedies.

          If
any Event of Default shall have occurred and be continuing:

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          (a)     Secured
Party may exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial Code
(the “Code”) and other applicable laws and agreements, as they may be amended
from time to time, and also may (i) require Obligor to, and Obligor hereby
agrees that it will at its expense and upon request of Secured Party forthwith,
assemble the tangible Collateral as directed by Secured Party and make it
available to Secured Party at a place or places to be designated by Secured
Party which are reasonably convenient to Secured Party and Obligor and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of Secured
Party’s offices or elsewhere, for cash, on credit, or for future delivery, and
upon such other terms as Secured Party may deem commercially reasonable.  Obligor agrees that, to the extent notice of
sale shall be required by law, at least five (5) Business Days’ notice to
Obligor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.  Secured Party shall not be obligated to make
any sale of the Collateral regardless of notice of sale having been given.  Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.

          (b)     All
cash proceeds received by Secured Party in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral may, in the
discretion of Secured Party, be held by Secured Party (without interest) as
collateral for, and/or then or at any time thereafter applied (after payment of
any amounts payable to Secured Party pursuant to Section 16) in whole or in
part by Secured Party against, all or any part of the Liabilities in such order
as Secured Party shall elect.  Any
surplus of such cash or cash proceeds held by Secured Party and remaining after
payment in full of all the Liabilities shall be paid over to Obligor or to
whosoever may be lawfully entitled to receive such surplus.  Obligor shall be liable to Secured Party for
any deficiency amount.

          (c)     Secured
Party may comply with any applicable law in connection with a disposition of
Collateral and compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. 
Secured Party may sell the Collateral without giving any warranties and
may specifically disclaim such warranties. 
If Secured Party sells any of the Collateral on credit, Obligor will
only be credited with payments actually made by the purchaser.

          SECTION
16.  Indemnity and Expenses.

          (a)     Obligor
agrees to indemnify Secured Party (including any partner, officer, employee,
director or agent of Secured Party) from and against any and all claims, losses,
and liabilities arising out of or resulting from this Agreement (including,
without limitation, enforcement of this Agreement), except claims, losses, or
liabilities resulting from Secured Party’s gross negligence or willful
misconduct as determined by a court of competent jurisdiction in a final,
nonappealable judgment.

          (b)     Obligor
will upon demand pay to Secured Party the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any

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experts and agents, which
Secured Party may incur in connection with (i) the preparation, administration
and amendment of this Agreement, (ii) the custody, preservation, use, or
operation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure by Obligor to perform or observe
any of the provisions hereof.

          SECTION
17.  Amendments, Indulgences, Etc.

          No
amendment or waiver of any provision of this Agreement nor consent to any
departure by Obligor here from shall in any event be effective unless the same
shall be in writing and signed by Secured Party and Obligor, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.  No
failure or delay on the part of Secured Party in the exercise of any right,
power, or remedy under this Agreement shall constitute a waiver thereof, or
prevent the exercise thereof in that or any other instance.  No remedy or right herein conferred upon, or
reserved to Secured Party is intended to be to the exclusion of any other
remedy or right, but each and every such remedy or right shall be cumulative
and shall be in addition to every other remedy or right given hereunder or
under any other contract or under law.

          SECTION
18.  Notices.

          All
notices, requests and demands to or upon the respective parties hereto shall be
deemed to have been given or made, (a) if delivered by hand against receipt, on
the date of such delivery, or (b) if deposited in the mails, postage prepaid,
registered or certified mail, return receipt requested, on the third day
following the date of postmark, addressed as follows or to such other address
as may be hereafter designated in writing by the respective parties hereto:

	
   

	
  If to Obligor:

	
   

	
   

	
   

	
   

	
   

	
  Neose Technologies, Inc.

	
   

	
   

	
  102 Witmer Road

	
   

	
   

	
  Horsham, PA 19044

	
   

	
   

	
  Attention: 
  General Counsel 

	
   

	
   

	
  Facsimile: (215) 315-9100

	
   

	
   

	
   

	
   

	
  With a copy to:

	
   

	
   

	
   

	
   

	
   

	
  Pepper Hamilton LLP

	
   

	
   

	
  3000 Two Logan Square

	
   

	
   

	
  18th & Arch Streets

	
   

	
   

	
  Philadelphia, PA 19103

	
   

	
   

	
  Attention: 
  Barry M. Abelson, Esquire

	
   

	
   

	
  Facsimile: 
  (215) 981-4750

	
   

	
   

	
   

	
   

	
  If to Secured Party:

	
   

	
   

	
   

	
   

	
   

	
  Brown Brothers Harriman & Co.

	
   

	
   

	
  1531 Walnut Street

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  Philadelphia, PA 19102

	
   

	
   

	
  Attention: J. Clark O’Donoghue

	
   

	
   

	
  Facsimile: 
  (215) 864-3989

	
   

	
   

	
   

	
   

	
  With a copy to:

	
   

	
   

	
   

	
   

	
   

	
  Stradley, Ronon, Stevens & Young, LLP

	
   

	
   

	
  2600 One Commerce Square

	
   

	
   

	
  Philadelphia, PA 
  19103

	
   

	
   

	
  Attention: Dean M. Schwartz, Esquire

	
   

	
   

	
  Facsimile: (215) 564-8120

          SECTION
19.  Continuing Security Interest; etc.

          This
Agreement shall create a continuing security interest in the Collateral and
shall (a) be binding upon Obligor and its successors and assigns and (b) inure
to the benefit of Secured Party and its successors and assigns.  The execution and delivery of this Agreement
shall in no manner impair or affect any other security (by endorsement or
otherwise) for the payment or performance of the Liabilities and no security
taken hereafter as security for payment or performance of the Liabilities shall
impair in any manner or affect this Agreement or the security interest granted
hereby, all such present and future additional security to be considered as one
general, continuing security.  Any of
the Collateral may be released from this Agreement without altering, varying,
or diminishing in any way this Agreement or the security interest granted
hereby as to the Collateral not expressly released, and this Agreement and such
security interest shall continue in full force and effect as to all of the
Collateral not expressly released.

          SECTION
20.  Governing Law; Consent to Jurisdiction; etc.

          This
Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania without reference to its conflicts of laws
principles.  Obligor consents to the
jurisdiction of the courts of Pennsylvania and of the courts of the United
States sitting in Pennsylvania in any litigation concerning this Agreement, and
Obligor waives any objection based on venue or inconvenient forum.  Each of Obligor and Secured Party waives any
right to trial by jury in any litigation involving this Agreement.  Unless otherwise defined herein, terms
defined in the Code as in effect in Pennsylvania on the date hereof (including
the terms “accounts,” “general intangibles,” “chattel paper,” “instruments,”
“inventory,” “documents,” “equipment,” “fixtures,” “investment property,”
“deposit accounts,” “letter of credit rights,” “supporting obligations,”
“proceeds,” and “products”) are used herein as therein defined as of such
date.  This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement
by signing any such counterpart.

          SECTION
21.  Severability.

          The
provisions of this Agreement are independent of and separable from each other,
and no such provision shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other such provision may be invalid
or unenforceable in whole or in part.

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          SECTION
22.  Waiver of Jury Trial; Confession of Judgment.

          WAIVER
OF JURY TRIAL.  EACH OBLIGOR AND
SECURED PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING.  OBLIGOR
FURTHER ACKNOWLEDGES AND AGREES THAT WAIVER OF JURY TRIAL IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AGREEMENT AND THAT SECURED PARTY WOULD NOT HAVE AGREED
TO MAKE ANY LOAN OR ACCEPT THIS AGREEMENT OR ANY NOTE WITHOUT SUCH AGREEMENT.

          CONFESSION
OF JUDGMENT.  OBLIGOR HEREBY
IRREVOCABLY AUTHORIZES AND EMPOWERS SECURED PARTY, BY ITS ATTORNEY OR BY THE
PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN COMMONWEALTH OF PENNSYLVANIA OR
IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT, TO APPEAR FOR OBLIGOR AND CONFESS AND ENTER
JUDGMENT AGAINST OBLIGOR IN FAVOR OF SECURED PARTY IN ANY JURISDICTION WHERE
OBLIGOR OR ANY OF ITS PROPERTY IS LOCATED FOR THE AMOUNT OF ALL OBLIGATIONS AND
OTHER SUMS DUE OR TO BECOME DUE BY OBLIGOR TO SECURED PARTY UNDER THIS
AGREEMENT, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS
(INCLUDING ATTORNEYS’ FEES), WITH OR WITHOUT DECLARATION, WITHOUT STAY OF
EXECUTION AND WITH RELEASE OF ALL ERRORS AND THE RIGHT TO ISSUE EXECUTION
FORTHWITH, AND FOR DOING SO THIS AGREEMENT OR A COPY HEREOF VERIFIED BY
AFFIDAVIT SHALL BE SUFFICIENT WARRANT. 
OBLIGOR HEREBY WAIVES ALL RELIEF FROM ANY APPRAISEMENT, STAY OR
EXEMPTION LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER ENACTED.  THIS AUTHORITY AND POWER SHALL NOT BE
EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM
TIME TO TIME AS OFTEN AS THERE IS OCCASION THEREFOR UNTIL ALL SUMS DUE AND
OWING HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.

- 11 -

          OBLIGOR
HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS SECURED PARTY, BY ITS ATTORNEY OR BY
THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE COMMONWEALTH OF
PENNSYLVANIA OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON THE OCCURRENCE
OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, TO APPEAR FOR OBLIGOR, AS
WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR THROUGH OBLIGOR, IN AN ACTION OR
ACTIONS FOR REPLEVIN OR OTHER APPROPRIATE ACTION AGAINST OBLIGOR TO CONFESS AND
ENTER JUDGMENT AGAINST OBLIGOR, FOR RECOVERY OF POSSESSION OF ANY OR ALL OF THE
MORTGAGED PROPERTY AND/OR THE PROCEEDS THEREOF, TOGETHER WITH COSTS OF SUIT AND
WITH ACTUAL COLLECTION COSTS (INCLUDING ATTORNEYS’ FEES), WITHOUT THE NECESSITY
OF FILING ANY BOND AND WITHOUT STAY OF EXECUTION OR APPEAL AND WITH RELEASE OF
ALL ERRORS AND FOR DOING SO THIS AGREEMENT OR A COPY HEREOF VERIFIED BY
AFFIDAVIT SHALL BE SUFFICIENT WARRANT, WHEREUPON A JUDGMENT AND/OR WRIT OF
POSSESSION AND/OR REPLEVIN OR OTHER APPROPRIATE PROCESS TO OBTAIN POSSESSION OF
SUCH MORTGAGED PROPERTY MAY BE ISSUED FORTHWITH, WITHOUT ANY PRIOR WRIT OR
PROCEEDING WHATSOEVER.  THIS AUTHORITY
AND POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE IS OCCASION THEREFOR
UNTIL ALL SUMS DUE AND OWING HEREUNDER ARE FULLY PAID, PERFORMED, DISCHARGED
AND SATISFIED.

Signatures follow
on next page.

- 12 -

          IN
WITNESS WHEREOF, Obligor, intending to be legally bound, has executed or caused
the execution of this Agreement, under seal, as of the date first above
written.

	
   

	
  NEOSE TECHNOLOGIES, INC.

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
  By:

	
  /s/ C. Boyd Clarke

	
   

	
   

	
  

  
	
   

	
   

	
  Name:  C.
  Boyd Clarke

	
   

	
   

	
  Title:    President and CEO

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
  BROWN BROTHERS HARRIMAN & CO.

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
  By:

	
  /s/ J. Clark O’Donoghue

	
   

	
   

	
  

  
	
   

	
   

	
  Name:  J.
  Clark O’Donoghue

	
   

	
   

	
  Title:    Managing Director

- 13 -

Schedule 1

to

General Security Agreement

	
  Legal Name of Obligor:

	
  Neose Technologies, Inc.

	
   

	
   

	
  Jurisdiction of Formation:

	
  Delaware

	
   

	
   

	
  Pennsylvania Corporate

	
   

	
  Tax Identification No.:

	
  6529-840

	
   

	
   

	
  FEIN:

	
  13-3549286

	
   

	
   

	
  Chief Executive Office:

	
  102 Witmer Road

	
   

	
  Horsham, PA 
  19044  (owned location)

	
   

	
   

	
  Other Collateral Locations:

	
  201 Witmer Road

	
   

	
  Horsham, PA 
  19044  (leased location)

	
   

	
   

	
   

	
  102 Rock Road

	
   

	
  Horsham, PA 
  19044  (leased location)

- 14 -Exhibit 10.4

OPEN-END MORTGAGE AND SECURITY AGREEMENT

This
Mortgage Secures Future Advances

                    THIS
MORTGAGE is dated as of the 23rd day of February, 2004 (the “Mortgage”) by and between NEOSE
TECHNOLOGIES, INC., a Delaware corporation, with an address of 102 Witmer Road,
Horsham, Pennsylvania 19044 (the “Mortgagor”)
and BROWN BROTHERS HARRIMAN & CO., a private bank organized as a
partnership, with its place of business at 1531 Walnut Street, Philadelphia,
Pennsylvania 19102 (the “Mortgagee”).

W I T N E S S E T H:

                    WHEREAS,
at the request of Mortgagor, the Montgomery County Industrial Development
Authority (the “Authority”) has
issued a Variable Rate Revenue Bond (“Neose
Technologies, Inc. Project”) Series 2004, in the principal amount of
One Million and 00/100 Dollars ($1,000,000.00) (the “Bond”); and

                    WHEREAS,
the obligations of the Mortgagor to repay the loan represented by the Bond (the
“Loan”) and certain other
covenants and representations of Mortgagor, are set forth in that certain
Financing Agreement by and among Mortgagor, Authority and Mortgagee, dated the
date hereof (the “Financing Agreement”),
the terms and conditions of which are incorporated herein by reference; and

                    WHEREAS,
the obligations of the Mortgagor to Mortgagee under the Bond and the Financing
agreement are further secured by that certain Security Agreement from Mortgagor
to Mortgagee dated of even date herewith (the “Security
Agreement”)(the Financing Agreement, the Bond, the Security
Agreement and all other documents, instruments or agreements evidencing and/or
securing the Loan, as the same may be amended, modified, or supplemented from
time to time, are sometimes collectively referred to below as the “Financing Documents”); and 

                    WHEREAS,
as security for the payment of the Bond and the obligations of Mortgagor under
the Financing Agreement, Mortgagee has required Mortgagor to execute and
deliver this Mortgage; and

                    WHEREAS,
the maximum amount of indebtedness intended to be secured hereby is One Million
and 00/100 Dollars ($1,000,000.00).

                    Capitalized
terms used herein and not otherwise defined shall have the meanings given to
them in the Financing Agreement.

                    NOW,
THEREFORE, in order to secure the obligations of Mortgagor as set forth in the
Bond and the Financing Agreement (the “Obligations”),
and in consideration of the premises and the further sum of Ten Dollars
($10.00) to Mortgagor in hand well and truly paid by Mortgagee at or before the
ensealing and delivery hereof, the receipt whereof is hereby acknowledged,
Mortgagor has granted, bargained and sold, aliened, enfeoffed, released,
remised, 

conveyed, confirmed and mortgaged, and by these presents does grant,
bargain and sell, alien, enfeoff, release, remise, convey, confirm, and
mortgage unto Mortgagee and its successors and assigns, that certain premises
located at 102 Witmer Road, Horsham Township, Montgomery County, Pennsylvania,
as more particularly described in Exhibit “A” attached hereto and made a part
hereof (the “Real Estate”);

                    TOGETHER
with the appurtenances and all the estates and rights of Mortgagor in and to
the Real Estate, including without limitation the fixtures, equipment,
reversions, remainders, easements, issues and profits arising or issuing from
the Real Estate and the improvements thereon including, but not limited to the
rents, issues and profits arising or issuing from the Real Estate and the
improvements thereon, including but not limited to the rents, fixtures,
equipment, issues and profits arising or issuing from all insurance policies,
sale agreements, licenses, options, leases and subleases now or hereafter
entered into covering any part of said Real Estate or the buildings, structures
and improvements thereon, all of which insurance policies, sale agreements,
licenses, options, leases, subleases, rents, issues and profits are hereby
assigned and shall be caused to be assigned to Mortgagee by Mortgagor.  Mortgagor will execute and deliver to
Mortgagee on demand such assignments as Mortgagee may require to implement this
assignment;

                    TOGETHER
with all the right, title and interest of Mortgagor in and to all streets, roads
and public places, opened or proposed, adjoining the Real Estate, and all
easements and rights of way, public or private, now or hereafter created or
used in connection therewith;

                    TOGETHER
with all the right, title and interest of Mortgagor, now owned or hereafter
acquired, in and to any and all sidewalks and alleys adjacent to the Real
Estate;

                    TOGETHER
with all buildings and improvements of every kind and description now or
hereafter erected or placed on the Real Estate;

                    TOGETHER
with all of Mortgagor’s right, title and interest now owned or hereafter
acquired in and to all heating, plumbing, sprinkler, water, gas, electric
power, lighting and air conditioning equipment, elevators, machinery, fixtures,
equipment, furniture, building materials of any kind or nature, together with
all replacements thereof and additions thereto, now, or at any time hereafter,
affixed or attached to said Real Estate, buildings, structures and improvements
(hereinafter collectively called “Personal
Property”), all of which Mortgagor represents and warrants are and
will be owned by Mortgagor free from any prior conditional sales, chattel
mortgages, security interests, liens, pledges, hypothecations, charges or
encumbrances other than the Prior Mortgages (as hereinafter defined) and those
liens, encumbrances and other matters affecting title to the Mortgaged Property
(as hereinafter  defined) set forth in Exhibit “B” attached hereto and
incorporated herein by this reference (the “Permitted Encumbrances”), and
is intended to be subject to the lien of this Mortgage as if part of the
realty.  This provision shall be
self-operative and this Mortgage, to the extent that any such Personal Property
or other property subject to this Mortgage shall not be deemed to be part of
the realty, shall constitute a security agreement under the Pennsylvania
Uniform Commercial Code, and Mortgagor shall execute and deliver to Mortgagee
on demand, and hereby irrevocably appoints Mortgagee, or any person designated
by Mortgagee, the attorney-in-fact of Mortgagor to execute, deliver and file
such financing statements and other instruments as Mortgagee may reasonably
require in order to perfect and maintain such security interest under the
Pennsylvania 

2

Uniform Commercial Code;

                    TOGETHER
with all accounts, contract rights, accounts receivable, agreements of sale,
and claims of any sort relating to or arising out of the Real Estate whether
now owned or hereafter acquired;

                    TOGETHER
with all awards, damages, payments and other compensation, and claims thereof
and rights thereto, which may result from a taking or injury by virtue of the
exercise of the power of eminent domain of or to, or from any damage, injury or
destruction by casualty or otherwise caused to, the Real Estate and said
improvements and personalty, or any part thereof, including insurance proceeds,
or from any change of grade or vacation of any street abutting thereon, all of
which are hereby assigned to Mortgagee to the fullest extent permitted by law,
Mortgagee being hereby irrevocably appointed attorney-in-fact for Mortgagor to
collect and receive any such awards, damages, payments and compensation from
the authorities or insurers making the same, and to give receipts and
acquittances therefor, and to institute, appear in and prosecute any proceeding
therefor, it being agreed that all sums collected by or paid to Mortgagee
pursuant to this assignment, net of any cost incurred by Mortgagee in collecting
the same (including attorneys’ fees), shall be applied to the payment of the
Obligations whether or not then due and payable, or to the restoration of the
Mortgaged Property (hereinafter defined) as Mortgagee shall elect, unless
otherwise set forth herein;

                    TOGETHER
with any and all proceeds (including insurance and condemnation proceeds and
proceeds of other proceeds) of any of the foregoing;

                    All
of the property and rights hereinabove described or mentioned being hereinafter
collectively called the “Mortgaged Property”.

                    TO
HAVE AND TO HOLD the Mortgaged Property unto Mortgagee, its successors and
assigns, forever;

                    AND,
at all times until the Obligations is paid in full with interest and faithfully
and strictly performed, Mortgagor does hereby covenant, promise and agree with
Mortgagee as follows:

ARTICLE I

Covenants As To Taxes and Assessments

          1.1     Mortgagor
will pay and discharge (i) all the taxes, general and special, levies and
assessments heretofore or hereafter charged, assessed or levied against the
Mortgaged Property or any part thereof by any lawful authority, or which
otherwise may become a lien thereon (collectively, the “Taxes”); and (ii) all water and sewer
rents which may be assessed or become liens on the Mortgaged Property before
the date on which any interest or penalties shall commence to accrue thereon,
and produce to Mortgagee evidence of such payment not less than ten days
thereafter.   In default of any of the
above-described payments, Mortgagee may, but shall not be obligated to, pay the
same, and such payment by Mortgagee shall be repaid by Mortgagor to Mortgagee
on demand, shall be secured hereby, and shall bear interest at the Default Rate
as defined in the Financing Agreement (the “Default
Rate”) from the date 

3

Mortgagee makes such payment until such sums are repaid in full.  Mortgagor shall promptly cause to be paid
and discharged, any lien or charge whatsoever which by any present or future
law may be or become superior, either in lien or in right of distribution out
of the proceeds of any judicial sale of the Mortgaged Property, to the liens
created hereby.  Mortgagor will cause to
be paid, when due, all charges for utilities whether public or private.

          1.2     Upon
the request of Mortgagee, Mortgagor will pay on a monthly basis to Mortgagee, a
sum equal to one-twelfth (1/12th) of the real estate taxes, water rents, sewer
rents, payments in lieu thereof, special assessments and any other tax,
assessment, lien, claim or encumbrance which may at any time be or become a
lien on the Mortgaged Property prior to, or on a parity with, the lien of this
Mortgage so as to enable Mortgagee to pay the same at least thirty (30) days
before they become due.  If special
assessments against the Mortgaged Property may be paid in installments and
Mortgagor elects to do so, the monthly payments to Mortgagee for such special
assessments shall be one-twelfth (1/12th) of the then current annual installment.

          No amounts
so paid shall be deemed to be trust funds but may be co-mingled with general
funds of Mortgagee, and no interest shall be payable thereon.  If, pursuant to any provision of this
Mortgage, the whole amount of said principal debt remaining or any installment
of interest, principal or principal and interest becomes due and payable,
Mortgagee shall have the right, at its election, to apply any amounts so held
against all or any of the Obligations, any interest thereon or in payment of
the premiums or payments for which the amounts were deposited.  Mortgagor will furnish to Mortgagee tax
bills in sufficient time to enable Mortgagee to pay such taxes, assessments,
levies, charges and fees, before interest and penalties accrue thereon.

          1.3     Mortgagor
covenants and agrees to pay to Mortgagee the principal and interest hereby
secured pursuant to and in accordance with the terms of the Financing Agreement
without deduction or credit for any amount for Taxes assessed or to be assessed
against the Mortgaged Property.

ARTICLE II

General Representations and Covenants of
Mortgagor

          2.1     Mortgagor
will observe and perform all of the terms, covenants and conditions on the part
of Mortgagor to be observed and performed under this Mortgage and shall pay and
faithfully and strictly perform all of the Obligations.

          2.2     Mortgagor
warrants and covenants that it has good and marketable fee simple title to the
Mortgaged Property, subject to no liens, claims, security interests, pledges,
hypothecations or other encumbrances or charges, other than the Prior Mortgages
(as hereinafter defined) and Permitted Encumbrances.  Mortgagor warrants that it has full power and lawful authority to
execute and deliver this Mortgage and to mortgage to Mortgagee all of the
property and rights purported to be mortgaged by it hereunder.  Mortgagor will forever warrant and defend
the title to the Mortgaged Property unto Mortgagee against the claims and
demands of all persons whomsoever.

4

          2.3     Mortgagor
will not, without the prior written consent of Mortgagee, cause or permit any
building or improvement comprising part of the Mortgaged Property to be removed,
demolished or structurally altered, in whole or in part, or any material
fixture therein to be removed or destroyed. 
Mortgagor will not abandon the Mortgaged Property or cause or permit any
waste thereto and will at all times maintain the Mortgaged Property in
substantially its current condition, normal wear and tear excepted.

          2.4     Throughout
the term of this Mortgage, Mortgagor, at its sole cost and expense, will take
good care of the Mortgaged Property and will keep the same in good order and
condition, and make all necessary repairs thereto, interior and exterior
(including parking areas), structural and non-structural, ordinary and
extraordinary, and unforeseen and foreseen. 
All repairs made by Mortgagor shall be equal in quality and class to the
original work.  The necessity for and
adequacy of repairs to the buildings and improvements pursuant to this Mortgage
shall be measured by the standard which is appropriate for structures of
similar construction and class, provided that Mortgagor shall in any event make
all repairs necessary to avoid any structural damage or injury to the buildings
and improvements to keep the buildings and improvements in a proper condition.

          2.5     Mortgagor
will permit Mortgagee and Mortgagee’s representatives to enter the Mortgaged
Property at reasonable times, upon five (5) days’ prior notice and during
regular business hours to inspect the same. 
In the absence of an Event of Default, such inspections shall be limited
to four (4) times in any calendar year. 
In case of any Event of Default, as defined hereinafter, Mortgagee may,
at its option, enter the Mortgaged Property to protect, restore or repair any
part thereof, but Mortgagee shall be under no obligation to do so.  Mortgagor will repay to Mortgagee on demand
any sums paid by Mortgagee to protect, restore or repair any part of the
Mortgaged Property, with interest thereon at the Default Rate, and, until so
paid, the same shall be secured by this Mortgage.

          2.6     Throughout
the term of this Mortgage, Mortgagor, at its sole cost and expense, shall
promptly comply with all present and future laws, ordinances, orders, rules,
regulations and requirements of all federal, state and municipal governments,
courts, departments, commissions, boards and officers, any national or local
Board of Fire Underwriters, or any other body exercising functions similar to
those of any of the foregoing, which may be applicable to the Mortgaged
Property, the maintenance and use thereof and the sidewalks and curbs adjoining
the Mortgaged Property whether or not such law, ordinance, order, rule,
regulation or requirement shall necessitate structural changes or improvements,
or the removal of any encroachments or projections, ornamental, structural or
otherwise, onto or over property contiguous or adjacent thereto, any such
structural changes or improvements or removal of encroachments to be performed
with the consent of Mortgagee, which consent will not be unreasonably
withheld.  Mortgagor will comply with
all orders and notices of violation thereof issued by any governmental authority.  Mortgagor will pay all license fees and
similar municipal charges for the use of the Mortgaged Property and the other
areas now or hereafter comprising part thereof or used in connection therewith
and will not, unless so required by any governmental agency having
jurisdiction, discontinue use of the Mortgaged Property without prior written
consent of Mortgagee.  If Mortgagor
shall fail to perform any covenant herein, Mortgagee may (but shall be under no
obligation to) perform such covenant for the account of Mortgagor and any sums
paid by Mortgagee in such event shall be repaid by Mortgagor to Mortgagee with
interest thereon at the Default Rate and, until so paid, the same shall be
secured by this Mortgage.

5

          2.7     Mortgagor
shall not, without the prior written consent of Mortgagee, by deed, mortgage,
pledge, lease, easement or other instrument grant, mortgage, pledge, convey,
assign, devise or otherwise transfer all or any part of the Mortgaged Property
or any interest therein, directly or indirectly, nor shall Mortgagor suffer or
permit such conveyance, assignment or transfer by execution sale or operation
of law or otherwise.

          2.8     Mortgagor
shall promptly pay upon demand, and presentation of invoices or bills, with
interest thereon at the Default Rate, all expenses and costs incurred by
Mortgagee, including reasonable attorney’s fees in connection with any action,
proceeding, litigation or claim instituted or asserted by or against Mortgagee
or in which Mortgagee becomes engaged, wherein it becomes necessary in the
reasonable opinion of Mortgagee to defend or uphold the lien of this Mortgage,
or the validity or effectiveness of any assignment of any claim, award,
payment, property damage, insurance policy or any other right or property
conveyed, encumbered or assigned by Mortgagor to Mortgagee hereunder, or the
priority of any of the same, and all such expenses and costs, and interest
thereon, may be added to and become part of the principal indebtedness of
Mortgagor hereunder, bear interest at the Default Rate and be secured by this
Mortgage.

          2.9     To
further secure payment of the Obligations, Mortgagor hereby pledges, assigns
and grants to Mortgagee a continuing security interest in and lien on all of
Mortgagor’s Personal Property (excluding Mortgagor’s intellectual property and
Liquidity, except as otherwise provided in the Financing Agreement Agreement),
accounts, contract rights, accounts receivable now owned or existing or
hereafter acquired and all proceeds thereof, whether now owned or hereafter
acquired and all proceeds of all of the foregoing.  The parties hereto agree that the security interest created
hereunder is valid under the Pennsylvania Uniform Commercial Code and is a
presently existing security interest and attaches to Mortgagor’s
above-mentioned Personal Property as of the date hereof.

          2.10   With
the exception of Permitted Liens (as defined below), Mortgagor will not,
without the prior written consent of Mortgagee, create or suffer to be created
any security interest under the Pennsylvania Uniform Commercial Code, or other
encumbrance in favor of any party other than Mortgagee, or create or suffer any
reservation of title by any such other party, with respect to any Personal
Property nor shall any such Personal Property be the subject matter of any
lease or other transaction whereby the ownership or any beneficial interest in
any of such Personal Property is held by any person or entity other than
Mortgagor (or Mortgagee as provided herein).  All such Personal Property shall be purchased for cash or in such
manner that no lien shall be created thereon except the lien of this Mortgage,
the Prior Mortgages and liens as otherwise permitted in the Financing Agreement
and the Security Agreement (collectively “Permitted
Liens”), unless Mortgagee shall agree in writing to the contrary
before a contract to purchase any such Personal Property is executed.  Mortgagor will deliver to Mortgagee on
demand, any contracts, bills of sale, statements, receipted vouchers or
agreements, under which Mortgagor claims title to any Personal Property
incorporated in the improvements or subject to the lien of this Mortgage.

          2.11   Mortgagor
shall at its expense, promptly upon request of Mortgagee (i) do all acts and
things, including but not limited to the execution of any further assurances,
deemed necessary by Mortgagee, to establish, confirm, maintain and continue the
lien created and intended to be created hereby, all assignments made or
intended to be made pursuant hereto, and 

6

all other rights and benefits conferred or intended to be conferred on
Mortgagee hereby, and Mortgagor shall pay all costs incurred by Mortgagee in
connection therewith, including all filing and recording costs, cost of
searches, and reasonable counsel fees incurred by Mortgagee; and (ii) furnish
Mortgagee with a written certification signed by Mortgagor, or an officer of
Mortgagor on Mortgagor’s behalf, as to all then existing leases for space
covering any part of the Mortgaged Property, the names of the tenants, the
rents payable thereunder and the dates to which such rents are paid, together
with executed copies of all such leases.

          2.12   Mortgagor
will promptly perform and observe, or cause to be performed or observed, all of
the terms, covenants and conditions of all instruments of record affecting the
Mortgaged Property, noncompliance with which may affect the security of this
Mortgage or which may impose any duty or obligation upon Mortgagor or any
lessee or other occupant of the Mortgaged Property or any part thereof, and
Mortgagor shall do or cause to be done all things necessary to preserve intact
and unimpaired any and all easements, appurtenances and other interests and
rights in favor of or constituting any portion of the Mortgaged Property.

          2.13   To
further secure payment of the Obligations, Mortgagor hereby assigns and sets
over unto Mortgagee the interest of such Mortgagor as lessor in and to all
leases, written or oral, of the Mortgaged Property or any part thereof now or
hereafter made, executed or delivered. 
Mortgagor hereby authorizes and empowers Mortgagee to collect the rents
under the aforesaid leases as they become due, and hereby directs each and all
of the tenants of the Mortgaged Property, upon demand made by Mortgagee, to pay
such rents as they become due to Mortgagee; provided, however, no such demand
shall be made unless and until there has occurred an Event of Default under the
terms of this Mortgage, and until such demand is made, Mortgagor is authorized
to collect the aforesaid rents; but such privilege of Mortgagor to collect
rents as aforesaid shall not operate to permit the collection by Mortgagor of
any installment of rent for more than one month in advance.

          2.14   Mortgagor
will not, without the prior written consent of Mortgagee, assign the rents of
the Mortgaged Property or any part thereof, nor consent (other than in the
ordinary course of business) to the cancellation, modification or surrender of
any lease now or hereafter covering the Mortgaged Property, or any part
thereof; nor accept any prepayment of rents under any such lease more than one
month in advance; and any such purported assignment, cancellation,
modification, surrender or prepayment made without consent of Mortgagee shall
be void as against Mortgagee.

          2.15   Mortgagor
shall, upon the request of Mortgagee, given 15 days in advance, furnish a duly
acknowledged written statement to Mortgagee, or any proposed assignee of this
Mortgage, setting forth the amount of the Obligations and stating either that
no off-sets or defenses exist against the Obligations, or, if such off-sets or
defenses are alleged to exist, the nature and amount thereof.

          2.16   Mortgagor
agrees not to do or suffer any act or thing which would impair the security of
the Obligations or of the lien of this Mortgage upon the Mortgaged Property, or
the rents, issues or profits thereof.

7

ARTICLE III

Compliance with Environmental Laws

          3.1     Mortgagor
shall comply with all Applicable Environmental Laws.  As set forth herein, the term “Applicable
Environmental Laws” shall mean any and all existing or future
federal, state and local statutes, ordinances, regulations, rules, executive
orders, standards and requirements, including the requirements imposed by
common law, concerning or relating to industrial hygiene and the protection of
health and the environment including, without limitation:  (i) the Comprehensive Environmental
Response, Compensation and Liability act of 1980, as amended, 42 U.S.C. §9601 et
seq. (“CERCLA”); (ii) the Resource Conservation and Recovery Act of
1976, as amended, 42 U.S.C. §6901 et. seq. (“RCRA”); (iii) the
Clean Air Act, as amended, 42 U.S.C. §7901 et seq.; (iv) the
Clean Water Act, as amended, 33 U.S.C. §1251 et seq.; (v) the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. §1801 et seq.;
(vi) the Toxic Substances Control Act, 15 U.S.C. §2601 et seq.,
as amended (“TSCA”), and the Pennsylvania Hazardous Sites Cleanup Act, 35 P.S.
§6020.101 et seq. (“HSCA”). 
Any terms mentioned herein which are defined in any Applicable
Environmental Laws shall have the meanings ascribed to such terms in such laws;
provided, however, that if any of such laws are amended so as to broaden any
term defined therein, such broader meaning shall apply subsequent to the
effective date of such amendment.

          3.2     Mortgagor
represents and warrants that Mortgagor has not and will not engage in
operations upon the Mortgaged Property, which involve the generation,
manufacture, refining, transportation, treatment, use, storage, handling or
disposal of any Hazardous Materials (as herein defined) other than in
compliance with all Applicable Environmental Laws.  For the purposes of this Mortgage, the term “Hazardous Materials”
shall include, but shall not be limited to, petroleum fuel products, any
petroleum or petroleum byproducts, PCBs, asbestos, friable asbestos or
asbestos-containing material, transformers or other equipment which contain
dielectric fluid containing levels of polychlorinated biphenyls in excess of 50
parts per million, any flammable explosives, radioactive materials, any
“Hazardous Substance”, as such term is defined in 42 U.S.C. Section 9601(14) or
35 P.S. Section 6020.103 (herein, “Hazardous
Substance”), any “Hazardous Waste”, as such term is defined in 42
U.S.C. Section 6903 (5) or 35 P.S. Section 6020.103 (herein, “Hazardous Waste”), or any other material,
substance, pollutant or contaminant that is considered hazardous, radioactive
or toxic under any applicable federal, state or local statues, ordinances,
rules or regulations now or at any time hereafter in effect.

          3.3     Mortgagor
has not caused or permitted to exist and shall not cause or permit to exist, as
a result of any intentional or unintentional action or omission on its part, or
any tenant’s part, any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, or dumping from, on or about the Mortgaged Property of any
Hazardous Materials other than in compliance with all Applicable Environmental
Laws.  Mortgagor will promptly cause the
removal and remediation of any Hazardous Materials which may hereafter be found
on the Mortgaged Property other than Hazardous Material that are being
maintained in compliance with all Applicable Environmental Laws.  The Mortgaged Property does not contain any
underground storage tanks, except as may have been previously disclosed in
writing to Mortgagee.

          3.4     To
the best of Mortgagor’s knowledge (and not imputed knowledge), and without a
duty to investigate on the part of Mortgagor, Mortgagor represents and warrants
that no 

8

adjacent property has been used in such a manner that Hazardous
Materials may be in the subsurface water supply.  

          3.5     Mortgagor
will permit Mortgagee and Mortgagee’s representatives to enter the Mortgaged
Property at reasonable times to inspect the same, for purposes of making site
and building investigations and performing soil, groundwater, structural and
other tests, upon three days prior notice to Mortgagor.  In the absence of an Event of Default, such
inspections and investigations shall be limited to four (4) times in any
calendar year.  Mortgagor shall provide
Mortgagee, its agents, employees, and representatives from time to time upon
request with access to and copies of any and all data and documents relating to
or dealing with any potentially Hazardous Materials used, generated,
manufactured, found, stored or disposed of, on, under, or about the Mortgaged
Property or transported to or from the Mortgaged Property within thirty (30)
days of a request therefore.  Mortgagor
shall bear the cost of such copies and reimburse Mortgagee for all reasonable
attorneys’ fees, copy costs, and other related costs incurred to procure such
information as Mortgagee, in its sole discretion deems necessary.

          3.6     Mortgagor
shall furnish to Mortgagee, immediately upon receipt or dispatch, a copy of any
notice, summons, citation, directive, letter or other written communication from
or to any federal, state or local environmental agency or department, which may
evidence or result in a liability under any Environmental Law such that the
costs of correcting, or of paying penalties assessed in connection with, such
liability would have a material adverse effect upon the business of Mortgagor
as now conducted or upon Mortgagor’s business, operations, properties or
condition, financial or otherwise.  In
such event, Mortgagor shall use diligent efforts to complete all remediation
which may be required by such communication from any federal, state, county,
municipal or other administrative, investigative, prosecutorial or enforcement
agency or environmental or occupational safety regulatory agency (“Environmental Regulator”) and to obtain
from all such Environmental Regulators having jurisdiction thereof, and deliver
to Mortgagee as received, such approvals and certifications as can be obtained
from such agencies from time to time to confirm Mortgagor’s completion of all
remediation and Mortgagor’s compliance with all governmental requirements
applicable thereto.

          3.7     In
the event of failure of Mortgagor to comply with any provision of this Mortgage
or any other Loan Document relating to Hazardous Substances, Environmental Laws
or Environmental Regulators, or if Mortgagee shall have reason to believe that
any Hazardous Substance has been or is likely to be released on, in or under
the Mortgaged Property (except in compliance with all Environmental Laws),
Mortgagee may do any or all of the following: (i) Mortgagee shall have the
right to investigate, or to demand that Mortgagor investigate and report to
Mortgagee on (in which case Mortgagor shall investigate and report to Mortgagee
on) the result of the investigation of such location, and if Mortgagee
requests, provide this investigation through an independent reputable
environmental consulting or engineering firm acceptable to Mortgagee; (ii)
without obligation to do so, to cure such default or to comply or cause
compliance, or to demand that Mortgagor cure such default or comply or cause
compliance, with any or all Environmental Laws.  All of the foregoing shall be at the expense of Mortgagor, and
any expense incurred by Mortgagee in connection with any of the foregoing
(including without limitation its expenses relating to attorneys fees and any
environmental consultants or engineers) shall be additional obligation of
Mortgagor hereunder which shall be payable to Mortgagee upon demand, with
interest computed at the Default Rate from the date(s) upon which said costs
and expenses were incurred by Mortgagee.

9

ARTICLE IV

Insurance, Damage or Destruction

          4.1     Mortgagor
will insure itself and the Mortgaged Property against such perils and to such
limits as Mortgagee shall reasonably require for the full replacement value of
the Mortgaged Property.  All such
insurance shall be in such forms and with such companies, and written in such
amounts and with such deductibles and endorsements, as may be reasonably
satisfactory to Mortgagee from time to time, and losses thereunder shall be
payable to Mortgagee under standard forms of lender loss payable and mortgagee
endorsements and shall require that the insurer provide Mortgagee with thirty
(30) days notice in the event of cancellation. 
In any case, Mortgagor’s obligation to carry such insurance may only be
brought within the coverage of a so-called blanket or umbrella policy or
policies of insurance carried and maintained by Mortgagor if and only if the
coverage afforded Mortgagee will not be limited, reduced or diminished by
reason of the use of a blanket or umbrella policy of insurance.

          4.2     In
the event of any material loss or damage to the Mortgaged Property, Mortgagor
will promptly (and, in any event, within five (5) days of such occurrence)
notify Mortgagee in writing of any loss thereunder, and Mortgagee may, after
notice of its intention to do so to Mortgagor, make proof of loss thereof if
not made within a reasonable time by Mortgagor.  After default Mortgagee may, after notice of its intention to do
so to Mortgagor, on behalf of Mortgagor, adjust and compromise any claims under
such insurance and collect and receive the proceeds thereof and endorse drafts
and Mortgagee is hereby irrevocably appointed attorney-in-fact of Mortgagor for
such purposes.  Mortgagee may deduct
from such proceeds any expenses properly incurred by Mortgagee in collecting
same, including reasonable counsel fees. 
Mortgagee shall hold such proceeds for the purposes set forth in Article
VI of this Mortgage.

          4.3     Mortgagor
will not maintain any other insurance on the Mortgaged Property competing or
contributing, in right of payment or otherwise, with any of the insurance required
to be afforded to Mortgagee hereunder unless Mortgagee is made the loss payee
under such other insurance.

          4.4     If
Mortgagor shall fail to procure, pay for and deliver to Mortgagee any policy or
policies of insurance or renewals thereof, Mortgagee may at its option, but shall
be under no obligation to do so, effect such insurance and pay the premiums
thereof, and Mortgagor will repay to Mortgagee on demand any premiums so paid,
with interest, at the Default Rate, and until so paid, the same shall be
secured by this Mortgage.

          4.5     Intentionally
omitted.

          4.6     Mortgagor,
at its sole cost and expense, shall obtain a mortgagee’s title insurance
policy, insuring the Mortgaged Property, in form and content and issued by a title
insurance company satisfactory to Mortgagee, which will insure Mortgagee as the
holder of a valid first mortgage lien for the full amount of the Mortgage on
the Mortgaged Property, subject only to the Prior Mortgages (as hereinafter
defined), the Permitted Encumbrances, and such exceptions as Mortgagee may
approve including, but not limited to, the satisfaction or release of all
mortgages encumbering the Mortgaged Property other than the first mortgage held
by Mortgagee.

10

ARTICLE V

Condemnation

          5.1     Mortgagor
immediately upon obtaining knowledge of the institution of any proceedings for
the condemnation of the Mortgaged Property or any part thereof shall notify
Mortgagee of the pendency of such proceedings. 
Unless and until Mortgagee shall notify Mortgagor of Mortgagee’s intent
to appear and prosecute such proceedings, pursuant to the appointment and
assignment given herein by Mortgagor to Mortgagee, Mortgagor may appear in and
prosecute such proceedings in any lawful manner; provided, however, that
Mortgagor shall have no right or authority to execute any instrument of
conveyance or confirmation in favor of the condemnor except subject hereto, nor
to accept any payment or settle or compromise any claim of Mortgagor arising
out of such condemnation proceedings without the consent of Mortgagee.  Mortgagee’s election not to appear in or
prosecute such proceedings shall not diminish any right Mortgagee may have to
receive any amount paid in connection with such condemnation and to apply such
funds as herein provided.

ARTICLE VI

Distribution Upon Damage, Destruction or
Condemnation

          6.1     In
the event the whole or materially all of the Mortgaged Property shall be
destroyed or damaged, Mortgagee shall have the right to collect the proceeds of
any insurance and to retain and apply such proceeds, at its election, to the
reduction of the Obligations or to restoration, repair, replacement, rebuilding
or alteration (herein sometimes collectively called the “Restoration”) of the Mortgaged
Property.  In the event the whole or
materially all of the Mortgaged Property shall be taken in condemnation
proceedings or by agreement between Mortgagor and Mortgagee and the condemning
authority, Mortgagee shall apply such award or proceeds thereof first to
payment of the Obligations, and any balance then remaining shall be paid to
Mortgagor.  For the purposes of this
Article VI, “materially all of the Mortgaged Property” shall be deemed to have
been damaged, destroyed or taken if the portion of the Mortgaged Property not
so damaged, destroyed or taken cannot be repaired or reconstructed so as to
constitute a complete structure and facility usable in substantially the manner
as prior to the damage, destruction or taking.

          6.2     So
long as no Event of Default has occurred, in the event of partial destruction
or partial condemnation, all of the proceeds or awards shall be collected and
held by Mortgagee, and shall be applied by Mortgagee, in its sole discretion,
to the repayment of the Obligations in the inverse order of maturity and any
other amounts due and owing under the Financing Documents, with any proceeds
then remaining being paid to Mortgagor, or to the payment of the
Restoration.  Upon the written request
of Mortgagor, Mortgagee shall apply such proceeds or awards to the payment of
the Restoration as the Restoration progresses, so long as:

                    (a)     Such
proceeds are, in Mortgagee’s reasonable judgment, sufficient to cover the cost
of such Restoration or, if insufficient, Mortgagor deposits with Mortgagee the
amount of any such deficiency,

11

                    (b)     Mortgagor
shall deliver to Mortgagee contracts, plans and specifications for the
Restoration which are satisfactory to Mortgagee,

                    (c)     the
work for which payment is requested has been done in a good and workmanlike
manner and Mortgagor presents evidence satisfactory to Mortgagee of amounts
owed or paid by Mortgagor for completed Restoration work,

                    (d)     The
Mortgaged Property, after such Restoration is or will be, in the reasonable
judgment of Mortgagee, of an economic utility not less than that of the
Mortgaged Property prior to the casualty or condemnation, and

                    (e)     Mortgagor
shall comply with such further conditions in connection with the use of such
proceeds or award as Mortgagee may reasonably request.

                              Any
balance remaining in the hands of Mortgagee after payment of such Restoration
shall be retained by Mortgagee and applied to the payment of the Obligations.

          6.3     Notwithstanding
the foregoing provisions of this Article VI regarding insurance or condemnation
proceeds, if no Event of Default has occurred, and if such proceeds do not
exceed $1,000,000.00, and if the undamaged or uncondemned portion of the
Mortgaged Property can be continuously used during the Restoration period as a
complete structure and operating facility in substantially the same manner as
prior to the damage, Mortgagor shall have the right to collect the insurance or
condemnation proceeds and apply them to the Restoration.

          6.4     No
damage, destruction or condemnation of the Mortgaged Property nor any
application of insurance or condemnation proceeds to the payment of the
Obligations shall postpone or reduce the amount of any of the current
installments of principal or interest becoming due under the Obligations which
shall continue to be made in accordance with the terms of the Obligations until
the Obligations and all interest due thereunder are paid in full.

ARTICLE VII

Events of Default and Remedies

          7.1     Each
of the following shall constitute an “Event of Default” under this Mortgage:

                    (a)     Failure
of Mortgagor to make any payment of principal or of interest as required by the
Bond;

                    (b)     Failure
of Mortgagor to pay any other fee, expense or other payment due under the
Financing Agreement or other Financing Document within five (5) days after
demand is made; or  

                    (c)     Failure
of Mortgagor to observe or perform any other covenant, agreement, undertaking,
performance or obligation of any provision hereof where such failure continues
for ten (10) business days after receipt by Mortgagor of written notice from
Mortgagee specifying such failure; 

12

                    (d)     Failure
of Mortgagor to observe or perform any covenant, agreement, undertaking,
performance or obligation under any of the other Financing Documents, or an
event of default under the Financing Agreement, subject to any applicable
notice and cure periods therein; or

                    (e)     Failure
of Mortgagor to provide the insurance required in Article IV hereof; 

                    (f)     If
any representation or warranty made by Mortgagor herein, in the Financing Documents or in any other instrument
which pertains to this Mortgage proves to be incorrect, now or hereafter, in
any material respect, when made; or

                    (g)     Any
default by Mortgagor under (i) that certain Open-End Mortgage and Security Agreement
dated January 30, 2004, from Mortgagor to Mortgagee in the amount of
$8,000,000, recorded in the Office of the Recorder of Deeds, in and for
Montgomery County; (ii) that certain Mortgage, Assignment of Leases and
Security Agreement dated March 20, 1997, from Mortgagor to Jefferson Bank in
the amount of One Million and 00/100 Dollars ($1,000,000.00), recorded in the
Office of the Recorder of Deeds in and for Montgomery County, Pennsylvania, on
March 25, 1997, at MB 7911, Pages 416, et seq., and (iii) that certain
Mortgage, Assignment of Leases and Security Agreement dated March 20, 1997,
from Mortgagor to Jefferson Bank in the amount of Eight Million Four Hundred
Thousand and 00/100 Dollars ($8,400,000.00), recorded in the Office of the
Recorder of Deeds in and for Montgomery County, Pennsylvania, on March 25,
1997, at MB 7911, Pages 388, et seq., (the “Prior
Mortgages”).

          7.2     Upon
the occurrence of an Event of Default which shall be continuing, Mortgagee
shall have the right and is hereby authorized, but without any obligation to do
so, to perform the defaulted obligation and to discharge Mortgagor’s
obligations on behalf of Mortgagor, and to pay any sums necessary for that
purpose, and the sums so expended by Mortgagee shall be an obligation of
Mortgagor, shall bear interest at the Default Rate, be payable on demand, and
be added to the Obligations.  Mortgagee
shall be subrogated to all the rights, equities and liens discharged by any
such expenditure.  Such performance by
Mortgagee on behalf of Mortgagor shall not constitute a waiver by Mortgagee of
such default and shall not limit Mortgagee’s rights, remedies and recourses
hereunder, or the Obligations, or as otherwise provided at law or in
equity.  Notwithstanding that the
Obligations shall not have been declared due and payable upon any such default,
the Obligations shall bear interest at the Default Rate from the date of notice
and demand therefor by Mortgagee until such default shall have been completely
cured and removed to the satisfaction of Mortgagee.

          7.3     Upon
the occurrence of an Event of Default, the entire unpaid balance of the
principal, accrued interest and all other sums secured by this Mortgage, shall,
at the option of Mortgagee, become immediately due and payable without notice
or demand and Mortgagee shall have and may exercise all the rights and remedies
permitted by law, including without limitation the right to foreclose this
Mortgage, and proceed thereon to final judgment and execution thereon for the entire
unpaid balance of said Obligations, with interest, at the default rate and
pursuant to the methods of calculation specified in the Bond, together with all
other sums secured by this Mortgage, all costs of suits, interest at the
Default Rate on any judgment obtained by Mortgagee from and after the date of
any Sheriff’s Sale of the Mortgaged Property until actual payment is 

13

made by the Sheriff of the full amount due Mortgagee, and reasonable
attorney’s fees, without further stay, any law, usage, or custom to the
contrary notwithstanding.  In any such
foreclosure proceedings, the Mortgaged Property shall be sold, at the sole
option of Mortgagee, either (a) in one lot or unit and, as an entirety; or (b)
in such lots or units and in such order and manner as may be required by law;
or (c) in the absence of any such requirement, in such lots or units and in
such order and manner as Mortgagee may determine in its sole discretion.

          7.4     Upon
the occurrence of an Event of Default which shall be continuing, Mortgagee
shall have the right, without further notice or demand and without the
appointment of a receiver, to enter immediately upon and take possession of the
Mortgaged Property, without further consent or assignment of Mortgagor or any
subsequent owner of the Mortgaged Property, with the right to let the Mortgaged
Property, or any part thereof, and to collect and receive all of the rents,
issues, profits and other amounts due or to become due to Mortgagor or any such
subsequent owner and to apply the same in such order of priority as Mortgagee
shall determine at its sole option, after payment of all necessary charges and
expenses in connection with the operation of the Mortgaged Property (including
any managing agent’s commission), on account of interest, principal, taxes,
water charges and assessments, insurance premiums and any advances for
improvements, alterations or repairs or otherwise pursuant to the terms hereof
for the account of Mortgagor, or on account of the Obligations.  Mortgagee may institute legal proceedings
against any tenant of the Mortgaged Property who fails to comply with the
provisions of his lease.  If Mortgagor
or any such subsequent owner is occupying the Mortgaged Property or any part
thereof, such Mortgagor or subsequent owner will either immediately vacate and
surrender possession thereof to Mortgagee or pay to Mortgagee a reasonable
rental for the use thereof, monthly in advance, and, in default of so doing,
such Mortgagor or subsequent owner may be dispossessed by legal proceedings or
otherwise.

          7.5     AFTER
AN EVENT OF DEFAULT WHENEVER AND AS OFTEN AS MORTGAGEE HAS THE RIGHT TO TAKE
POSSESSION OF THE MORTGAGED PROPERTY, MORTGAGOR IRREVOCABLY AUTHORIZES AND EMPOWERS
THE CLERK OF COURT OR ANY ATTORNEY OF ANY COURT OF COMMON PLEAS OR ANY OTHER
COURT OF COMPETENT JURISDICTION, AS ATTORNEY FOR MORTGAGOR AND MORTGAGOR’S
SUCCESSORS AND ASSIGNS OR ANY OTHER PERSONS CLAIMING ANY INTEREST UNDER OR
THROUGH MORTGAGOR, AS WELL AS FOR ALL PERSONS CLAIMING UNDER, BY OR THROUGH
MORTGAGOR, TO APPEAR FOR MORTGAGOR IN AN ACTION OR ACTIONS IN EJECTMENT OR
OTHER APPROPRIATE ACTION FOR POSSESSION OF THE MORTGAGED PROPERTY FILED BY
MORTGAGEE OR ANY HOLDER OF THIS MORTGAGE (WITHOUT THE NECESSITY OF FILING ANY
BOND AND WITHOUT ANY STAY OF EXECUTION OR APPEAL) AND IN SUCH ACTION OR ACTIONS
TO ADMIT MORTGAGEE’S SUPERIOR TITLE AND/OR CONFESS JUDGMENT FOR THE RECOVERY BY
MORTGAGEE OF POSSESSION OF THE MORTGAGED PROPERTY, FOR WHICH THIS INSTRUMENT
(OR A COPY HEREOF VERIFIED BY AFFIDAVIT OF MORTGAGEE OR ANYONE AUTHORIZED TO
MAKE SUCH AFFIDAVIT ON BEHALF OF MORTGAGEE) SHALL BE A SUFFICIENT WARRANT;
WHEREUPON A WRIT OF POSSESSION OR OTHER APPROPRIATE PROCESS TO OBTAIN
POSSESSION OF THE MORTGAGED PROPERTY MAY BE ISSUED FORTHWITH, WITHOUT ANY PRIOR
WRIT OR PROCEEDING WHATSOEVER, MORTGAGOR HEREBY RELEASING AND AGREEING TO
RELEASE MORTGAGEE AND SAID ATTORNEYS FROM ALL ERRORS AND DEFECTS 

14

WHATSOEVER OF A PROCEDURAL NATURE IN ENTERING ANY SUCH ACTION OR
JUDGMENT OR IN CAUSING ANY SUCH WRIT OR PROCESS TO BE ISSUED OR IN ANY
PROCEEDING THEREON OR CONCERNING THE SAME, PROVIDED THAT MORTGAGEE SHALL HAVE
FILED IN SUCH ACTION AN AFFIDAVIT MADE BY A PERSON ON MORTGAGEE’S BEHALF
SETTING FORTH THE FACTS NECESSARY TO AUTHORIZE THE ENTRY OF SUCH JUDGMENT ACCORDING
TO THE TERMS OF THIS INSTRUMENT, OF WHICH FACTS SUCH AFFIDAVIT SHALL BE A PRIMA
FACIE EVIDENCE; AND IT IS HEREBY EXPRESSLY AGREED THAT IF FOR ANY REASON AFTER
ANY SUCH ACTION HAS BEEN COMMENCED THE SAME SHALL BE DISCONTINUED, MARKED
SATISFIED OF RECORD OR TERMINATED, OR POSSESSION OF THE MORTGAGED PROPERTY
SHALL REMAIN IN OR BE RESTORED TO EITHER MORTGAGOR OR ANYONE CLAIMING UNDER, BY
OR THROUGH MORTGAGOR, MORTGAGEE MAY, WHENEVER AND AS OFTEN AS MORTGAGEE SHALL
HAVE THE RIGHT TO TAKE POSSESSION AGAIN OF THE MORTGAGED PROPERTY, BRING ONE OR
MORE FURTHER ACTIONS IN THE MANNER HEREINABOVE SET FORTH TO RECOVER POSSESSION
OF THE MORTGAGED PROPERTY AND TO CONFESS JUDGMENT THEREIN AS HEREINABOVE
PROVIDED, AND THE AUTHORITY AND POWER GIVEN ABOVE TO ANY SUCH ATTORNEY SHALL
EXTEND TO ALL SUCH FURTHER ACTIONS. 
MORTGAGEE SHALL HAVE THE RIGHT TO BRING SUCH AN ACTION IN EJECTMENT AND
TO CONFESS JUDGMENT THEREIN AS HEREINABOVE PROVIDED BEFORE OR AFTER COMMENCING
AN ACTION OF MORTGAGE FORECLOSURE AND BEFORE OR AFTER JUDGMENT THEREON OR
THEREIN HAS BEEN RECOVERED OR A JUDICIAL SALE OF ALL OR ANY PART OF THE
MORTGAGED PROPERTY HAS TAKEN PLACE. 

          Notwithstanding
anything in this Paragraph 7.5 to the contrary, this Paragraph 7.5 and the
authority granted by Mortgagor therein is not and shall not be construed to
constitute a “power of attorney” and is not governed by the provisions of 20
Pa.C.S. Chapter 56.  Furthermore, an
attorney or other person or entity acting under this Paragraph 7.5 shall not
have any fiduciary obligations to Mortgagor and, without limiting the foregoing
shall have NO duty to:  (1) Exercise the
powers for the benefit of Mortgagor, (2) Keep separate any assets of Mortgagor
from those of such attorney, other person or entity or Mortgagee, (3) Exercise
reasonable caution and prudence on behalf of Mortgagor, or (4) Keep a full and
accurate record of all actions, receipts and disbursements on behalf of
Mortgagor.

          MORTGAGOR
AND MORTGAGEE HEREBY CONSENT TO THE JURISDICTION OF THE COURT OF COMMON PLEAS
OF MONTGOMERY COUNTY OR THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA FOR ANY PROCEEDING IN CONNECTION HEREWITH, AND HEREBY WAIVE
OBJECTIONS AS TO VENUE AND CONVENIENCE OF FORUM IF VENUE IS IN MONTGOMERY
COUNTY, PENNSYLVANIA OR IN THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT
OF PENNSYLVANIA.  IN ANY ACTION OR SUIT
UNDER THIS MORTGAGE, SERVICE OF PROCESS MAY BE MADE UPON MORTGAGEE OR MORTGAGOR
BY MAILING A COPY OF THE PROCESS BY FIRST CLASS MAIL TO THE RECIPIENT.  MORTGAGEE AND MORTGAGOR HEREBY WAIVE ANY AND
ALL OBJECTIONS TO SUFFICIENCY OF SERVICE OF PROCESS IF DULY SERVED IN THIS 

15

MANNER.  MORTGAGOR AND
MORTGAGEE, AS AN INDEPENDENT COVENANT, HEREBY MUTUALLY WAIVE AND AGREE TO WAIVE
THE RIGHT, IF ANY, TO A JURY TRIAL IN CONNECTION WITH ANY ACTION, SUIT OR OTHER
PROCEEDING WITH RESPECT HERETO OR WITH RESPECT TO ANY TRANSACTION RELATED
HERETO.

          7.6     All
monies received by Mortgagee by virtue of the assignments made herein to
Mortgagee, after payment therefrom of the costs and expenses incident to the
enforcement or collection of the assigned rights or claims, shall be applied to
the payment of the Obligations.

          7.7     Upon
the occurrence of an Event of Default, Mortgagee may proceed to protect and
enforce its rights under this Mortgage by suit for specific performance of any
covenant herein contained, or in aid of the execution of any power herein
granted, or for the foreclosure of this Mortgage and the sale of the Mortgaged
Property under the judgment or decree of a court of competent jurisdiction, or
for the enforcement of any other right as Mortgagee shall deem most effectual
for such purpose.  The foregoing rights
shall be in addition to, and not in lieu of, the rights of Mortgagee as a secured
creditor under the Uniform Commercial Code of Pennsylvania with respect to any
portion of the Mortgaged Property which is subject to such Code.  Mortgagee may also proceed in any other
manner permitted by law to enforce its rights hereunder and under the Financing
Agreement and/or the Security Agreement.

          7.8     No
failure or delay on the part of Mortgagee in exercising any right, power or
privilege under this Mortgage, and no course of dealings between Mortgagor and
Mortgagee, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  No notice to or demand on
Mortgagor shall entitle Mortgagor to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of Mortgagee
to any other or further action in the same or other circumstances without
notice or demand.

          7.9     In
any action to foreclose this Mortgage, Mortgagee, to the fullest extent
permitted by law, shall be entitled as a matter of right to the appointment of
a receiver of the Mortgaged Property and of the rents, revenues, issues, income
and profits thereof, without notice or demand, and without regard to the
adequacy of the security for the Obligations or the solvency of Mortgagor.

          7.10   Upon
the occurrence of any Event of Default, Mortgagor shall pay monthly in advance
to Mortgagee, or to any receiver appointed at the request of Mortgagee to
collect the rents, revenues, issues and profits of the Mortgaged Property, the
fair and reasonable rental value for the use and occupancy of the Mortgaged
Property or of such part thereof as may be possessed by Mortgagor.  Upon default in payment thereof, Mortgagor
shall vacate and surrender possession of the Mortgaged Property to Mortgagee or
such receiver, and upon a failure so to do may be evicted by summary
proceedings, in the manner hereinabove provided or otherwise.

          7.11   The
rights and remedies of Mortgagee expressed or contained in this Mortgage are
cumulative and no one of them shall be deemed to be exclusive of the others or
of any right or remedy Mortgagee may now or hereafter have at law or in equity.
 The covenants of this Mortgage shall
run with the land and bind Mortgagor and, unless the context clearly indicates
a 

16

contrary intent or unless otherwise specifically provided herein, its
successors and assigns and all subsequent owners, encumbrancers, tenants and
subtenants of the Mortgaged Property and shall inure to the benefit of
Mortgagee and its successors and assigns and all subsequent holders of this
Mortgage and the Obligations.

          7.12   Mortgagee
may in its discretion from time to time grant to Mortgagor indulgences,
forbearances and extensions of the Obligations, may release, with or without
consideration, any portion of the Mortgaged Property from the lien hereof, and
may accept other and further collateral security for the payment of and strict
and faithful performance of the Obligations, all without otherwise affecting
the lien or priority of this Mortgage, and the release of any portion of the
Mortgaged Property from the lien hereof shall not affect the lien of this
Mortgage with respect to the remainder of the Mortgaged Property.

          7.13   Mortgagor
hereby waives and relinquishes the benefits of all present and future laws (i)
exempting the Mortgaged Property or any other property or any part of the
proceeds of sale thereof from attachment, levy or sale on execution, and (ii)
staying execution or other process.  

          7.14   Mortgagor
acknowledges and agrees that the occurrence of an Event of Default under the
terms of this Mortgage shall constitute a default under each of the other
Financing Documents, and a default under the other Financing Documents shall
constitute an Event of Default under this Mortgage.  The security interests, liens and other rights and interests in
and relative to any of the collateral now or hereafter granted to Mortgagee by
Mortgagor by or in any instrument or agreement, including but not limited to
this Mortgage and the other Financing Documents, shall serve as security for
any and all liabilities of Mortgagor to Mortgagee, including but not limited to
the liabilities described in this Mortgage and the other Financing Documents,
and, for the repayment thereof, Mortgagee may resort to any security held by it
in such order and manner as it may elect.

ARTICLE VIII

Indemnity

          8.1     To
the maximum extent permitted by applicable law, Mortgagor, for itself and its
successors (herein, “Indemnifying Parties”),
shall jointly and severally indemnify, hold harmless, and upon request defend
Mortgagee and its partners, employees and agents, officers, directors and
attorneys, and their respective successors and assigns (collectively, the “Indemnified Parties”) from and against any
and all claims and liabilities which any Indemnified Party may suffer, incur or
be exposed to by reason of or in connection with or arising out of the
transport, release, treatment, processing, manufacture, deposit, storage,
disposal, burial, dumping, injecting, spilling, leaking or placement at any
time heretofore or hereafter, by any person or entity, of any Hazardous Material,
including but not limited to (1) costs of or liability for investigation,
monitoring, boring, testing and evaluation; (2) costs or liabilities for
abatement, correction, response, cleanup, removal or remediation; (3) fines,
damages, penalties and other liabilities; and (4) liability for personal injury
or property damage.

17

ARTICLE IX

Miscellaneous Provisions

          9.1     All
notices, demands, requests and consents required under this Mortgage shall be
in writing.  All such notices, demands, requests
and consents shall be deemed to have been properly given if sent by United
States registered or certified mail, return receipt requested, postage prepaid,
if addressed to Mortgagee at 1531 Walnut Street, Philadelphia, Pennsylvania  19102, Attention:  J. Clark O’Donoghue, with a copy in all instances to Dean M.
Schwartz, Esquire, Stradley, Ronon, Stevens & Young, LLP, 2600 One Commerce
Square, Philadelphia, Pennsylvania 19103, and if addressed to Mortgagor at 102
Witmer Road, Horsham, Pennsylvania, 19044, Attention:  General Counsel, with a copy in all instances to Barry M.
Abelson, Esquire, Pepper Hamilton LLP, 3000 Two Logan Square, 18th
& Arch Streets, Philadelphia, Pennsylvania 19103 or at such other address
or addresses as either party may hereafter designate in writing to the
other.  Notices, demands and requests
which shall be served by registered or certified mail, return receipt
requested, upon Mortgagor or Mortgagee, in the manner aforesaid, shall be deemed
sufficiently served or given for all purposes hereunder two (2) days after the
time such notice, demand or request shall be mailed by United States registered
or certified mail, return receipt requested, postage prepaid, in any Post
Office or Branch Post Office regularly maintained by the United States
Government.

          9.2     If
Mortgagor complies with the provisions of this Mortgage and pays to Mortgagee
all sums secured hereby in accordance with the terms of and at the times
provided in the Bond and the Financing Agreement, without deduction, fraud or
delay, then this Mortgage and the estate and security interest hereby granted
and created shall then cease, terminate and become void, and Mortgagee shall
execute and deliver such mortgage satisfactions and other documents as
Mortgagor may reasonably request to evidence the same.

          9.3     Mortgagor
shall promptly cause this Mortgage to be duly recorded in the Office for the
Recording of Deeds and Mortgages in and for Montgomery County, Pennsylvania and
shall pay all recording fees and other costs incurred in connection therewith.

          9.4     All
amendments and modifications of this Mortgage must be in writing.

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

          9.6     This
Mortgage is intended to be eligible for all of the benefits of the provisions
of Act 126 of 1990, 42 Pa. C.S. Sections 8143 and 8144, but to the extent that
any rule or law would grant greater protection to Mortgagee or greater priority
for the lien of this Mortgage as it secures any advance, such rule or law shall
prevail.

          9.7     This
Mortgage is not a residential mortgage as that term is defined in 41 P.S. §101 et
seq. or Act 91 of 1983.

18

          9.8     This
Mortgage and all terms, covenants and conditions hereof shall inure to the
benefit of and bind the parties hereto, their successors and assigns, to the
extent assignments are permitted herein.

          9.9     The
interest rate on the Bond secured by this Open-End Mortgage and Security
Agreement is an adjustable rate based on the London Interbank Offering Rate or
rates otherwise established by Mortgagee from time to time, each as more
particularly set forth in the Bond.

          9.10   MORTGAGOR
CERTIFIES THAT IT HAS RECEIVED A FULLY EXECUTED COPY OF THIS MORTGAGE WITHOUT
CHARGE.

Signatures follow on
next page.

19

          IN WITNESS
WHEREOF, Mortgagor has executed and delivered this Mortgage on the day and year
above written.

	
   
	
  NEOSE TECHNOLOGIES, INC., a

  Delaware corporation

	
   
	
   

	
   
	
   

	
  Attest:
	
   
	
   
	
  By:
	
  /s/ C. Boyd Clarke
	
   

	
   
	
  

  	
   
	
   
	
  

  	
   

	
   
	
   
	
  Name: C. Boyd Clarke

	
   
	
   
	
  Title:   President and CEO

							

          THIS
MORTGAGE CONTAINS A CONFESSION OF JUDGMENT IN EJECTMENT.  A JUDGMENT FOR POSSESSION COULD BE ENTERED
AGAINST YOU WITHOUT A PRIOR HEARING OR NOTICE. 
MORTGAGOR HEREBY CERTIFIES THAT THEY HAVE CONSULTED AN ATTORNEY
REGARDING THE IMPLICATIONS OF A CONFESSION OF JUDGMENT AND KNOWINGLY,
VOLUNTARILY AND INTELLIGENTLY WAIVE ANY RIGHTS TO PRIOR NOTICE AND OPPORTUNITY
TO BE HEARD IN CONNECTION THEREWITH.

	
   
	
  NEOSE TECHNOLOGIES, INC., a

  Delaware corporation

	
   
	
   

	
   
	
   

	
  Attest:
	
   
	
   
	
  By:
	
  /s/ C. Boyd Clarke
	
   

	
   
	
  

  	
   
	
   
	
  

  	
   

	
   
	
   
	
  Name: C. Boyd Clarke

	
   
	
   
	
  Title:   President and CEO

							

The address of
Mortgagee is:

1531 Walnut Street

Philadelphia, PA  19102

	
  

  	
   

	
  On behalf of Mortgagee
	
   

20

	
  STATE OF
  PENNSYLVANIA
	
  :
	
   

	
   
	
  :
	
  SS

	
  COUNTY OF
  PHILADELPHIA
	
  :
	
   

          On
this _______ day of February, 2004, before me, a Notary Public, personally
appeared C. Boyd Clarke who acknowledged that he is President and CEO of NEOSE
TECHNOLOGIES, INC., a Delaware corporation, and that he being authorized to do
so as such officer, executed the foregoing instrument for the purposes therein
contained.

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

	
   
	
  

  	
   

	
   
	
  Notary Public

	
   
	
   

	
   
	
  My Commission Expires:

21

EXHIBIT “A”

Description of Real Estate

22

EXHIBIT “B”

Permitted Encumbrances

23

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