<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended December 31, 1996- Commission File Number: 1-12748
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1176514
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11412 Cronridge Drive, Owings Mills, MD 21117 2834
- ---------------------------------------- ---------------- ---------------
(Address of principal executive offices) (zip code) (SIC)
(410) 998-9800
-----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- ----
The number of shares outstanding of each of the issuer's classes of common stock
as of December 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
Outstanding at Outstanding at
Class December 31, 1996 December 31, 1995
--------- ------------------ --------------------
<S> <C> <C>
Class A Common Stock, $.01 par value 4,111,188 3,979,938
Class B Common Stock, $.01 par value -0- -0-
This Form 10-Q consists of 12 pages plus Exhibits
The Exhibit index is set forth on page 11
</TABLE>
1
<PAGE>
Chesapeake Biological Laboratories, Inc.
Table of Contents
Page
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as of
December 31, 1996 and March 31, 1996. . . . . 3
Consolidated Statements of Operations for
the three months and nine months ended
December 31, 1996 and 1995 . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
for the nine months ended December 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
---- ----
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 1,437,087 $ 240,583
Accounts receivable, net of allowance
for doubtful accounts of $6,650 and
$16,400, respectively 666,429 616,458
Inventories (Notes 1 and 3) 1,364,107 1,687,616
Prepaid expenses 98,251 43,637
Other receivables --- 55,168
Deferred tax asset 87,454 134,639
----------- -----------
Total current assets 3,653,328 2,778,101
PROPERTY AND EQUIPMENT, net (Notes 1 and 4) 4,129,090 1,514,167
BOND FUNDS HELD BY TRUSTEE (Notes 1 and 5) 5,353,901 ---
OTHER ASSETS (Note 5) 399,917 27,690
----------- -----------
Total assets $ 13,536,236 $ 4,319,958
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 482,707 $ 351,742
Current portion of long term debt and
capital lease obligations (Note 4) 49,769 49,769
Deferred revenue (Note 1) 238,570 215,513
----------- -----------
Total current liabilities 771,046 617,024
LONG TERM LIABILITIES:
Long term debt and capital lease obligations, net
of current portion (Notes 4 and 5) 8,566,946 105,668
Other liabilities 60,107 82,657
Deferred tax liability 145,463 130,598
----------- -----------
Total liabilities 9,543,562 935,947
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 2)
STOCKHOLDERS' EQUITY
Class A common stock, par value $.01 per share;
8,000,000 shares authorized; 4,111,188 and
3,979,938 shares issued and outstanding 41,112 39,799
Class B common stock, par value $.01 per
share; 2,000,000 shares authorized; no
shares issued and outstanding --- ---
Additional paid-in capital 3,980,869 3,827,182
Accumulated deficit (29,307) (482,970)
----------- -----------
Total stockholders' equity 3,992,674 3,384,011
----------- -----------
Total liabilities and stockholders' equity $ 13,536,236 $ 4,319,958
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
3
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUE $1,836,779 $1,182,176 $6,416,203 $4,719,732
COST OF SALES 1,091,431 641,361 4,218,315 2,972,310
--------- --------- --------- ---------
GROSS PROFIT 745,348 540,815 2,197,888 1,747,422
--------- --------- --------- ---------
OPERATING EXPENSES
General and administrative 357,464 315,202 1,045,577 938,735
Selling 100,481 99,232 311,713 352,772
Research and development 2,588 15,164 108,477 15,164
--------- --------- --------- ---------
Income from operations 284,815 111,217 732,121 440,751
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income 7,423 1,015 10,261 1,923
Interest expense (13,063) (8,439) (22,283) (23,129)
--------- --------- --------- ---------
Total (5,640) (7,424) (12,022) (21,206)
--------- --------- --------- ---------
Income before provision
for income taxes 279,175 103,793 720,099 419,545
PROVISION FOR INCOME TAXES
(Notes 1 and 5) (103,294) (35,202) (266,436) (167,818)
--------- --------- --------- ---------
NET INCOME $ 175,881 $ 68,591 $ 453,663 $ 251,727
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER COMMON AND
EQUIVALENT SHARE $ .042 $ .017 $ .110 $ .063
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 4,160,423 3,979,938 4,120,335 3,979,938
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements
4
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
----------------------------
1996 1995
---- ----
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 453,663 $ 251,727
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 268,554 236,501
Provision for deferred income taxes 62,050 112,818
(Increase) decrease in accounts receivable (49,971) 388,147
Decrease (increase) in inventories 323,509 (244,940)
(Increase) decrease in prepaid expenses (54,614) 11,976
Decrease in other receivables 55,168 11,358
Increase in deferred revenue 23,057 73,854
Increase (decrease) in accounts payable
and accrued expenses 130,965 (343,761)
Decrease in other liabilities (22,550) (12,598)
---------- ----------
Net cash provided by operating activities 1,189,831 485,082
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,733,477) (155,194)
Increase in bond funds held by Trustee (5,353,901) ---
Net cash (used in) investing activities (8,087,378) (155,194)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of short-term borrowings --- (127,991)
Proceeds from sale of stock 5,000 ---
Proceeds from long-term note and bond 8,500,000 ---
Payment of debt issuance costs (372,227) ---
Repayments of capital lease obligations and debt (38,722) (37,241)
---------- -----------
Net cash provided by (used in) financing activities 8,094,051 (165,232)
---------- -----------
Increase in cash and cash equivalents 1,196,504 164,656
CASH AND CASH EQUIVALENTS,
beginning of period 240,583 160,792
---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $1,437,087 $ 325,448
---------- -----------
---------- -----------
CASH PAID DURING THE PERIOD FOR:
Interest $ 22,283 $ 23,129
---------- -----------
---------- -----------
Income taxes $ 7,733 $ 55,000
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies:
--------------------
The consolidated financial statements included herein for Chesapeake
Biological Laboratories, Inc. (the "Company" or "Registrant") and its
wholly owned subsidiary, CBL Development Corp. (the "Subsidiary"), have
been prepared from the records of the Company without audit and include, in
management's opinion, all adjustments necessary for a fair presentation.
All such adjustments were of a normal recurring nature. The results for an
interim period are not necessarily indicative of results to be expected for
a full fiscal year. The financial statements have been prepared in
conformity with the accounting principles described in Note 1 to the
Financial Statements included in the Company's 1996 Annual Report on Form
10-K.
Inventories:
------------
Inventories consist of raw materials, work-in-process and finished goods
which are stated at the lower of cost or market, determined under the
first-in, first-out (FIFO) method.
Property and Equipment:
-----------------------
Property and equipment are stated at cost less accumulated depreciation.
Equipment is depreciated using the straight-line method over the estimated
useful lives of three to ten years. Leasehold improvements are amortized
over the term of the lease.
Bond Funds Held by Trustee:
---------------------------
Bond funds held by Trustee include the unused portion of the $7 million
bond used to finance the Company's expansion, which is being retained by
the Trustee in an interest bearing account.
Revenue Recognition:
--------------------
The Company recognizes income when product is shipped or services have been
provided to the customer. Deferred revenue represents deposits normally
required of development customers.
Cash and Cash Equivalents:
--------------------------
Cash and cash equivalents include amounts invested in accounts which are
readily convertible to known amounts of cash with a maturity of three
months or less. Also included are Company funds of $700,000 which are
being held by the Bond Trustee as collateral for the capital expansion now
in process.
Income Taxes:
-------------
The Company has adopted the provisions of Statement No. 109, "Accounting
for Income Taxes", which was issued by the Financial Accounting Standards
Board in February 1992.
Per Share Information:
----------------------
Per share information is based on the weighted average number of shares of
common and common equivalent shares outstanding. The Company uses the
Treasury Stock method to calculate the dilutive effect of outstanding
warrants and options at period end based on the Company's stock price on
the AMEX Emerging Company Marketplace.
6
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Strategic Alliances:
--------------------
As a result of negotiations during fiscal 1994, Allergan, a major customer,
has forgiven all of the indebtedness outstanding from CBL to Allergan.
Allergan remains obligated to purchase up to 240,000 units per year of
their VitraxTM requirements which are to be resold in the United States,
exclusively from CBL until February 1997. Allergan may now purchase the
United States requirements for VitraxTM in excess of 240,000 units per year
and all of its requirements for VitraxTM for resale outside of the United
States from CBL or elsewhere.
3. Inventories:
------------
Inventories consist of the following:
December 31, March 31,
1996 1996
---- ----
Raw Materials $ 390,836 $ 371,954
Work-in-Process 968,824 1,288,163
Finished Goods 4,447 27,499
---------- ----------
$1,364,107 $1,687,616
---------- ----------
---------- ----------
4. Leases:
-------
In December 1993, the Company entered into a non-cancelable operating lease
agreement for a second facility to house its corporate offices,
warehousing, shipping and receiving. The lease expires December 31, 1998,
with two renewal terms of two years each. The rent expense under the lease
agreement was $108,466 and $111,370 for the 9 months ended December 31,
1996 and December 31, 1995, respectively.
The Company's original facility is primarily used for production and is
occupied under a non-cancelable operating lease agreement with an initial
six and one-half year term, expiring December 31, 1998, with two renewal
terms of two years each. Related rental payments for the 9 months ended
December 31, 1996, and 1995, were $175,642 and $174,860, respectively. The
operating lease agreement contains terms which feature reduced rental
payments in the early years and accelerated payments toward the end of the
lease term. For financial reporting purposes, rental expense represents an
average of the minimum annual rental payments over the initial six and
one-half year term. On an annual basis, this expense is approximately
$192,000.
The Company has also entered into several non-cancelable capital lease
obligations for various pieces of laboratory equipment and furniture that
expire during fiscal year 1999.
5. Long Term Debt:
---------------
In November 1996, the Company completed the acquisition of an approximately
70,000 square foot building on 3.5 acres in Baltimore City, Maryland, which
the Company is now in the process of renovating to provide CBL with office,
warehouse and pharmaceutical manufacturing space. The purchase and
renovation costs were financed with a $7,000,000 Economic Development Bond
issued by the Maryland Industrial Development Financing Authority, and a
$1,500,000 loan from the Mayor and City Counsel of Baltimore City by and
through the
7
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Department of Housing and Community Development. The bonds are variable
rate, which may be converted to a fixed rate, tax exempt and have a maximum
rate of 12%. The loan has an interest rate which is fixed at 61/2%.
The principal portion of the Bonds, and the accrued interest thereon, is
payable from monies drawn under a direct pay Letter of Credit issued by The
First Union National Bank of North Carolina (the "Bank"), in an amount up
to $7,280,000. Interest is payable quarterly, commencing February 1, 1997,
and principal portions of the Bonds are subject to redemption, in part,
commencing November 1998, in accordance with a schedule set forth in the
Bonds. The Maturity Date is August 1, 2018. The loan from the City of
Baltimore requires interest only payments for the first two years, with
monthly principal and interest payments beginning March 1998 with the final
payment due in November 2016.
In connection with the financing the Company incurred costs of $372,000
which will be amortized over the terms of the bond.
8
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
Management Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Results of Operations
- ---------------------
The management discussion below should be read in conjunction with the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996.
Three and nine months ended December 31, 1996 and 1995:
Operating revenue was $1,837,000 for the three month period ended December
31, 1996, compared to $1,182,000 for the comparable period last year. For the
nine month period ended December 31, 1996, operating revenues of $6,416,000 were
up 36% versus operating revenues of $4,720,000 for the comparable period of last
year. Operating revenues for both new and existing customers increased over the
prior year in both the quarter and year to date period.
Gross profit on sales was $745,000 for the three month period, and
$2,198,000 for the nine month period, ended December 31, 1996, compared to
$541,000 and $1,747,000 respectively, for the same periods last year. Gross
margin was up 38% and 26% respectively for the three and nine months ended
December 31, 1996. As a percent of revenues, gross margin was 41% and 34%,
respectively, for the quarter and year-to-date ended December 31, 1996, compared
to 46% and 37% in the prior year. The decrease in the gross margin percentage
this quarter primarily reflects a provision for costs related to the move to the
recently purchased facility; and the decrease in gross margin percentage for the
nine month period ended December 31, 1996 is in part a result of the write-off
in an earlier quarter.
Selling, general and administrative expenses of $458,000 for the three
month period ended December 31, 1996, increased $44,000 when compared to the
same period last year, and increased $66,000, to $1,357,000, for the nine month
period ended December 31, 1996, as compared to the same period last year.
Selling, general and administrative expenses decreased to 25% of operating
revenue for the three months ended December 31, 1996, compared to 35% for the
same period last year, and were 21% of operating revenues for nine month period
ended December 31, 1996, versus 27% for the same period last year. Research and
development expenses were $3,000 and $108,000, respectively, for the three and
nine months ended December 31, 1996, versus $15,000 for each of the same periods
last year.
Net income was $176,000 for the three month period ended December 31, 1996,
compared to net income of $69,000 for the same period last year, with net income
of $454,000 for the nine month period ended December 31, 1996, as compared to
$252,000 for the same period last year.
Financial Condition and Liquidity
- ---------------------------------
On December 31, 1996, CBL had cash and cash equivalents of $1,437,000
compared to $241,000 at March 31, 1996. Operating cash was $737,000 plus
$700,000 held as collateral security by First Union National Bank pending an
appraisal of the new facility. Not included is the sum of $5,354,000 being held
by the Bond Trustee for the renovation and equipping of the new facility. The
Company had no balance due under its $750,000 Revolving Line of Credit from the
First Union National Bank at December 31, 1996.
Part II. Other Information
Item 1. Legal Proceedings.
------------------
None
9
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
The Annual Meeting of Stockholders of the Company was held on October 29,
1996. At the Annual Meeting, the entirety of the Board of Directors was
re-elected to serve until the next Annual Meeting of Stockholders and until
their successors shall be duly elected and shall qualify. In addition, the
Stockholders of the Corporation, by a vote of 2,312,688 shares FOR, 72,997
shares AGAINST, and 16,000 shares either abstaining or constituting broker
non-votes, approved the Fourth Incentive Stock Option Plan of the Company at the
Annual Meeting. The Fourth Incentive Stock Option Plan provides for the
issuance by the Company to eligible executives or employees of the Company of
options to purchase up to an aggregate of 800,000 shares of the Class A Common
Stock, $0.01 par value per share, of the Company. A copy of the Fourth
Incentive Stock Option Plan of the Company is being filed contemporaneously
herewith as an Exhibit to this Form 10-Q, and the terms thereof are incorporated
herein fully by this reference.
Item 5. Other Information.
------------------
As described in Form 8-K filed November 21, 1996, the Company has completed
the acquisition of an approximately 70,000 square foot building, located on 3.48
acres of land, in Baltimore City, Maryland, which is to be renovated and
equipped for use as a pharmaceutical manufacturing facility. The purchase price
paid for the land and existing improvements was comprised of $2,150,000 in cash,
and 125,000 shares of the Company's Class A Common Stock, $0.01 par value per
share. Once renovated, the facility will also include office and warehouse
space, as required to support the Company's pharmaceutical manufacturing
operations.
The cash portion of the purchase price for the land and existing building,
as well as the cost of the proposed renovations and a portion of the
pharmaceutical manufacturing equipment and related pharmaceutical facility
build-out, was financed through a $7,000,000 Economic Development Bond, issued
by the Maryland Industrial Development Financing Authority ("MIDFA"), and a
$1,500,000 loan from the Mayor and City Counsel of Baltimore, and through the
Department of Housing and Community Development c/o the City of Baltimore
Development Corporation. A closing occurred in connection with the Bond
issuance and the $1,500,000 loan, concurrent with the purchase of the land and
existing building. The Company also intends to equip the new facility with
approximately $2,900,000 of additional pharmaceutical manufacturing equipment to
be financed through equipment leasing arrangements with others.
The Bonds are variable rate, tax exempt, and are issued pursuant to a Trust
Indenture. The maximum annual interest rate on the Bonds is 12% and, subject to
certain conditions, the Bonds may be converted to fixed-rate at the option of
the Company. The principal portion of the Bonds, and the accrued interest
thereon, is payable from monies drawn under a direct pay Letter of Credit issued
by The First Union National Bank of North Carolina (the "Bank"), in an amount up
to $7,280,000. Interest is payable quarterly, commencing February 1, 1997, and
principal portions of the Bonds are subject to redemption, in part, commencing
November 1998, in accordance with a schedule set forth in the Bonds. The
Maturity Date is August 1, 2018. The Letter of Credit is issued pursuant to a
Letter of Credit and Reimbursement Agreement containing various terms and
covenants applicable to the Company, and the Company's obligations in respect of
the Letter of Credit and the Bonds are secured by substantially all of the
assets of the Company, including the new facility. MIDFA has also provided the
Bank with additional credit support for the Letter of Credit, in the form of a
$1,800,000 deficiency guaranty.
The loan from the City of Baltimore Development Corporation accrues
interest at a fixed rate of 61/2% per annum, amortized over twenty (20) years
with monthly interest only payments due through December 1998, and monthly
payments of principal and interest due thereafter through November 2016.
10
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC. AND SUBSIDIARY
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits:
10(T) Loan Agreement dated as of November 1, 1996, by and
between the Registrant and Maryland Industrial
Development Financing Authority.
10(U) Letter and Credit and Reimbursement Agreement dated
as of November 1, 1996, by and between the Registrant
and First Union National Bank of North Carolina.
10(V) Collateral Pledge Agreement dated as of November 1,
1996, by and between the Registrant and First Union
National Bank of North Carolina.
10(W) Promissory Note dated as of November 21, 1996 from
the Registrant to the Mayor and City of Council of
Baltimore, in the original principal sum of $1,500,000.
10(X) Promissory Note dated as of November 21, 1996 from
the Registrant to the Maryland Industrial Financing
Authority, in the original principal sum of $7,000,000
10(Y) Fourth Incentive Stock Option Plan of the Registrant
b. Reports on Form 8-K:
A Form 8-K was filed November 21, 1996 detailing
the acquisition and related financing of a building
and land in Baltimore City, Maryland.
11
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHESAPEAKE BIOLOGICAL
LABORATORIES, INC.
___________________________
Registrant
DATE:___________ By:_____________________________
John C. Weiss, III
President
DATE:___________ By:_______________________________
Thomas C. Mendelsohn
Secretary
12
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOAN AGREEMENT
Dated as of November 1, 1996
BETWEEN
MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY
("Issuer") and
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
("Borrower") $7,000,000
Maryland Industrial Development Financing Authority
Economic Development Revenue Bonds
(Chesapeake Biological Laboratories, Inc. Facility)
1996 Issue
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CERTAIN RIGHTS OF THE ISSUER UNDER THIS AGREEMENT HAVE BEEN ASSIGNED TO, AND
ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, AS TRUSTEE AND BRANCH BANKING AND TRUST COMPANY, AS CREDIT
FACILITY TRUSTEE UNDER A TRUST INDENTURE OF EVEN DATE HEREWITH BETWEEN THE
ISSUER, THE TRUSTEE AND THE CREDIT FACILITY TRUSTEE, AS AMENDED OR SUPPLEMENTED
FROM TIME TO TIME.
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT, dated as of November 1, 1996, between the Maryland
Industrial Development Financing Authority, a body corporate and politic and a
public instrumentality of the State of Maryland, (the "Issuer"), and Chesapeake
Biological Laboratories, Inc., a Maryland corporation (the "Borrower"),
W I T N E S S E T H:
In consideration of the respective representations and agreements contained
herein, the parties hereto, recognizing that under the Act (as hereinafter
defined) this Loan Agreement shall not in any way obligate the State (as
hereinafter defined) or any political subdivision thereof, the Department (as
hereinafter defined), the Issuer or any other public body, to raise any money by
taxation or use other public moneys for any purpose in relation to the Facility
(as hereinafter defined) and that neither the State nor any political
subdivision thereof, nor the Department, nor the Issuer, nor any other public
body, shall pay or promise to pay any debt or meet any financial obligation to
any person at any time in relation to the Facility, except from moneys received
or to be received under the provisions of this Loan Agreement, the Note, the
Insurance Agreement and from the Credit Facility Issuer under a Credit Facility
(each as hereinafter defined) or derived from the exercise of the rights of the
Issuer thereunder, agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. In addition to words and terms elsewhere defined
in this Loan Agreement or in the Indenture, the following words and terms shall
have the following meanings:
"Acquisition" or "acquisition" means, when used in regard to the Facility,
and shall include, where applicable, and without limitation, the acquisition,
construction, rehabilitation, remodeling, extension, equipping and permanent
improvement of the Facility, and paying the necessary costs of preparing,
printing and selling the Bonds, and such other costs as may be permitted by the
Act and the Code.
"Act" shall mean the MIDFA Act and the Revenue Bond Act.
"Administrative Expenses" shall mean the amounts payable pursuant to Section
7.2 hereof by the Borrower to or for the account of the Issuer to provide for
payment of the costs and expenses incurred by the Issuer.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, "control"
when used with respect to a Person means the power
<PAGE>
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Alternate Credit Facility" shall mean an irrevocable direct pay letter of
credit, insurance policy, surety bond or similar credit enhancement or support
facility for the benefit of the Trustee, the terms of which Alternate Credit
Facility shall in all respects material to the Bondholders be the same (except
for the term set forth in such Alternate Credit Facility) as the Letter of
Credit.
"Bank" shall mean First Union National Bank of North Carolina, as the issuer
of the Letter of Credit.
"Bond" or "Bonds" shall mean any bond or bonds authenticated and delivered
under the Indenture.
"Bond Documents" shall mean collectively the Indenture, the Bonds, this Loan
Agreement, the Note, the Placement Agreement, the Tender Agency Agreement and
the Remarketing Agreement.
"Bondholder" or "Bondholders" or "owner of Bonds" or "owners of Bonds" shall
mean (a) in the event that the book-entry system of evidence of transfer of
ownership in the Bonds is employed pursuant to Section 206 of the Indenture,
Cede & Co., as nominee of DTC, or its nominee, and (b) in all other cases the
person or persons in whose name any of the Bond or Bonds are registered on the
books and records of the Bond Registrar pursuant to Section 204 of the
Indenture.
"Bond Fund" shall mean the trust fund created under Section 502 of the
Indenture.
"Borrower" shall mean Chesapeake Biological Laboratories, Inc., a Maryland
corporation, and its successors and assigns and any surviving, resulting or
transferee corporation or other entity.
"Borrower Representative" shall mean any one of the persons at the time
designated to act on behalf of the Borrower by the written certificate furnished
to the Issuer and the Trustee containing the specimen signatures of such persons
and signed on behalf of the Borrower by the President or any duly authorized
Vice President of the Borrower.
"Borrower's Tax Certificate" shall mean the Borrower's Tax Certificate and
Compliance Agreement dated the date of the initial issuance and delivered of the
Bonds, together with any amendments or supplements thereto.
"Business Day" shall mean a day upon which banks in the State and in the
Commonwealth of Virginia and the State of North Carolina are open for the
transaction of business of the nature required pursuant to this Loan Agreement
and the Indenture.
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"Co-Bond Counsel" or "Bond Counsel" shall mean Chewanney A. Brown, Attorney
At Law, and Miles & Stockbridge, a Professional Corporation, or a firm of
attorneys of nationally recognized standing in matters pertaining to the
tax-exempt nature of interest on bonds issued by states and their political
subdivisions, duly admitted to the practice of law before the highest court of
any state of the United States of America and approved by the Issuer.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
related regulations, rulings and procedures issued by the United States
Department of the Treasury or its successors.
"Completion Date" shall mean that date certified by the Borrower under
Section 4.3 hereof.
"Consistent Basis" shall mean, in reference to the application of Generally
Accepted Accounting Principles, that the accounting principles observed in the
period referred to are comparable in all material respects to those applied in
the preceding period, except as to any changes consented to by the Trustee and
the Credit Facility Issuer.
"Cost of Acquisition of the Facility" shall mean the costs and allowances
for the Acquisition of the Facility which are permitted under the Act and which
include, but are not limited to, all capital costs of the Facility, including
the following: (i) the Acquisition, construction, renovation and installation of
the Facility at the Facility Site; (ii) preparation of the plans and
specifications, if any, for the Facility (including any preliminary study or
plan of the Facility or any aspect thereof), any labor, services, materials and
supplies used or furnished in the Acquisition of the Facility, the acquisition
and installation necessary to provide utility services or other services and all
real and tangible personal property deemed necessary by the Borrower in
connection with the Facility; (iii) the fees for architectural, engineering,
supervisory and consulting, services in connection with the Acquisition of the
Facility; (iv) to the extent they shall not be paid by a contractor, the
premiums of all insurance and surety and performance bonds required to be
maintained in connection with the Acquisition of the Facility; (v) any fees and
expenses in connection with the acquisition, perfection and protection of title
to the Facility Site and any fees and expenses incurred in connection with the
preparation, recording or filing of such documents, instruments or financing
statements as either the Borrower, the Issuer or the Trustee may deem desirable
to perfect or protect the rights of the Issuer or the Trustee under the Bond
Documents, the Bonds and the Letter of Credit Documents; (vi) the legal,
accounting and financial advisory fees and expenses, filing fees, and printing
and engraving costs incurred in connection with the authorization, issuance,
sale and purchase of the Bonds, and the preparation of the Bond Documents, the
Bonds, the Letter of Credit Documents, and all other documents in connection
with the authorization, issuance and sale of the Bonds; (vii) interest prior to,
during and for a period not exceeding one year after completion of construction
of the Facility; and (viii) any administrative or other fees charged by the
Issuer or reimbursement thereto of expenses, in connection with the Facility to
the Completion Date.
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"Counsel" shall mean an attorney or a firm of attorneys acceptable to the
Trustee, and may, but need not, be Co-Bond Counsel to the Issuer, the Credit
Facility Issuer or the Borrower.
"Collateral Pledge Agreement" means the Collateral Pledge Agreement dated as
of November 1, 1996 by and between the Borrower and the Bank.
"Credit Facility" shall mean the Letter of Credit or any Alternate Credit
Facility delivered to the Credit Facility Trustee, pursuant to Article VI of the
Indenture.
"Credit Facility Issuer" shall mean the Bank with respect to the Letter of
Credit and the institution issuing any Alternate Credit Facility.
"Credit Facility Trustee" shall mean the banking institution at the time
serving as Credit Facility Trustee under the Indenture, if any.
"Deed of Trust" shall mean the Deed of Trust dated as of November 1, 1996
from the Borrower to certain individual trustees named therein.
"Department" means the Department of Business and Economic Development of
the State.
"Determination of Taxability" shall be defined as and shall be deemed to
have occurred on the first to occur of the following: (i) on that date when
the Borrower files any statement, supplemental statement or other tax
schedule, return or document (whether pursuant to Treasury Regulations
Section 1.103-10(b)(2)(vi), as the same may be amended or supplemented, or
otherwise) which discloses that an Event of Taxability shall have in fact
occurred; (ii) on that date when any Bondholder or former Bondholder notifies
the Borrower or the Trustee that it has received a written opinion of bond
counsel to the effect that an Event of Taxability shall have occurred unless,
within 180 days after receipt by the Borrower of such notification from the
Trustee, any Bondholder or any former Bondholder, the Borrower shall obtain
and deliver to the Trustee and each Bondholder and former Bondholder a
favorable ruling or determination letter issued to or on behalf of the
Borrower by the Commissioner or any District Director of Internal Revenue (or
any other government official exercising the same or a substantially similar
function from time to time) to the effect that, after taking into
consideration such facts as form the basis for the opinion that an Event of
Taxability has occurred, an Event of Taxability shall not have occurred;
(iii) on that date when the Borrower shall be advised in writing by the
Commissioner or any District Director of Internal Revenue (or any other
government official or agent exercising the same or a substantially similar
function from time to time) that, based upon filings of the Borrower, or upon
any review or audit of the Borrower, or upon any other grounds whatsoever, an
Event of Taxability shall have occurred; (iv) on that date when the Borrower
shall receive notice in writing from any Bondholder or former Bondholder, or
from the Trustee, that the Internal Revenue Service (or any other government
agency exercising the same or a substantially similar function from time to
time) has assessed as includable in the gross income of any Bondholder or
former Bondholder the interest on such Bondholder's or former Bondholder's
Bond due to the occurrence of an Event of Taxability;
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provided, however, no Determination of Taxability shall occur under
subparagraph (iii) or (iv) hereof unless the Borrower has been afforded the
opportunity, at its expense, to contest any such assessment or unfavorable
ruling and, further, no Determination of Taxability shall occur until such
contest, if made, has been finally determined.
"Eminent Domain" shall mean the taking of title to, or the temporary use of,
the Facility or any part thereof pursuant to eminent domain or condemnation
proceedings, or any voluntary conveyance of any part of the Facility during the
pendency of, or as a result of a threat of, such proceedings.
"Equipment" shall mean all of the fixtures (including all leasehold
improvements), machinery, equipment and other items of tangible personal
property now owned or hereafter acquired by the Borrower and located or to be
located on or affixed to the Facility Site, together with all substitutions
therefor and all repairs, renewals and replacements thereof.
"Event of Default" or "Default" shall have the meaning set forth in Section
9.1 hereof.
"Event of Taxability" shall mean a change in law or fact or the
interpretation thereof, or the occurrence or existence of any fact, event or
circumstance (including, without limitation, the issuance of obligations or the
incurring of capital expenditures in excess of those permitted by Sections
144(a)(4)(A) of the Code, or the taking of any action by the Borrower, or the
failure to take any action,by the Borrower, or the making by the Borrower of any
misrepresentation herein or in any certificate required to be given in
connection with the issuance, sale or delivery of the Bonds) which has the
effect of causing the interest paid or payable on any Bond to become includable
in the gross income of any Bondholder or former Bondholder other than a
Bondholder or former Bondholder who is or was a "substantial user" or "related
person" as such terms are used in Section 147(a) of the Code.
"Facility" shall mean (a) the acquisition of the Facility Site, (b) the
renovation and rehabilitation of the existing improvements thereon, (c) the
acquisition and installation of certain necessary or useful equipment and
machinery, and (d) the acquisition of such other interests in land or
improvements as may be necessary and suitable for the foregoing, including roads
and rights of access, utilities and other necessary site preparation facilities.
"Facility Site" shall mean those parcels of land containing in the aggregate
approximately 3.5 acres located at 1111 South Paca Street in Baltimore City,
Maryland (as more particularly described in Exhibit A attached to the Deed of
Trust) and any and all improvements thereon including, without limitation, a
building containing approximately 70,000 square feet.
"Generally Accepted Accounting Principles" shall mean those principles of
accounting set forth in pronouncements of the Financial Accounting Standards
Board and its predecessors or pronouncements of the American Institute of
Certified Public Accountants or those principles of accounting which have
other substantial authoritative support and are applicable in the
circumstances as of the date of application, as such principles are from time
to time supplemented and amended.
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"Government Obligations" shall mean (i) direct obligations of the United
States of America, (ii) obligations unconditionally guaranteed by the United
States of America, and (iii) securities or receipts evidencing ownership
interests in obligations or specified portions (such as principal or interest)
of obligations described in clause (i) or (ii) above the full and timely payment
of which securities, receipts or obligations is unconditionally guaranteed by
the United States of America.
"Indenture" shall mean the Trust Indenture of even date herewith by and
between the Issuer, the Trustee and the Credit Facility Trustee, together with
any amendments or supplements thereto permitted thereby.
"Insurance Agreement" shall mean the Insurance Agreement dated as of
November 1, 1996 by and among the Issuer, the Bank and the Borrower, pursuant to
which the Issuer is insuring a portion of the obligations of the Borrower under
the Reimbursement Agreement.
"Issuer" shall mean the Maryland Industrial Development Financing Authority,
a body corporate and politic and a public instrumentality of the State.
"Issuer Representative" shall mean the Chairman, Vice Chairman or Executive
Director or such other persons at the time designated to act on behalf of the
Issuer by written certificate furnished to the Borrower and the Trustee
containing the specimen signatures of such persons and signed on behalf of the
Issuer by its Chairman or Vice Chairman.
"Letter of Credit" shall mean the irrevocable direct pay letter of credit
dated as of November 1, 1996 in the amount of $7,280,000 issued by the Bank,
including any extensions thereof.
"Letter of Credit Documents" shall mean the Letter of Credit, the Deed of
Trust, the Security Agreement, the Reimbursement Agreement, the Insurance
Agreement, the Pledge Agreement and the Collateral Pledge Agreement.
"Loan Agreement" shall mean this Loan Agreement and any amendments and
supplements hereto.
"Net Proceeds" when used with respect to any insurance proceeds or award
resulting from, or other amount received in connection with, Eminent Domain
shall mean the gross proceeds from such proceeds, award or other amount, less
all expenses (including attorneys' fees) incurred in the realization thereof.
"Note" shall mean the promissory note given by the Borrower pursuant to
Section 5.1 of this Loan Agreement, substantially in the form of Exhibit A
attached hereto.
"Official Intent" shall mean the action taken by the Issuer on May 23, 1996
in adopting a resolution authorizing the issuance of the Bonds.
"Overdue Rate" shall mean the Prime Rate plus two percent.
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"Payment of the Bonds" shall mean payment of (i) the principal of, premium
(if any) and interest on and purchase price of the Bonds in accordance with
their terms whether through payment at maturity, upon acceleration, prepayment
or purchase, (ii) all amounts due as Administrative Expenses or otherwise, and
(iii) any and all other liabilities and obligations arising under the Indenture
and this Loan Agreement; in any case, in such a manner that all such amounts due
and owing with respect to the Bonds shall have been paid.
"Permitted Encumbrances" shall mean, as of any particular time, "Permitted
Liens," as defined in the Reimbursement Agreement.
"Person" shall mean an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture, joint-stock company, or
a government or agency or political subdivision thereof.
"Placement Agreement" shall mean the letter agreement of even date herewith
between the Borrower and First Union National Bank of North Carolina, as
Placement Agent, providing for the introducing of the Bonds by the Placement
Agent to prospective purchasers.
"Plans and Specifications" shall mean the plans and specifications used in
the Acquisition of the Facility, as the same may be revised from time to time by
the Borrower in accordance with Section 3.3 hereof.
"Plant" shall mean all buildings, structures, improvements, fixtures,
furniture, machinery, equipment or other property (excluding inventory) of the
Borrower, now or hereafter located at or affixed to the Facility Site, including
without limitation the Facility.
"Pledge Agreement" shall mean the Pledge Agreement of even date herewith
between the Borrower and the Bank, and any amendments or supplements thereto.
"Prime Rate" shall mean the rate of interest per annum announced by First
Union National Bank of North Carolina at its principal office in Charlotte,
North Carolina from time to time to be its prime rate.
"Private Placement Memorandum" shall mean the Private Placement Memorandum
dated November 1, 1996, relating to the Bonds.
"Reimbursement Agreement" shall mean the Letter of Credit and Reimbursement
Agreement of as of November 1, 1996 between the Borrower and the Bank, as the
same may be amended from time to time and filed with the Trustee, and any
agreement of the Borrower with a Credit Facility Issuer setting forth the
obligations of the Borrower to such Credit Facility Issuer arising out of any
payments under a Credit Facility and which provides that it shall be deemed to
be a Reimbursement Agreement for the purposes of the Indenture.
"Remarketing Agent" shall mean First Union National Bank of North Carolina
(acting through its Capital Markets Group) and its successor as provide in
Section 1201 of the Indenture.
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"Remarketing Agreement" shall mean the Remarketing Agreement of dated as of
November 1, 1996 between the Borrower and the Remarketing Agent, as amended,
restated, modified or supplemented from time to time.
"State" shall mean the State of Maryland.
"Tender Agency Agreement" shall mean the Tender Agency Agreement dated as of
November 1, 1996 among the Borrower, the Trustee and the Tender Agent.
"Tender Agent" means First Union National Bank of North Carolina and its
successors as provided in Section 1202 of the Indenture.
"Trustee" shall mean the banking institution at the time serving as Trustee
under the Indenture.
Section 1.2. Rules of Construction.
(a) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders, and words of the neuter
gender shall be deemed and construed to include correlative words of the
masculine and feminine genders.
(b) The table of contents, captions and headings in this Loan Agreement are
for convenience only and in no way define, limit or describe the scope or intent
of any provisions or sections of this Loan Agreement.
(c) All references herein to particular articles or sections are references
to articles or sections of this Loan Agreement unless some other reference is
established.
(d) All accounting terms not specifically defined herein shall be construed
in accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis.
(e) All references herein to the Borrower shall be deemed to refer to each
of the Persons if more than one, as described by such term and any agreement,
obligation, duty or liability of the Borrower shall be a joint and several
agreement, obligation, duty or liability of each of the Persons so described by
such term.
(f) Any terms not defined herein but defined in any of the other Bond
Documents shall have the same meaning herein.
(g) All references herein to the Code or any particular provision or section
thereof shall be deemed to refer to any successor, or successor provision or
section, thereof, as the case may be.
ARTICLE II
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REPRESENTATIONS
Section 2.1. Representations by the Issuer. The Issuer represents and
warrants as follows:
(a) The Issuer is a body politic and corporate and a public instrumentality
of the State. Under the provisions of the Act, the Issuer has the power to enter
into this Loan Agreement and the other Bond Documents entered into by it and the
transactions contemplated hereunder and thereunder and to carry out its
obligations hereunder and thereunder. By proper action, the Issuer has duly
authorized the execution and delivery of this Loan Agreement and each of the
other Bond Documents executed and delivered by it. The Issuer is not in default
under any of the provisions of the laws of the State which would affect its
existence or its powers referred to in this subsection (a).
(b) To finance the cost of the acquisition of the Facility, the Issuer has
agreed at the request of the Borrower to issue and sell the Bonds and to lend
the proceeds thereof to the Borrower under and pursuant to this Loan Agreement.
(c) As provided in the Indenture, the Revenues are pledged to secure the
payment of the principal of and interest and premium (if any) on the Bonds and
for any other payment referred to in this Loan Agreement.
(d) This Loan Agreement and the Indenture have been duly and properly
authorized, executed, sealed and delivered by the Issuer, constitute valid and
legally binding obligations of the Issuer, and are fully enforceable against the
Issuer in accordance with their respective terms. Provided, however, that the
enforceability and binding nature of this Loan Agreement and the Indenture are
subject to bankruptcy, insolvency, reorganization and other state and federal
laws affecting the enforcement of creditors' rights generally, and, to the
extent that certain remedies under such instruments require, or may require
enforcement by a court of equity, such principles of equity as the court having
jurisdiction may impose.
(e) There are no proceedings pending or, to the knowledge of the Issuer,
threatened before any court or administrative agency which may affect the
authority of the Issuer to enter into this Loan Agreement or the Indenture.
(f) The execution, delivery and performance by the Issuer of this Loan
Agreement and the Indenture, or any other document required or contemplated
hereby to be delivered by the Issuer, do not and shall not constitute a
violation or breach of or a default under any existing mortgage, indenture,
contract, instrument or agreement binding on the Issuer or affecting its
property, or any provision of law or order of any court binding upon the Issuer.
Section 2.2. Representations, Warranties and Covenants by the Borrower.
The Borrower represents, warrants and covenants as follows:
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(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland, and is qualified to do
business in the State, has legal authority to enter into and to perform the
agreements and covenants on its part contained in the Bond Documents and the
Letter of Credit Documents to which it is a party and the approval of the
section of the Private Placement Memorandum entitled "The Borrower," and has
duly authorized the execution, delivery and performance of the Bond Documents
and the Letter of Credit Documents to which it is a party.
(b) The borrowing under the Note, the execution and delivery of this Loan
Agreement and the other Bond Documents and the Letter of Credit Documents to
which it is a party and the approval of the section of the Private Placement
Memorandum entitled "The Borrower," the consummation of the transactions
contemplated hereby and thereby, and the fulfillment of or compliance with the
terms and conditions hereof and thereof do not and will not violate, conflict
with or constitute a breach of or default under or require any consent (except
for such consents and approvals as have heretofore been obtained) pursuant to
the Articles of Incorporation or Bylaws of the Borrower, any law or regulation
of the United States or the State or, to the best knowledge of the Borrower, of
any other jurisdiction presently applicable to the Borrower, any order of any
court, regulatory body or arbitral tribunal or any agreement or instrument to
which the Borrower is a party or by which it or any of its property is bound.
(c) The Borrower will cause the proceeds of the Bonds to be applied to the
Facility.
(d) The Borrower intends that the proceeds of the Loan be used solely to pay
Facility Costs. The Borrower intends that the interest payable on the Bonds
shall be excludable from the gross income of the holders thereof for purposes of
federal income taxation and shall be exempt from state, county and municipal
taxation in the State.
(e) The Borrower presently expects to operate the Facility as a
pharmaceutical-manufacturing facility until Payment of the Bonds.
(f) The Facility is a "facility" within the meaning of the Act.
(g) The Facility is located wholly within Baltimore City, Maryland.
(h) Assuming due authorization, execution and delivery by the other parties
thereto, when executed and delivered, the Bond Documents to which the Borrower
is a party and the Placement Agreement will be the valid and binding obligations
or agreements of the Borrower enforceable in accordance with their respective
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws effecting the rights of creditors
generally and by general principles of equity, whether applied in a proceeding
at law or in equity.
(i) There is no action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or agency or arbitral body now pending,
or to the knowledge of the Borrower, threatened against or affecting the
Borrower or any properties or rights of the
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Borrower which, if adversely determined, would materially impair the right of
the Borrower to carry on its business substantially as now conducted or would
materially adversely affect the Facility Site or the financial condition,
business or operations of the Borrower or the transactions contemplated by,
or the validity of, any of the Bond Documents, the Letter of Credit Documents
or the Placement Agreement.
(j) The Borrower has filed all federal, state and local tax returns which
are required to be filed by it and has paid or caused to be paid all taxes as
shown on said returns or on any assessment received by it, to the extent that
such taxes have become due, and no controversy in respect of additional
income taxes, state or federal, of the Borrower is pending or, to the
knowledge of the Borrower, threatened which has not heretofore been disclosed
in writing to the Trustee and which, if adversely determined, would
materially and adversely affect the financial condition or operations of the
Borrower.
(k) Neither the Bond Documents nor the Letter of Credit Document to which
the Borrower is a party nor the Borrower's Tax Certificate contains any
misrepresentation or untrue statement of fact or omits to state a material fact
necessary in order to make any such representation or statement contained
therein in light of the circumstances under which made, not misleading.
(l) The Borrower possesses all necessary patents, licenses, trademarks,
trademark rights, trade names, trade name rights and copyrights to conduct its
business as now conducted, without known conflict with any patent, license,
trademark, trade name or copyrights of any other Person.
(m) The Facility Site is properly zoned, and its intended use and the
operation of the Facility comply with the uses permitted by applicable zoning
regulations.
(n) No approval, consent or authorization of, or registration, declaration
or filing with, any governmental or public body or authority is required in
connection with the valid execution, delivery and performance by the Borrower of
the Bond Documents or the Letter of Credit Documents to which it is a party
which has not heretofore been obtained, other than approvals and permits
relating to the construction and improvements at the Facility to be financed
with proceeds of the Bonds, which will be obtained in a timely manner.
(o) The Borrower will not take or omit to take any action which would impair
the exemption of interest on the Bonds from federal income taxation.
(p) All of the representations, warranties and covenants of the Borrower
contained in the Borrower's Tax Certificate are hereby reaffirmed and
incorporated herein by reference.
(q) The Borrower has a place of business in only two counties in the State,
such counties being Baltimore City and Baltimore County. In addition to the
places of business described in the next preceding sentence, since January 1,
1976, the Borrower has had a place of business in the following counties in the
State: Baltimore County at a different location. Since January 1, 1976, the
Borrower has had no other places of business in the State.
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(r) In addition to Chesapeake Biological Laboratories, Inc., since January
1, 1976, the Borrower has used or operated under the following corporate and/or
trade names: GAC Equine Diagnostics, Inc. Since January 1, 1976, the Borrower
has not changed its name from Chesapeake Biological Laboratories, Inc., or
changed its identity or corporate structure so as to make the use of the name
Chesapeake Biological Laboratories, Inc. in a filed financing statement
materially misleading.
(s) Except for simultaneous liens being granted in favor of the Trustee and
the Bank, there exist no liens or security interests on or with respect to the
Facility (other than Permitted Encumbrances).
(t) The Borrower will comply with all applicable federal, State and local
laws, rules and regulations, subject to the Borrower's right to contest any of
the foregoing in good faith and by appropriate proceedings diligently
prosecuted.
(u) The Borrower will permit access by the Issuer and Trustee to the books
and records of the Borrower at the offices of the Borrower during normal
business hours.
All of the above representations, warranties and covenants shall survive the
execution of this Loan Agreement and the issuance of the Note.
ARTICLE III
ACQUISITION OF THE FACILITY
Section 3.1. Acquisition of the Facility. The Borrower shall complete the
Acquisition of the Facility with all reasonable dispatch, delays incident to
strikes, riots, acts of God or the public enemy or any delay beyond its
reasonable control only excepted, in accordance with the Plans and
Specifications; provided, however, that if completion of such Acquisition is
delayed for any reason, there shall be no diminution in or postponement of the
payments to be made by the Borrower pursuant to the Note or Section 5.1 hereof.
Section 3.2. Borrower to Obtain Approvals Required for the Facility and the
Plant. The Borrower shall obtain or cause to be obtained all necessary permits
and approvals for the Acquisition of the Facility and the operation and
maintenance of the Plant and the Equipment and shall comply with all lawful
requirements of any governmental body regarding the use or condition of the
Equipment, the Facility Site and the Plant. The Borrower may, however, contest
any such requirement by an appropriate proceeding diligently prosecuted in good
faith.
Section 3.3. Plans and Specifications. The Borrower shall maintain a set
of Plans and Specifications at the Facility Site which shall be available to
the Issuer and the Trustee for inspection and examination during the
Borrower's regular business hours. The Borrower may supplement, amend and add
to the Plans and Specifications, and the Borrower shall be authorized to omit
or make substitutions for components of the Facility, provided that no such
change shall be made which shall be contrary to subsections (c), (d), (e),
(f), (g), (h) and (i)
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of Section 2.2 hereof or the provisions of Article IX hereof, and provided
further that if any such change would render materially incorrect or
incomplete the description of the initial components of the Facility or the
description of the Facility Site as set forth in Exhibit B to this Loan
Agreement, the Borrower and the Issuer shall amend such Exhibit B to reflect
such change, upon receipt by the Issuer and the Trustee of an opinion of
Co-Bond Counsel that such change will not result in an Event of Taxability.
ARTICLE IV
ISSUANCE OF THE BONDS; FACILITY FUND
Section 4.1. Agreement to Issue the Bonds, Insurance of Other Obligations.
To provide funds for Facility, the Issuer agrees that it will sell, issue and
deliver the Bonds in the aggregate principal amount of $7,000,000 in the manner
set forth in the Indenture and cause the proceeds of the Bonds to be applied as
provided in the Indenture.
THE BONDS AND THE PREMIUM (IF ANY) AND INTEREST THEREON, AND THE PURCHASE
PRICE THEREOF, ARE LIMITED OBLIGATIONS OF THE ISSUER, THE PRINCIPAL OF,
PREMIUM, IF ANY, AND INTEREST ON, AND THE PURCHASE PRICE OF WHICH ARE PAYABLE
SOLELY FROM THE REVENUES TO BE RECEIVED IN CONNECTION WITH THE FINANCING OF
THE FACILITY AND FROM ANY OTHER MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH
PURPOSE. NEITHER THE BONDS NOR ANY PREMIUM OR INTEREST THEREON, NOR THE
PURCHASE PRICE THEREOF, SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE
AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE STATE OF MARYLAND, THE
DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT OF THE STATE OF MARYLAND (THE
"DEPARTMENT"), THE ISSUER, BALTIMORE CITY, MARYLAND (THE "CITY") OR ANY OTHER
PUBLIC BODY WITHIN THE MEANING OF ANY CONSTITUTIONAL OR CHARTER PROVISION OR
STATUTORY LIMITATION AND NONE OF THE ABOVE SHALL EVER CONSTITUTE OR GIVE RISE
TO ANY PECUNIARY LIABILITY OF THE STATE OF MARYLAND, THE DEPARTMENT, THE
ISSUER, THE CITY OR ANY OTHER PUBLIC BODY. THE BONDS DO NOT CONSTITUTE AN
INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE OF MARYLAND, THE
DEPARTMENT, THE ISSUER, THE CITY OR ANY OTHER PUBLIC BODY IS PLEDGED.
The Issuer expressly reserves the right (but shall be under no obligation to
do so) to enter into, to the extent permitted by law, an agreement other than
this Loan Agreement with respect to the issuance by the Issuer under an
indenture or indentures other than the Indenture to provide additional funds to
complete the Facility, or to refund all or any principal amount of the Bonds, or
any combination of the foregoing.
Section 4.2. Disbursement from the Facility Fund. All payments from the
Facility Fund to pay the Cost of Acquisition of the Facility or to reimburse the
Borrower for any Cost of Acquisition of the Facility paid or incurred by the
Borrower before or after the execution
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and delivery of this Loan Agreement and the issuance and delivery of the
Bonds shall be made by the Trustee pursuant to the Indenture upon receipt by
the Trustee of a requisition and certificate substantially in the form of
Exhibit A attached to the Indenture.
Section 4.3. Closeout of the Facility Fund. The Completion Date for the
Facility shall be promptly established and evidenced to the Trustee and shall be
the date on which the Borrower Representative delivers to the Trustee, the
Credit Facility Issuer and the Issuer a certificate stating that, except for the
amounts retained by the Trustee at the Borrower's direction for any Cost of
Acquisition of the Facility not then due and payable, the Acquisition of the
Facility has been completed substantially in accordance with the Plans and
Specifications, and all costs and expenses incurred in connection therewith have
been paid. Notwithstanding the foregoing, such certificate may state that it is
given without prejudice to any rights against third parties that exist at the
date of such certificate or that may subsequently come into being. Such
certificate shall be accompanied by a permanent use and occupancy certificates
authorizing occupancy of the Facility and final lien waivers of the general
contractor and all subcontractors.
Section 4.4. Disposition of the Balance in the Facility Fund. Pursuant to
the Indenture, as soon as practicable after, and in any event within sixty (60)
days from, the Trustee's receipt of the certificate mentioned in Section 4.3
hereof, all amounts remaining in the Facility Fund, including any unliquidated
investments made with money theretofore deposited in the Facility Fund except
for amounts to be retained in the Facility Fund for any Cost of Acquisition of
the Facility not then due and payable as provided in Section 4.3 hereof, shall
be transferred by the Trustee to the Loan Repayment Account of the Bond Fund and
shall be applied to the prepayment of the principal installments of the Bonds in
accordance with the terms of the Indenture.
Section 4.5. Borrower Required to Pay in Event Facility Fund Insufficient.
In the event the moneys in the Facility Fund should not be sufficient to pay the
total cost of the Facility, the Borrower agrees to complete the Facility and to
pay that portion of such cost in excess of the moneys available therefor in the
Facility Fund. THE ISSUER MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, THAT THE
MONEYS PAID INTO THE FACILITY FUND AND AVAILABLE FOR PAYMENT OF THE COST OF THE
FACILITY WILL BE SUFFICIENT TO PAY THE TOTAL COST OF THE FACILITY. The Borrower
agrees that if, after exhaustion of the moneys in the Facility Fund, the
Borrower should pay any portion of the total cost of Facility pursuant to the
provisions of this Section, it shall not be entitled to any reimbursement
therefor from the Issuer, the Trustee, the Credit Facility Trustee or any
Bondholder and it shall not be entitled to any abatement or diminution of the
payments required to be made by the Borrower pursuant to the Note or Section 5.1
hereof.
Section 4.6. No Third Party Beneficiary. It is specifically agreed
between the parties executing this Loan Agreement that it is not intended by
any of the provisions of any part of this Loan Agreement to establish in
favor of the public or any member thereof, other than as may be expressly
provided herein or as contemplated in the Indenture, the rights of a third
party beneficiary hereunder, or to authorize anyone not a party to this Loan
Agreement to maintain a suit for personal injuries or property damage
pursuant to the terms or provisions of
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this Loan Agreement. The duties, obligations, and responsibilities of the
parties to this Loan Agreement with respect to third parties shall remain as
imposed by law.
ARTICLE V
LOAN BY THE ISSUER TO THE BORROWER; REPAYMENT; PAYMENT OF REBATE AMOUNT AND
PURCHASE PRICE
Section 5.1. Loan by the Issuer; Repayment. Upon the terms and conditions of
this Loan Agreement, the Issuer shall lend to the Borrower the proceeds of the
sale of the Bonds. The loan shall be evidenced by and repayable as set forth in
the Note. The loan shall be made by depositing said proceeds in the Facility
Fund in accordance with the terms of the Indenture.
As consideration for the issuance of the Bonds and the making of the loan to
the Borrower by the Issuer, the Borrower will execute and deliver this Loan
Agreement and the Note, in the form attached as Exhibit A hereto, and the Issuer
will endorse the Note without recourse to the order of, and pledge the Note and
assign this Loan Agreement (except for the Reserved Rights of the Issuer) and
the Note to, the Trustee, as the assignee of the Issuer under the Indenture,
contemporaneously with the issuance of the Bonds. The Borrower shall repay the
loan in accordance with the provisions of the Note and of this Loan Agreement.
Section 5.2. No Set-Off. The obligation of the Borrower to make the payments
required by the Note shall be absolute and unconditional. The Borrower will pay
without abatement, diminution or deduction (whether for taxes or otherwise) all
such amounts regardless of any cause or circumstance whatsoever including,
without limitation, any defense, set-off, recoupment or counterclaim that the
Borrower may have or assert against the Issuer, the Trustee, the Credit Facility
Trustee, any Bondholder or any other Person.
Section 5.3. Prepayments. The Borrower may prepay all or any part of the
amounts the Note obligates it to pay as provided in Section 701 and 702 of the
Indenture with respect to redemption of the Bonds. Except as provided in this
Section 5.3 and in Sections 4.4, 10.1, 10.2 and 10.3, the Borrower shall not be
entitled to prepay the Note or cause the Bonds to be prepaid. The Borrower shall
prepay all of the amounts it is required to prepay as provided in Sections 10.2
and 10.3 hereof.
Section 5.4. Credits Against the Note. To the extent that principal of or
interest on the Bonds shall be paid, including those payments made pursuant
to a draw under a Credit Facility, there shall be credited against the unpaid
principal of or interest on the Note, as the case may be, an amount equal to
the principal of or interest on the Bonds so paid. If the principal of and
interest on and other amounts payable under the Bonds shall have been paid
sufficiently that Payment of the Bonds shall have occurred, then the Note,
ipso facto, shall be deemed to have been paid in full, the Borrower's
obligations thereon shall be discharged (with the exception of the obligation
of the Borrower to make certain payments which may subsequently arise as a
result of a Determination of Taxability which shall survive
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(notwithstanding Payment of the Bonds), and the Note shall be canceled and
surrendered to the Borrower.
Section 5.5. Letter of Credit and Reimbursement Agreement. As a further
condition to the Issuer's making the loan hereunder, the Borrower shall:
(a) cause the Letter of Credit to be issued and delivered to the Credit
Facility Trustee as security for the Bonds. Until the earlier to occur of the
Conversion Date or payment of the Note and the Bonds in full, the Borrower shall
cause a Credit Facility meeting the requirements of Section 603 of the Indenture
to be maintained with the Credit Facility Trustee; and
(b) enter into the Reimbursement Agreement in form and substance
satisfactory to the Bank and execute and deliver the other Letter of Credit
Documents required by the Bank.
Section 5.6. Rebate Amount. The Borrower shall pay at any time and from
time to time the Rebate Amount, if any, to the United States of America as
provided in the Indenture and the Borrower's Tax Certificate. The Borrower
shall pay to the Trustee at any time and from time to time for deposit into
the Rebate Fund moneys equal to the Rebate Amount. If the moneys on deposit
in the Rebate Fund are not sufficient to pay the Rebate Amount, the Borrower,
immediately upon notice from the Trustee, shall pay to the Trustee, for
deposit in the Rebate Fund, an amount of money sufficient to cause the amount
of moneys on deposit in the Rebate Fund to equal the Rebate Amount.
Section 5.7. Payments to Trustee for Purchase of Bonds. The Borrower shall
pay to the Trustee amounts equal to the amounts to be paid to Owners of Bonds
pursuant to Section 203 and Section 701(e) of the Indenture, on the dates the
purchase price of Bonds tendered or deemed tendered for purchase to the Trustee
is to be paid pursuant to the Indenture and the Bonds. The obligation of the
Borrower to make the payments required to be made under this Section 5.7 shall
be reduced by the amount of any moneys available for such payment from proceeds
of the remarketing and sale of Bonds or money received from a drawing under the
Credit Facility to pay the purchase price of such Bonds.
ARTICLE VI
GENERAL COVENANTS
Throughout the Loan Term and until all of the Issuer's obligations and the
Borrower's obligations under the Bond Documents and the Letter of Credit
Documents shall have been paid and performed in full, the Borrower will
undertake the following:
Section 6.1. Maintenance and Modification of the Plant by Borrower. The
Borrower agrees that, until Payment of the Bonds shall be made, it will at
its own expense, (i) keep the Plant and the Facility Site or cause the Plant
and the Facility Site to be kept in as reasonably safe a condition as its
operations shall permit, (ii) make or cause to be made from time to time
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all necessary repairs thereto and renewals and replacements thereof and
otherwise keep the Plant in good repair and in good operating condition and
(iii) not permit or suffer others to commit a nuisance on or about the Plant
or the Facility Site. The Borrower shall pay or cause to be paid all costs
and expenses of operation and maintenance of the Plant.
The Borrower may, at its own expense, make from time to time any additions,
modifications or improvements to the Plant that it may deem desirable for its
business purposes and that do not materially impair the effective use, or
decrease the value, of the Facility.
Section 6.2. Taxes and Utility Charges.
(a) The Borrower shall pay as the same respectively become due, all taxes,
assessments, levies, claims and charges of any kind whatsoever that may at any
time be lawfully assessed or levied against or with respect to the Facility
(including, without limiting the generality of the foregoing, any tax upon or
with respect to the income or profits of the Borrower from the Plant and that,
if not paid, would become a charge on the payments to be made under this Loan
Agreement or the Note prior to or on a parity with the charge thereof created by
the Indenture and including ad valorem, sales and excise taxes, assessments and
charges upon the Borrower's interest in the Plant), all utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of the
Facility and all assessments and charges lawfully made by any governmental body
for public improvements that may be secured by lien on any portion of the
Facility.
(b) The Borrower may, at its expense, contest in good faith any such
levy, tax, assessment, claim or other charge, but the Borrower may permit the
items so contested to remain undischarged and unsatisfied during the period
of such contest and any appeal therefrom only if the Borrower shall notify
the Issuer, the Trustee and the Credit Facility Trustee that in the opinion
of Counsel, by non-payment of any such items, the rights of the Trustee and
the Credit Facility Trustee with respect to this Loan Agreement and the Note
created by the assignment under the Indenture, as to the rights assigned
under this Loan Agreement, or any part of the payments to be made under this
Loan Agreement or the Note, will not be materially endangered nor will the
Facility or any part thereof be subject to loss or forfeiture. If the
Borrower is unable to deliver such an opinion of Counsel, the Borrower shall
promptly pay or bond and cause to be satisfied or discharged all such unpaid
items or furnish, at the expense of the Borrower, indemnity satisfactory to
the Trustee and the Credit Facility Trustee; but provided further, that any
tax assessment, charge, levy or claim shall be paid forthwith upon the
commencement of proceedings to foreclose any lien securing the same. The
Issuer, the Trustee and the Credit Facility Trustee, at the expense of the
Borrower, will cooperate fully in any such permitted contest. If the Borrower
shall fail to pay any of the foregoing items, the Issuer or the Trustee may
(but shall be under no obligation to) pay the same and any amounts so
advanced therefor by the Issuer or the Trustee shall become an additional
obligation of the Borrower to the one making the advancement, which amounts,
together with interest thereon at the Overdue Rate, or the maximum contract
rate permitted by law, whichever is lower, from the date of payment, the
Borrower agrees to pay on demand therefor.
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(c) The Borrower shall furnish the Issuer, the Credit Facility Issuer, the
Trustee and the Credit Facility Trustee, upon request, with proof of payment of
any taxes, governmental charges, utility charges, insurance premiums or other
charges required to be paid by the Borrower under this Loan Agreement.
Section 6.3. Insurance. Until Payment of the Bonds shall be made, the
Borrower will keep the Plant and the Facility Site continuously insured against
such risks as are customarily insured against by businesses of like size and
type engaged in the same or similar manufacturing operations (other than
business interruption insurance) including, without limiting the generality of
the foregoing:
(a) casualty insurance on the Plant in an amount not less than the full
insurable value of all property located at, and all improvements to, the
Facility Site, against loss or damage by fire and lightning and other hazards
ordinarily included under uniform broad form extended coverage policies, limited
only as may be provided in the uniform broad form of extended coverage
endorsement at the time in use in the State;
(b) general comprehensive liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Plant or the
Facility Site (such coverage to include provisions waiving subrogation against
the Issuer and the Trustee) in amounts not less than $1,000,000 with respect to
bodily injury to any one person, $1,000,000 with respect to bodily injury to two
or more persons in any one accident and $1,000,000, with respect to property
damage resulting from any one occurrence;
(c) liability insurance with respect to the Plant and the Facility Site
under the workers' compensation laws of the State; provided, however, that the
insurance so required may be provided by blanket policies now or hereafter
maintained by the Borrower; and
(d) if at any time any portion of the Facility Site is in an area that has
been identified by the Secretary of Housing and Urban Development as having
special flood and mud slide hazards, a policy of flood insurance covering
improvements located on such portion of the Facility Site with amounts and
coverage satisfactory to the Trustee.
Section 6.4. General Requirements Applicable to Insurance.
(a) Each insurance policy obtained in satisfaction of the requirements of
Section 6.3 hereof:
(i) shall be by such insurer (or insurers) as shall be financially
responsible, qualified to do business in the State and of recognized standing;
(ii) shall be in such form and have such provisions (including, without
limitation, the lenders long-form loss payable clause, the waiver of subrogation
clause, the deductible amount, if any, and the standard mortgagee endorsement
clause), as are generally considered standard provisions for the type of
insurance involved and are acceptable in all respects to the Trustee;
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(iii) shall prohibit cancellation or substantial modification, termination
or lapse in coverage by the insurer without at least 30 days' prior written
notice to the Issuer and the Trustee;
(iv) shall provide that losses thereunder shall be adjusted with the insurer
by the Borrower at its expense on behalf of the insured parties and the decision
of the Borrower as to any adjustment shall be final and conclusive; and
(v) without limiting the generality of the foregoing, all insurance policies
carried on the Plant shall name the Borrower, the Issuer and the Trustee as
parties insured thereunder as the respective interests of each may appear, and
any loss thereunder shall be made payable and shall be applied as provided in
Section 6.8 hereof.
(b) Prior to expiration of any such policy, the Borrower shall furnish the
Trustee with evidence satisfactory to the Trustee that the policy or certificate
has been renewed or replaced in compliance with this Loan Agreement or is no
longer required by this Loan Agreement.
Section 6.5. Advances by the Issuer or the Trustee. In the event the
Borrower shall fail to maintain, or cause to be maintained, the full insurance
coverage required by this Loan Agreement or shall fail to keep or cause to be
kept the Plant in good repair and good operating condition, the Issuer or the
Trustee may (but shall be under no obligation to), after 10 days' written notice
to the Borrower, contract for the required policies of insurance and pay the
premiums on the same and make any required repairs, renewals and replacements,
and the Borrower agrees to reimburse the Issuer and the Trustee to the extent of
the amounts so advanced by them or any of them with interest thereon at the
Overdue Rate or the maximum rate permitted by law, whichever is lower, from the
date of advance to the date of reimbursement. Any amounts so advanced by the
Issuer or the Trustee shall become an additional obligation of the Borrower,
shall be payable on demand, and shall be deemed a part of the obligation of the
Borrower evidenced by the Note.
Section 6.6. Borrower to Make up Deficiency in Insurance Coverage. The
Borrower agrees that to the extent that it shall not carry insurance required by
Section 6.3 hereof, it shall pay promptly to the Trustee for application in
accordance with the provisions of Section 6.8 hereof, such amount as would have
been received as Net Proceeds by the Trustee under the provisions of Section 6.8
hereof had such insurance been carried to the extent required.
Section 6.7. Eminent Domain. Unless the Borrower shall have prepaid the Note
pursuant to the provisions of Article X hereof, in the event that title to, or
temporary use of, the Facility Site, the Plant or any part thereof shall be
taken by Eminent Domain, the Borrower shall be obligated to continue to make the
payments required to be made pursuant to the Note and the Net Proceeds received
as a result of such Eminent Domain shall be applied as provided in Section
6.8(b) hereof.
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Section 6.8. Application of Net Proceeds of Insurance and Eminent Domain.
(a) The Net Proceeds of the insurance carried pursuant to the provisions of
Sections 6.3(b) and 6.3(c) hereof shall be applied by the Borrower toward
extinguishment of the defect or claim or satisfaction of the liability with
respect to which such insurance proceeds may be paid.
(b) The Net Proceeds of the insurance carried with respect to the Plant
pursuant to the provisions of Sections 6.3(a) and 6.3(d) hereof (excluding the
Net Proceeds of any business interruption insurance, which shall be paid to the
Borrower, but including any Net Proceeds from title insurance), and the Net
Proceeds resulting from Eminent Domain shall be paid to the Trustee and applied
as follows:
(i) If the amount of the Net Proceeds does not exceed $50,000, the Net
Proceeds shall be paid to the Borrower and shall be applied to the repair,
replacement, renewal or improvement of the Plant as necessary. Any residual
amount of Net Proceeds not applied to the repair, replacement, renewal or
improvement of the Plant shall be promptly paid to the Trustee for deposit in
the Loan Repayments Account of the Bond Fund.
(ii) If the amount of the Net Proceeds exceeds $50,000, the Net Proceeds
shall be paid to and held by the Trustee as a special trust fund and invested
in accordance with Section 602 of the Indenture pending receipt of written
instructions from the Borrower. At the option of the Borrower, to be
exercised within the period of 90 days from the receipt by the Trustee of
such Net Proceeds, the Borrower shall advise the Trustee that (A) the
Borrower will use the Net Proceeds for the repair, replacement, renewal or
improvement of the Plant (such funds to be disbursed by the Trustee to the
Borrower following substantially the same procedure for the disbursement of
the proceeds of the Bonds from the Facility Fund), or (B) the Net Proceeds
shall be applied to the prepayment of the Bonds as provided in Article X
hereof. If the Borrower does not advise the Trustee within said period of 90
days that it elects to proceed under clause (A) to use such Net Proceeds for
the repair, replacement, renewal or improvement of the Plant, such Net
Proceeds shall be applied to the prepayment of the Bonds pursuant to Article
X hereof. Any prepayment pursuant to the preceding sentence shall be effected
on the next interest payment date not less than 30 days after the earlier of
notice of the Borrower's election to prepay the Bonds or expiration of said
period of 90 days without an election by the Borrower. The Borrower shall
deposit with the Trustee an amount that together with moneys representing Net
Proceeds, shall be sufficient so that upon redemption no Bonds are in
denomination other than Authorized Denominations.
The Borrower agrees that if it shall elect to use the moneys paid to the
Trustee pursuant to subsection (b)(ii) of this Section 6.8 for the repair,
replacement, renewal or improvement of the Plant, it will restore the Plant,
or cause the same to be done, to a condition substantially equivalent to its
condition prior to the occurrence of the event to which the Net Proceeds were
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attributable. To the extent that the Net Proceeds are not sufficient to
restore or replace the Plant, the Borrower shall use its own funds to restore
or replace the Plant. Prior to the commencement of such work, the Trustee,
the Issuer or the Credit Facility Issuer may require the Borrower to furnish
a completion bond, escrow deposit, or other satisfactory evidence of the
Borrower's ability to pay or provide for the payment of any estimated costs
in excess of the amount of the Net Proceeds. Any balance remaining after any
such application of such Net Proceeds, shall be promptly paid to the Trustee
for deposit in the Loan Repayment Account of the Bond Fund.. The Borrower
shall be entitled to the Net Proceeds of any insurance or resulting from
Eminent Domain relating to property of the Borrower not included in the Plant
or the Facility Site and not providing security for the Note or this Loan
Agreement.
Section 6.9. Parties to Give Notice. In case of any material damage to or
destruction of all or any part of the Plant, the Borrower shall give prompt
notice thereof to the Issuer and the Trustee. In case of a taking or proposed
taking of all or any part of the Plant, the Facility Site or any right therein
by Eminent Domain, the Borrower shall give prompt notice thereof to the Issuer
and the Trustee. Each such notice shall describe generally the nature and extent
of such damage, destruction, taking, loss, proceeding or negotiations.
Section 6.10. Hazardous Material. (1) The Borrower shall not place,
manufacture or store, or permit to be placed, manufactured or stored, on the
Property any Hazardous Materials, except in accordance with all applicable laws.
(2) The Borrower agrees to (a) give notice to the Issuer immediately upon
the Borrower's acquiring knowledge of the presence of any Hazardous Materials
on the Property that are not being used or stored in accordance with all
applicable laws or of any Hazardous Materials Contamination, with a full
description thereof; (b) promptly comply with any laws requiring the removal,
treatment or disposal of such Hazardous Materials or Hazardous Materials
Contamination and provide the Issuer with satisfactory evidence of such
compliance; (c) provide the Issuer, within thirty (30) days after a demand by
the Issuer, with a bond, letter of credit or similar financial assurance
evidencing to the Issuer's satisfaction that the necessary funds are
available to pay the cost of removing, treating and disposing of such
Hazardous Materials or Hazardous Materials Contamination and discharging any
Encumbrance which may be established on the Property as a result thereof; and
(d) indemnify and hold harmless the Issuer and the Trustee from any and all
claims which may now or in the future (whether before or after the release of
this Financing Agreement) be asserted as a result of the presence of any
Hazardous Materials on the Property or any Hazardous Materials Contamination
except for those resulting from the gross negligence of the Issuer and the
Trustee or their Agents.
ARTICLE VII
SPECIAL COVENANTS
Section 7.1. Payment of Administrative Expenses of the Trustee, the
Paying Agent, the Remarketing Agent and the Credit Facility Trustee. The
Borrower agrees to pay to the Trustee, the Credit Facility Issuer, the
Remarketing Agent and the Credit Facility Trustee
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amounts equal to the respective fees and charges of the Trustee, the Credit
Facility Issuer, the Remarketing Agent and the Credit Facility Trustee for
the services rendered and expenses reasonably incurred (including attorneys
fees) under the Bond Documents as and when the same become due; provided,
however, that the fees and expenses of the Remarketing Agent shall be paid by
the Borrower as provided in the Remarketing Agreement. In addition, the
Borrower shall pay all reasonable costs and expenses of the Trustee, the
Credit Facility Trustee and the Credit Facility Issuer in connection with the
registration, exchange or registration of transfer of the Bonds pursuant to
Section 204 of the Indenture. The obligation of the Borrower under this
Section shall survive the termination of this Loan Agreement and the payment
and performance of all other of the Borrower's obligations.
Section 7.2. Payment of Issuer's Administrative Expenses. The Borrower
agrees to pay the Issuer (or, if the Issuer so elects, to pay directly to the
person entitled to payment) for the Administrative Expenses, if any, incurred by
the Issuer in the administration of this Loan Agreement, of the Loan, and of the
Bonds, including attorneys' fees. The obligation of the Borrower under this
Section shall survive the termination of this Loan Agreement and the payment and
performance of all other of the Borrower's obligations.
Section 7.3. No Pecuniary Liability. The Acts prescribe and the parties
intend that by reason of making this Loan Agreement, by reason of the issuance
of the Bonds, by reason of the performance of any act required of it by this
Loan Agreement, or by reason of the performance of any act requested of it by
the Borrower, no indebtedness or charge against the general credit or taxing
powers of the State, the Department or the Issuer within the meaning of any
constitutional or charter provision or statutory limitation shall occur, nor
shall any of the foregoing ever constitute or give rise to any pecuniary
liability of the State, the Department or the Issuer. Nevertheless, if the
Issuer incurs any such pecuniary liability, then in such event the Borrower
shall indemnify and hold the Issuer harmless by reason thereof.
Section 7.4. Indemnification of the Issuer, the Trustee, the Credit
Facility Issuer, the Remarketing Agent and the Credit Facility Trustee. The
Borrower shall protect, indemnify, and save harmless the Issuer, the Trustee,
the Credit Facility Issuer, the Remarketing Agent and the Credit Facility
Trustee and their respective officers, employees and agents against and from
any and all liabilities, suits, actions, claims, demands, losses, expenses
and costs of every kind and nature incurred by, or asserted or imposed
against, the Issuer, the Trustee, the Credit Facility Issuer, the Remarketing
Agent and the Credit Facility Trustee and their respective officers, agents
or employees, or any of them, by reason of any accident, injury (including
death) or damage to any person or property, however caused (other than the
gross negligence or willful misconduct of the Trustee, the Credit Facility
Issuer, the Remarketing Agent or the Credit Facility Trustee, which gross
negligence or willful misconduct shall affect the indemnification rights of
only that person which committed such gross negligence or willful
misconduct), resulting from, connected with or growing out of any act of
commission or omission of the Borrower, or any officers, employees, agents,
assignees, contractors or subcontractors of the Borrower or any use, non-use,
possession, occupation, condition, operation, service, design, construction,
acquisition, maintenance or management of, or on, or in connection with, the
Facility, or any part thereof, during the term of the loan and regardless of
whether such liabilities, suits, actions, claims, demands, damages, losses,
expenses and costs
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be against or be suffered or sustained by the Issuer, the Trustee, the Credit
Facility Issuer, the Remarketing Agent or the Credit Facility Trustee, or any
of their respective officers, agents or employees, or be against or be
suffered or sustained by legal entities, officers, agents, or other persons
to whom the Issuer, the Trustee, the Credit Facility Issuer, the Remarketing
Agent and the Credit Facility Trustee, or any of their respective officers,
agents or employees may become liable therefor. The Issuer shall not be
liable for any damage or injury occurring during the Loan Term to the persons
or property of the Borrower or any of its officers, agents, including
operating personnel, contractors and employees, or any other person or entity
who or which may be upon the Facility. The Borrower may, and if so requested
by the Issuer, the Trustee, the Credit Facility Issuer, the Remarketing Agent
and the Credit Facility Trustee, shall, undertake to defend, at its sole cost
and expense, any and all suits, actions and proceedings brought against the
Issuer, the Trustee, the Credit Facility Issuer, the Remarketing Agent and
the Credit Facility Trustee, or any of their respective officers, agents or
employees in connection with any of the matters indemnified against in this
Section. The Issuer, the Trustee, the Credit Facility Issuer, the Remarketing
Agent and the Credit Facility Trustee shall give the Borrower timely notice
of and shall forward to the Borrower every demand, notice, summons or other
process received with respect to any claim or legal proceedings within the
purview hereof, but the failure of the Issuer, the Trustee, the Credit
Facility Issuer, the Remarketing Agent or the Credit Facility Trustee to give
such notice shall not affect its right to indemnification hereunder, unless
the failure to give notice shall have deprived the Borrower of a reasonable
opportunity to contest any such matter.
The Borrower agrees to indemnify the Trustee, the Credit Facility Issuer,
the Credit Facility Trustee and their respective officers, employees and agents
for, and to hold them harmless against, any loss, liability or expense incurred
without gross negligence, willful misconduct or bad faith on their part, arising
out of or in connection with the acceptance or administration of the trust or
trusts and duties hereunder and under the Bond Documents, including the costs
and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers or duties
hereunder.
If the indemnification provided for herein is held by a court to be
unavailable or is insufficient to hold any indemnified party harmless in respect
of any losses, claims, damages or liabilities (or actions in respect thereof),
then the Borrower shall contribute to the amount paid or payable by the
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Borrower on the one hand and the indemnified party on the
other hand, as well as any other relevant equitable considerations.
The obligations of the Borrower under this Section shall survive the
termination of this Loan Agreement and the payment and performance of all other
of the Borrower's obligations.
All acts, including any failure to act, relating to the Facility by any
agent, representative or designee of the Trustee are performed solely for the
benefit of the Trustee and the Owners to assure repayment of the loan and are
not for the benefit of the Borrower or the benefit of any other person.
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Section 7.5. Right to Perform; Advances by Issuer or Trustee. If the
Borrower fails to make, or cause to be made, any payment or to perform any other
of the Borrower's obligations, the Issuer or the Trustee, without notice or
demand upon the Borrower, without waiving any default or releasing the Borrower
from any of the Borrower's obligations, and without being under any obligation
to do so, may make such payment or perform any of the Borrower's obligations.
All amounts so paid by the Issuer or the Trustee and all costs, fees and
expenses incurred by the Issuer or the Trustee in connection with such payment
or performance shall be immediately due and payable by the Borrower as
additional payments, together with interest thereon from the date the same are
paid or incurred, until the same are paid in full by the Borrower.
Section 7.6. Agreement to Pay Attorneys' Fees and Expenses. In the event the
Borrower defaults under any of the provisions of the Bond Documents and the
Issuer or the Trustee employs attorneys or incur other expenses for the
collection of amounts due hereunder or the enforcement of performance or
observance of any obligation or agreement on the part of the Borrower contained
in the Bond Documents, the Borrower will, on demand therefor, pay to the Issuer
or the Trustee the reasonable fees of such attorneys and such other reasonable
expenses so incurred by the Issuer or the Trustee.
Section 7.7. Inspection of Facility. The Borrower will permit the Issuer or
the Trustee or any person or persons authorized by the Issuer or the Trustee to
enter and make inspections of the Facility or any part thereof at all reasonable
times and as often as may be reasonably requested by the Trustee or the Issuer,
and at any time whatsoever, to enforce any remedies upon the occurrence of an
Event of Default, provided, however, that, except in an apparent emergency
situation, neither Bank nor MIDFA, nor their agents or representatives, may
enter any areas of the Property which are proprietary areas or areas designed
for laboratory or related manufacturing activity which would be disturbed or
destroyed as a result of entrance by unauthorized persons (collectively, the
"Clean Areas") without at least three (3) days prior written notice to Borrower,
and then only upon reasonable conditions established by Borrower to maintain the
integrity of the Clean Areas.
Section 7.8. No Warranty of Suitability or Merchantability by Issuer. The
Borrower recognizes that since the Plans and Specifications for constructing the
Facility are furnished by it, and since any items of equipment are selected by
it and are to be installed in accordance with its directions, the Issuer makes
no warranty, either express or implied, and offers no assurances that the
Facility will be suitable for the Borrower's purposes or needs or that the
proceeds derived from the Loan will be sufficient to pay in full all costs of
the acquisition of the Facility. Without limiting the generality of the
foregoing provisions of this Section, the Borrower hereby acknowledges that THE
ISSUER DOES NOT IN ANY WAY WARRANT THE MERCHANTABILITY OF ANY EQUIPMENT, AND
THAT THERE ARE NO IMPLIED WARRANTIES OR WARRANTIES OF FITNESS MADE BY THE
ISSUER. By acceptance of each item of equipment, the Borrower is deemed to have
acknowledged to the Issuer that such item of equipment is in acceptable
condition, occurrence, and operating order.
Section 7.9. Issuer's Rights to Approve Certain Actions and Receive
Notices and Information. Notwithstanding the Granting Clauses of the
Indenture, the Issuer reserves to
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itself and shall retain the right to grant any and all approvals which the
Issuer is specifically entitled to grant under the terms of the Bond
Documents, and the right to receive from time to time reports, notices and
other information from the Borrower or any other person pursuant to the Bond
Documents.
Section 7.10. Officials of Issuer Not Liable. No covenant or agreement
contained in the Bonds or in the other Bond Documents shall be deemed to be the
covenant or agreement of any official, officer, agent, or employee of the Issuer
in his or her individual capacity, and neither any member of the staff of the
Issuer nor any official executing the Bonds shall be liable personally on the
Bonds or be subject to any personal liability or accountability by reason of the
issuance thereof.
Section 7.11. Access to the Facility and Inspection. The Credit Facility
Issuer, the Trustee, the Credit Facility Trustee, and the Issuer shall have
the right in addition to the rights set forth ins Section 7.7 hereof, at all
reasonable times upon the furnishing of reasonable notice to the Borrower
under the circumstances, to enter upon the Facility Site and to examine and
inspect the Plant and the Equipment, provided, however, that, except in an
apparent emergency situation, neither Bank nor MIDFA, nor their agents or
representatives, may enter any areas of the Property which are Clean Areas
without at least three (3) days prior written notice to Borrower, and then
only upon reasonable conditions established by Borrower to maintain the
integrity of the Clean Areas. The Trustee, the Credit Facility Trustee, the
Credit Facility Issuer, the Issuer and their duly authorized agents shall
also have such right of access to the Facility as may be reasonably necessary
to cause to be completed the construction, acquisition and installation of
the Facility, and thereafter for its proper maintenance, in the event of
failure by the Borrower to perform its obligations relating to maintenance
under this Loan Agreement. The Borrower hereby covenants to execute,
acknowledge and deliver all such further documents, and do all such other
acts and things as may be necessary to grant to the Issuer Representative,
the Credit Facility Trustee, and the Trustee such right of entry. The Issuer,
the Credit Facility Trustee, the Trustee and the Credit Facility Issuer shall
also be permitted, at all reasonable times, to examine the books and records
of the Borrower with respect to the Facility and the obligations of the
Borrower hereunder, but none of them shall be entitled to access to trade
secrets or other proprietary information (other than financial information)
of the Borrower or its clients or customers. No prior notice shall be
required upon the occurrence and continuance of an Event of Default.
Section 7.12. Further Assurances and Corrective Instruments. Subject to
the provisions of the Indenture, the Issuer and the Borrower agree that they
will, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such supplements and amendments hereto
and such further instruments as may reasonably be required for carrying out
the intention or facilitating the performance of this Loan Agreement. All
such supplements, amendments and further instruments shall require the
approval of the Credit Facility Issuer.
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Section 7.13. Recording and Filing; Other Instruments.
(a) The Borrower covenants that it will, at its expense, cause Counsel in
the State to take all steps are as reasonably necessary to render an opinion,
and to render an opinion to the Issuer and the Trustee not earlier than 60 nor
later than 30 days prior to each anniversary date occurring at five-year
intervals after the issuance of the Bonds, to the effect that all financing
statements, continuation statements, notices and other instruments required by
applicable law have been recorded or filed or re-recorded or re-filed in such
manner and in such places required by law in order fully to preserve and protect
the rights of the Trustee and the Credit Facility Trustee in the granting by the
Issuer of certain rights of the Issuer, pursuant to the Indenture, under this
Loan Agreement and the Note.
(b) The Borrower and the Issuer shall execute and deliver all instruments
and shall furnish all information and evidence deemed necessary or advisable by
such Counsel to enable him to render the opinion referred to in subsection (a)
of this Section. The Borrower shall file and re-file and record and re-record or
cause to be filed and re-filed and recorded and re-recorded all instruments
required to be filed and re-filed and recorded or re-recorded pursuant to the
opinion of such Counsel and shall continue or cause to be continued the liens of
such instruments for so long as the Bonds shall be outstanding, except as
otherwise required by this Loan Agreement.
Section 7.14. Non-Arbitrage Covenants: Notice of Event of Taxability.
(a) Neither the Borrower nor the Issuer shall take any action, and the
Borrower covenants that it will not approve the Trustee's taking any action or
making any investment or use of the proceeds of the Bonds, which would cause any
of the Bonds to be an "arbitrage bond" within the meaning of Section 148 of the
Code.
(b) The Borrower's obligation to make any payments of rebate amounts
required by this Loan Agreement and the Indenture and to prepare and furnish to
the Issuer and the Trustee the statements and forms described herein and therein
shall survive Payment of the Bonds notwithstanding any provision of this Loan
Agreement to the contrary.
(c) The Borrower shall give immediate telephonic notice, promptly confirmed
in writing, to the Issuer and the Trustee of any Event of Taxability whether the
Borrower is on Notice of such Event of Taxability by its own filing of any
statement, tax schedule, return or document with the Internal Revenue Service
which discloses that an Event of Taxability shall have occurred, by its receipt
of any oral or written advice from the Internal Revenue Service that an Event of
Taxability shall have occurred, or otherwise.
Section 7.15. Release and Indemnification. The Borrower shall at all
times protect and hold the Issuer, and the Trustee, their respective members,
officers, employees and agents harmless against any claims or liability
resulting from any loss or damage to property or any injury to or death of
any person that may be occasioned by any cause whatsoever pertaining to the
Facility, the Facility Site, the Plant and the Equipment or the use thereof,
including without limitation any lease thereof or assignment of its interest
in this Agreement, such
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indemnification to include reasonable expenses and attorneys' fees incurred
by the Issuer, and the Trustee, their respective members, officers, employees
and agents in connection therewith, provided that such indemnity shall be
effective only to the extent of any loss that may be sustained by the Issuer
or the Trustee, their respective members, officers, employees and agents in
excess of the Net Proceeds received by it or them from any insurance carrier
with respect to such loss and provided further that the benefits of this
Section 7.7 shall not inure to any person other than the Issuer or the
Trustee, their respective members, officers, employees and agents.
Section 7.16. Additional Information. Until Payment of the Bonds shall have
occurred, the Borrower shall promptly, from time to time, deliver to the Issuer
and the Trustee such information regarding the operations, business affairs and
financial condition of the Borrower as the Issuer and the Trustee may reasonably
request, but in any event exclusive of proprietary or confidential information
of the Borrower and any client or customer of the Borrower. The Trustee is
hereby authorized to deliver a copy of any such financial information delivered
hereunder, or otherwise obtained by the Trustee, to the Credit Facility Trustee,
to any Bondholder or prospective Bondholder, to any regulatory authority having
jurisdiction over the Trustee and to any other Person as may be required by law.
The Issuer and the Trustee are authorized to provide information concerning the
outstanding principal amount and payment history of, and other information
pertaining to, the Bonds or the Note to any agency or regulatory authority of
the State requesting such information.
Section 7.17. Corporate Existence, Sale of Assets, Consolidation or Merger.
Unless the Issuer, the Trustee and the Credit Facility Trustee consent in
writing, the Borrower will maintain its corporate existence, will not dissolve
or otherwise dispose of all or substantially all of its assets and will not
enter into any transaction of merger or consolidation; provided that, if a
Reimbursement Agreement is in effect, the Borrower may take such action if it is
permitted by the terms of the Reimbursement Agreement. If the Reimbursement
Agreement permits such action, the Borrower shall promptly notify the Issuer,
the Trustee and the Credit Facility Trustee thereof.
Section 7.18. Default Certificates. The Borrower shall deliver to the
Trustee and the Credit Facility Trustee, annually, within 60 days after the
close of each fiscal year, a certificate that no Event of Default hereunder or
under the Note, the Indenture, or the Reimbursement Agreement, or an event which
would constitute such an Event of Default but for the requirement that notice be
given or time elapse or both has occurred and is continuing, or if such an event
has occurred or is continuing, a certificate of the Borrower specifying the
nature and period of existence thereof and what action the Borrower proposes to
take with respect thereto.
Section 7.19. Notification to Trustee and Credit Facility Trustee. The
Borrower shall notify the Issuer, the Trustee and the Credit Facility Trustee in
writing promptly, but in any event within five Business Days, of the occurrence
of any of the following, with respect to the Borrower:
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(i) any levy of an attachment, execution or other process against its
assets, which may materially adversely affect the financial condition or
operation of the Borrower;
(ii) any change in any existing agreement or contract which may materially
adversely affect its business or affairs, financial or otherwise; and
(iii) any change in the senior executive management of the Borrower or upon
taking the Borrower in private rather than public ownership.
Section 7.20. Additional Reporting Requirements. The Borrower shall deliver
on or prior to December 1 of each year to the Issuer and the Trustee a
certificate stating the principal amount of the Bonds outstanding and the
Registered Owners of such Bonds as of June 30 of such year.
Section 7.21. Observe Laws. The Borrower shall observe all applicable laws,
regulations and other valid requirements of any regulatory authority with
respect to its operations at the Plant and the Facility Site.
Section 7.22. Covenants of the Issuer. The Issuer hereby covenants and
agrees as follows:
(a) Maintenance of Existence; Compliance with Laws. The Issuer will not
voluntarily take any action towards dissolution unless it has assured the
assumption of its obligations under this Agreement and the other Documents by
any other person succeeding to its powers; and it will comply with all laws
applicable to this Agreement or any of the other Documents.
(b) Further Instruments and Actions. The Issuer will from time to time
execute and deliver such further instruments and take such further actions as
may be reasonable and as may be required to carry out the purpose of this
Agreement; provided, however, that no such instruments or actions shall pledge
the credit or taxing power of the State, the Department, the Issuer or any other
public body or require the State, the Department, the Issuer or any other public
body to incur any pecuniary obligations.
(c) Priority of Pledge. Except for the assignment to the Bank under this
Agreement and the Assignment of Note and except for its use of the Bond
Insurance Fund to provide financial assistance in connection with other
facilities and transactions, to the extent permitted by law, the Issuer will not
sell, lease or otherwise dispose of or encumber its interest in any part of the
security for the Bond, and will cooperate in causing to be discharged any
Encumbrances created by it with respect to any of the security for the Bond.
(d) Books and Documents Open to Inspection. The Issuer shall, to the
extent required and permitted by law, within a reasonable time after request,
open any and all of its books and documents in its possession relating to the
financing of the Facility, if any, during
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the normal business hours of the Issuer, to such Accountants or other persons
as the Bank or the Borrower or both may from time to time designate.
(e) Covenant with Respect to Insurance. Until the earlier to occur of (i)
payment in full to the Bank of the Insured Portion of the Bonds (as defined in
the Insurance Agreement) or (ii) the Issuer becoming the holder of the Note, the
Issuer shall provide to the Bank as soon as available, but in any event within
thirty (30) days after available for distribution, its audited financial
statements prepared by an independent certified public accountant in accordance
with generally accepted accounting principles, consistently applied.
Section 7.23. Affirmative Covenants of the Borrower. Until the Bonds have
been fully paid, the Borrower will, unless the prior written consent to do
otherwise has been obtained from the Bank and the Issuer:
(a) Financial Statements. Furnish to the Bank and the Issuer:
(i) as soon as available but no later than 45 days after the close of each
of the Borrower's first three fiscal quarters, a balance sheet of the Borrower
and its subsidiaries, if any, as of the close of such period and an income
statement for such period, certified by the principal financial officer of the
Borrower and accompanied by a certificate of that officer stating whether any
event has occurred which constitutes an event of default under any of the
documents or which would constitute such an event of default with the giving of
notice or the lapse of time or both, and, if so, stating the facts with respect
to such default; and
(ii) as soon as available but no later than 120 days after the close of each
of the Borrower's fiscal years, a copy of the annual financial statement in
detail reasonably satisfactory to the Credit Facility Issuer and the Issuer
relating to the Borrower and its subsidiaries, if any, prepared in accordance
with generally accepted accounting principles and audited by an independent
accountant, which financial statement shall include a balance sheet of the
Borrower and its subsidiaries, if any, as of the end of such fiscal year, and an
income statement, a statement of retained earnings and a statement of cash flows
of the Borrower and its subsidiaries, if any, for such fiscal year; and
(iii) such additional information, reports or statements as the Credit
Facility Issuer or the Issuer may from time to time reasonably request.
(b) Taxes and Claims. Pay and discharge all Taxes prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become an encumbrance upon any of its properties, subject to the right of the
Borrower to contest the same in accordance with the provisions of this
Article VII hereof. If the Borrower fails to pay any of such Taxes at the
time or in the manner provided in this Section, the Bank may, at its option,
pay such Taxes and the Borrower shall pay to the Bank the amount of any sum
so paid, with interest thereon.
The fact that the Issuer is assisting in the financing of the acquisition
of the Facility shall not imply that the Borrower is or shall be eligible for
any decrease in or
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immunity from any applicable Taxes ordinarily imposed by the State, the
County or any other public body.
(c) Insurance. In addition to the insurance required by Article VI hereof,
maintain insurance with responsible insurance companies on such of its
properties, in such amounts and against such risks as is customarily maintained
by similar businesses operating in the same vicinity. The Borrower shall file
with the Bank and the Issuer, upon request, a detailed list of the insurance
then in effect, stating the names of the insurance companies, the amounts and
rates of insurance, dates of the expiration thereof and the properties and risks
covered thereby; and, within 30 days after Notice from the Bank, obtain such
additional insurance as the Bank may reasonably request.
(d) Existence. Maintain in good standing its existence as a Maryland
corporation.
(e) Compliance With Laws. Comply with all applicable federal, state and
local laws, rules and regulations, including, without limitation, the Employment
Retirement Income Security Act of 1974, as amended.
(f) Equal Employment. Prohibit and not engage in discrimination on the basis
of (i) political or religious opinion or affiliation, marital status, race,
color, creed or national origin, (ii) sex or age, except when sex or age
constitutes a bona fide occupational qualification, or (iii) the physical or
mental disability of a qualified individual with a disability. Upon the request
of the Issuer or the Department, the Borrower will submit to the Issuer or the
Department, as appropriate, information relating to its employment practices and
operations, with regard to this subsection (f) on a form to be prescribed by the
Department.
(g) Drug and Alcohol Free Workplace. Make a good faith effort to eliminate
illegal drug use and alcohol and drug abuse from any workplace of the Borrower
in the State, including, without limitation, the Facility, during the term of
this Agreement by:
(1) prohibiting the unlawful manufacture, distribution, dispensation,
possession, or use of drugs in any workplace of the Borrower in the State,
including without limitation, the Facility;
(2) prohibiting its employees from working while under the influence
of alcohol or illegal drugs or abusing alcohol or drugs;
(3) not hiring or assigning to work on an activity funded in whole or
part with State funds, anyone whom it knows, or in the exercise of due
diligence should know, currently abuses alcohol or drugs and is not actively
engaged in a bona fide rehabilitation program;
(4) promptly informing the appropriate law enforcement agency of
every drug-related crime that occurs in any workplace of the Borrower in the
State, including, without limitation, the Facility if it or its employee has
observed the violations or otherwise has reliable information that a
violation has occurred; and
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(5) notifying employees that illegal drug use and alcohol and drug
abuse are banned in any workplace of the Borrower in the State, including,
without limitation, the Facility, imposing sanctions on employees who abuse
drugs and alcohol in any workplace of the Borrower in the State, including,
without limitation, the Facility, and instituting steps to maintain any
workplace of the Borrower in the State, including, without limitation, the
Facility free from illegal drug use and drug and alcohol abuse.
(h) Employment Count. Upon request, but not more frequently than twice
annually, supply the employment count at the Facility to the Issuer, including
the number of employees of tenants.
(i) Licenses and Permits. Obtain and maintain all licenses and permits
required for the Borrower's operations.
(j) Coverage Ratio and Net Worth. Maintain a ratio of debt to tangible
net worth (including subordinate debt) not greater than 2.25 to 1.00,
measured quarterly. The Borrower shall also maintain a current assets to
current liabilities ratio of 2.5 to 1.0, measured quarterly, and a ratio of
EBITDA plus operating lease and rental expenses to principal and interest due
plus operating and lease expense of not less than 1.20 to 1.0, measured
quarterly. In addition, the Borrower shall maintain a tangible net worth
(including subordinated debt) of not less than (1) $4,250,000 from December
31, 1996 to and including March 31, 1997, and (2) $4,500,000 as of each
quarter end thereafter. Anything to the contrary notwithstanding, the value
of the collateral (as described in the Collateral Pledge Agreement) shall be
included as a current asset of the Borrower when determining compliance by
the Borrower with the covenants required of the Borrower under this
subsection (j).
(k) Bank Accounts. Maintain its operating accounts and depository accounts
with the Bank.
(l) Books and Records; Inspection. Keep adequate records and books of
account with respect to the Facility and its business in accordance with
generally accepted accounting principles and permit the Issuer and the Bank to
inspect the Facility and examine such records and books of account.
(m) Issuer's Fee. Starting not later than one year from the date of issuance
of the bonds, and annually thereafter, the Issuer shall be paid an Issuer's Fee
equal to 0.125% of the outstanding principal balance of the Bonds before taking
into account that year's annual principal reduction. This Issuer's Fee shall
have a priority over principal of and interest on the Bonds in the Indenture,
shall be collected in monthly installments by the Trustee, and shall be remitted
by the Trustee without the necessity of any notice from the Issuer. Failure to
pay the Issuer's Fee shall be an Event of Default under Article IX hereof, and
shall be treated in a manner similar to non-payment of principal of or interest
on the Bonds.
Section 7.24. Negative Covenants of the Borrower. Until full payment of the
Bonds, the Borrower will not, without the prior written consent of the Bank,
directly or indirectly:
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(a) ERISA Compliance.
(i) amend any employee benefit pension plan (as that term is defined in
Section 3(2) of ERISA) which is maintained by the Borrower or any corporation,
trade or business that is under common control with the Borrower as defined in
Section 414(b), (c), (m) or (o) of the Code (hereafter "commonly controlled
entity") and intended to be a qualified plan under Section 401(a) of the Code in
any manner designed to cause such plan to not be qualified under Section 401(a)
of the Code;
(ii) permit any officers of the Borrower or any commonly controlled entity
to take any action that would cause such plan not to be qualified under Section
401(a) of the Code;
(iii) engage in or permit any commonly controlled entity to engage in any
transaction prohibited by Section 4975 of the Code in connection with such plan;
(iv) permit any such plan that is subject to Section 412 of the Code to have
an accumulated funding deficiency (within the meaning of Section 412 of the
Code);
(v) take, or permit any commonly controlled entity to take, any action in
connection with such plan which results in the imposition of a lien on any
property of the Borrower or any commonly controlled entity pursuant to Section
4068 of ERISA;
(vi) fail to notify the Bank and the Issuer that notice has been received of
the termination of an employee pension benefit plan which is a multiemployer
pension plan (as those terms are defined in Section 3(2) and Section 3(37) of
ERISA) to which the Borrower or any commonly controlled entity is required to
contribute under circumstances where such termination would result in a material
liability to the Borrower or any commonly controlled entity;
(vii) fail to notify the Bank and the Issuer that notice has been
received of the reorganization of an employee pension benefit plan which is a
multiemployer pension plan (as those terms are defined in Section 3(2),
Section 3(37) and Section 4241 of ERISA) to which the Borrower or any
commonly controlled entity is required to contribute under circumstances
where such reorganization would result in a material liability to the
Borrower or any commonly controlled entity; and
(viii) incur or permit a commonly controlled entity to incur a material
liability as a result of a complete withdrawal or partial withdrawal (as those
terms are defined in Section 4203 and Section 4205 of ERISA).
(b) Additional Borrowings. The Borrower shall not make any further or
additional borrowings, whether or not such borrowings are secured by property
constituting security for the Loan, except for borrowings which are Permitted
Encumbrances.
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(c) Mergers; Acquisitions. The Borrower shall not enter into any merger or
consolidation or acquire any equity interest in, or all or any material part of
the assets of, any other entity.
(d) Sale of Assets. The Borrower shall not sell, lease or otherwise dispose
of any of its assets, except for sales of inventory in the ordinary course of
business and the sale of equipment and other assets in the ordinary course of
business if replaced with equipment and/or other assets of equivalent value and
except that the Borrower may enter into agreements and/or arrangements with its
clients, customers or other third parties from time-to-time with respect to
license, sublease or dedication of portions of the Facility to or for the
benefit of customers or clients of the Borrower, or other third parties, in the
ordinary course of the Borrower's business.
(e) Mortgages and Liens. The Borrower shall not create, incur, assume or
permit to exist any mortgage, pledge, lien or other encumbrance of any kind upon
any of its property or assets, whether now owned or hereafter acquired, except
any encumbrances consented to in writing by the Bank and the Issuer, and except
for any Permitted Encumbrances.
(f) Sell Leaseback. The Borrower shall not enter into any sale and leaseback
arrangement.
(g) Loans. The Borrower shall not make loans or advances to any person,
except for advances for reasonable business expenses.
Section 7.25. Consent Relating to Construction of the Facility. Until all
obligations of the Borrower hereunder to be performed and paid shall have been
performed and paid in full, and so long as the Credit Facility shall be
outstanding, the Borrower covenants and agrees that all required consents
hereunder shall include the written consent of the Credit Facility Issuer and
MIDFA.
Section 7.26. Notice To Trustee. The Borrower agrees to notify the Trustee
in writing promptly upon the occurrence of an Event of Bankruptcy.
ARTICLE VIII
ASSIGNMENT, LEASING AND SELLING
Section 8.1. Assignment of Loan Agreement or Lease or Sale of Facility by
the Borrower. Except with the prior written consent of the Issuer, the Credit
Facility Issuer, the Credit Facility Trustee and the Trustee, the rights of the
Borrower under this Loan Agreement may not be assigned, and, except to the
extent permitted by Section 7.24(e) hereof, the Facility may not be leased or
sold as a whole or in part.
Section 8.2. Restrictions on Transfer of Issuer's Rights. Except for the
assignment made pursuant to the Indenture of certain of its rights under this
Loan Agreement and its
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pledge of the Note, endorsed without recourse to the order of the Trustee, to
the Trustee as security pursuant to the Indenture, the Issuer will not,
during the term of this Loan Agreement, sell, assign, transfer or convey any
of its interests in this Loan Agreement or the Note. The Borrower hereby
assents to such assignment and pledge of the Issuer's rights under the Loan
Agreement and the pledge of the Note to the Trustee.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Events of Default Defined. The term "Event of Default" shall
mean any one or more of the following events:
(a) The failure by the Borrower to pay when due any payment of principal or
interest on or other amount payable under the Note.
(b) The failure of the Issuer to pay when due any payment of principal of or
interest on or other amount payable under the Bonds.
(c) The failure of the Borrower to perform any of its obligations under
Sections 7.4, 7.23(a) and 7.24 hereof.
(d) The occurrence of an "Event of Default" or "event of default" under any
of the other Bond Documents or the Letter of Credit Documents.
(e) Any representation or warranty of the Borrower contained in Section 2.2
hereof, or in any document, instrument or certificate delivered pursuant hereto
or to the Indenture or in connection with the issuance and sale of the Bonds,
including but not limited to the Borrower's Tax Certificate, shall be false,
misleading or incomplete in any material respect on the date as of which made.
(f) Failure by the Borrower to observe and perform any covenant, condition
or agreement on the part of the Borrower under the Note or this Loan Agreement,
other than as referred to in the preceding paragraphs of this Section 9.1, for a
period of 30 days after written notice, specifying such failure and requesting
that it be remedied, is given to the Borrower by the Issuer or the Trustee.
(g) The commencement against the Borrower of an involuntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or of
any action or proceeding for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the Borrower
or for any substantial part of its property, or for the winding-up or
liquidation of its affairs and the continuance of any such case, action, or
proceeding unstayed and in effect for a period of 60 consecutive days.
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(h) The commencement by the Borrower of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or the
consent by it to, or its acquiescence in the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Borrower or of any substantial part of its property, or
the making by it of or the consent by it to any assignment for the benefit of
creditors, or the taking of any action by the Borrower in furtherance of any of
the foregoing.
(i) Failure by the Borrower to pay, when due or within any applicable grace
period, any amount owing on account of indebtedness for money borrowed or for
deferred purchases of property, or the failure by the Borrower to observe or
perform any covenant or undertaking on its part to be observed or performed in
any agreement evidencing, securing or relating to such indebtedness, if the
effect of such default is to cause, or permit the holder or holders of such
obligation (or a trustee for such holder or holders) to cause such obligation to
become due prior to its stated maturity and the acceleration of such obligation
would have a material and adverse effect on the business or financial condition
of the Borrower and its subsidiaries as a whole.
(j) The entry of a judgment or decree against the Borrower in an amount in
excess of $100,000 which remains undischarged and unstayed for a period of 30
consecutive days.
Section 9.2. Remedies on Default. If Payment of the Bonds shall not have
been made, whenever any Event of Default referred to in Section 9.1 hereof shall
have happened and shall not have been waived:
(a) The Issuer, or the Trustee on behalf of the Issuer, may by written
notice declare all installments of principal repayable pursuant to the Note for
the remainder of the term thereof to be immediately due and payable, whereupon
the same, together with accrued interest thereon as provided for in the Note,
shall become immediately due and payable without presentment, demand, protest or
any other notice whatsoever, all of which are hereby expressly waived by the
Borrower; provided, however, all such amounts shall automatically be and become
immediately due and payable without notice upon the occurrence of any event
described in Section 9.1(g) or 9.1(h) hereof, which notice the Borrower hereby
expressly waives.
(b) The Issuer may take whatever other action at law or in equity may appear
necessary or desirable to collect the amounts payable pursuant to the Note then
due and thereafter to become due, or to enforce the performance and observance
of any obligation, agreement or covenant of the Borrower under this Loan
Agreement or under any of the other Bond Documents.
In the enforcement of the remedies provided in this Section 9.2, the Issuer
may treat all reasonable expenses of enforcement, including, without limitation,
legal, accounting and advertising fees and expenses, as additional amounts
payable by the Borrower then due and owing and the Borrower agrees to pay such
additional amounts upon demand, the amount of such legal fees to be without
regard to any statutory presumption.
35
<PAGE>
Section 9.3. Application of Amounts Realized in Enforcement of Remedies. Any
amounts collected pursuant to action taken under Section 9.2 hereof shall be
paid to the Trustee and applied to the payment of, first, any costs, expenses
and fees incurred by the Issuer, the Trustee and the Credit Facility Trustee as
a result of taking such action; second, any interest which shall have accrued on
any overdue interest and any accrued interest on any overdue principal of the
Bonds at the rate set forth in the Bonds; third, any overdue interest on the
Bonds; fourth, any overdue principal of the Bonds; fifth, the outstanding
principal balance of the Bonds; and sixth, if Payment of the Bonds shall have
been made in full, all remaining moneys shall be applied as set forth in Article
IX of the Indenture.
Section 9.4. No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Issuer is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Loan Agreement or now or
hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient.
Section 9.5. Agreement to Pay Attorneys' Fees and Expenses. In any Event of
Default, if the Issuer, the Trustee, the Credit Facility Trustee, the Credit
Facility Issuer or any Bondholder employs attorneys or incurs other expenses for
the collection of amounts payable hereunder or for the enforcement of the
performance or observance of any covenants or agreements on the part of the
Borrower contained herein or in the Indenture (in the case of the Issuer, the
Trustee, the Credit Facility Trustee, or the Credit Facility Issuer) or
contained in the Indenture (on the part of any Bondholder), the Borrower agrees
that it will on demand therefor pay to the Issuer, the Trustee, the Credit
Facility Trustee, the Credit Facility Issuer or such Bondholder the reasonable
fees of such attorneys and such other reasonable expenses so incurred by the
Issuer, the Trustee, the Credit Facility Trustee, the Credit Facility Issuer or
such Bondholder, the amount of such fees of attorneys to be without regard to
any statutory presumption.
Section 9.6. Correlative Waivers. If an event of default under Section 901
of the Indenture shall be cured or waived and any remedial action by the Trustee
or the Credit Facility Trustee rescinded, any correlative default under this
Loan Agreement shall be deemed to have been cured or waived.
Section 9.7. MIDFA Insurance. Pursuant to the terms and conditions of the
Insurance Agreement, the Issuer has insured a portion of the Borrower's
obligations under the Reimbursement Agreement. Certain of the rights, duties,
obligations and remedies of the Trustee, the Borrower and the Bank under this
Loan Agreement and the other Bond Documents are subject to the terms,
conditions and limitations set forth in the Insurance Agreement.
Section 9.8. Conflicting Provisions. Upon the occurrence of a conflict
between provisions of this Loan Agreement and the Reimbursement Agreement, so
long as the Credit Facility is outstanding and there are no defaults under the
Reimbursement Agreement by the Credit Facility Provider, provisions of the
Reimbursement Agreement shall control.
36
<PAGE>
ARTICLE X
PREPAYMENTS
Section 10.1. Optional Prepayments.
(a) The Borrower is hereby granted, and shall have, the option to prepay the
unpaid principal of the Note in whole or in part in accordance with and as set
forth in Section 701 and 702 of the Indenture with respect to the prepayment of
the Bonds; provided, all prepayments shall be made in immediately available
funds and with accrued interest to the date of prepayment and that any
prepayment of the Note in part shall be applied to unpaid installments of
principal in inverse order of maturity. Any prepayment pursuant to this
subsection (a) shall be made by the Borrower taking, or causing the Issuer to
take, the actions required (i) for Payment of the Bonds, in the case of
prepayment of the Note in whole, or (ii) to effect prepayment of less than all
of the Bonds according to their terms in the case of a partial prepayment of the
Note.
(b) In the event of damage, destruction, or condemnation of the Plant or any
part thereof, the Borrower may, at its option, pursuant to Section 6.8 hereof
and without penalty or premium, prepay the Note in whole or in part; provided
that any such prepayment shall be made in immediately available funds with
accrued interest to the date of whole or partial prepayment. Any prepayment
pursuant to this subsection (b) shall be made by the Borrower taking, or causing
the Issuer to take, the actions required for the full or partial prepayment of
the Bond as provided for in subsection (a) hereof.
(c) To exercise the option granted in subsection (a) or (b) of this Section
10.1, the Borrower shall give written notice to the Issuer and the Trustee which
shall specify therein (i) the date of the intended prepayment of the Note, which
shall not be less than 30 nor more than 60 days from the date the notice is
mailed and (ii) the principal amount of the Note to be prepaid. When given such
notice shall be irrevocable by the Borrower.
Section 10.2. Mandatory Prepayments.
(a) In the event of a Determination of Taxability, the Borrower shall, on a
date selected by the Borrower not more than 180 days following the date of
written notice to the Trustee of a Determination of Taxability, prepay the
entire unpaid principal balance of the Note in full, plus accrued interest to
such date. Immediately upon the occurrence of a Determination of Taxability, the
Borrower shall notify the Issuer, the Trustee and the Credit Facility Trustee of
the date selected for payment pursuant to this Section 10.2.
(b) Prior to the Conversion Date, in the event any Credit Facility is not
renewed and an Alternate Credit Facility has not been provided in accordance
with Section 603 of the Indenture, the Borrower shall on or before the
Interest Payment Date occurring closest but not less than 15 days prior to
the expiration date of the then current Credit Facility, prepay the
37
<PAGE>
entire unpaid principal balance of the Note in full. The Borrower shall
promptly notify the Issuer, the Trustee and the Credit Facility Trustee of
the date selected for such payment.
Section 10.3. Other Mandatory Prepayments. The amounts required to be
applied to the prepayment of the Note by Sections 4.4, 5.3 and 6.8 hereof
shall be applied by the Borrower to prepay, together with accrued interest,
all or a portion of the unpaid principal of the Note. Such prepayment shall
be made by the Borrower taking, or causing the Issuer to take, the actions
required (i) for payment of the Bonds, whether by redemption prior to the
maturity or by payment at maturity, or (ii) to effect the purchase,
redemption or payment at maturity of less than all of the installments of
principal on the Bonds in inverse order of their maturities.
ARTICLE XI
MISCELLANEOUS
Section 11.1. References to the Bonds Ineffective After Bonds Paid. Upon
payment of the Bonds, all references in this Loan Agreement to the Bonds shall
be ineffective and the Issuer and any holder of the Bonds shall not thereafter
have any rights hereunder, excepting reporting and payment of rebate amounts and
other payments under the Borrower's Tax Certificate.
Section 11.2. No Implied Waiver. In the event any agreement contained in the
Note or this Loan Agreement should be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the particular breach
so waived and shall not be deemed to waive any other breach thereunder or
hereunder. Neither any failure nor any delay on the part of the Trustee to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof, or the exercise of any
other right, power or privilege.
Section 11.3. Issuer Representative. Whenever under the provisions of this
Loan Agreement the approval of the Issuer is required or the Issuer is required
to take some action at the request of the Borrower, such approval shall be made
or such action shall be taken by the Issuer Representative; and the Borrower,
the Trustee and the Bondholders shall be authorized to rely on any such approval
or action.
Section 11.4. Borrower Representative. Whenever under the provisions of this
Loan Agreement the approval of the Borrower is required or the Borrower is
required to take some action at the request of the Issuer, such approval shall
be made or such action shall be taken by the Borrower Representative; and the
Issuer, the Trustee, the Credit Facility Trustee and the Bondholders shall be
authorized to act on any such approval or action.
38
<PAGE>
Section 11.5. Notices. All notices, certificates or other communications
hereunder shall be sufficiently given and shall be deemed given when delivered
by hand delivery or mailed by first class, postage prepaid, registered or
certified mail, addressed as follows:
If to the Issuer: Maryland Industrial Development Financing Authority 217
East Redwood Street, 22nd Floor Baltimore, Maryland 21202 Attention: Executive
Director
If to the Borrower: Chesapeake Biological Laboratories, Inc. 6000 Metro
Drive Baltimore, Maryland 21215 Attention: John C. Weiss III, President
If to the Trustee: First Union National Bank of Virginia Bond Administration
901 E. Cary Street, 2nd Floor Richmond, Virginia 23219 Attention: Corporate
Trust Department
If to the Credit Facility Issuer: First Union National Bank of North
Carolina Two First Union Center Charlotte, North Carolina 28288 Attention:
International Operations
If to Credit Facility Trustee: Branch Banking and Trust Company 223 West
Nash Street Wilson, North Carolina 27984 Attention: Corporate Trust Department
The Issuer, the Borrower or the Trustee may, by notice given hereunder,
designate from time to time any further or different addresses to which
subsequent notices, certificates or other communications shall be sent.
Section 11.6. If Payment or Performance Date Is Other Than a Business Day.
If the specified or last date for the making of any payment, the performance of
any act or the exercising of any right, as provided in this Loan Agreement,
shall be a day other than a Business Day, such payment may be made or act
performed or right exercised on the next succeeding Business Day with the same
effect as if made, performed or exercised on the specified date; provided that
interest shall accrue during any such period during which payment shall not
occur.
39
<PAGE>
Section 11.7. Binding Effect. This Loan Agreement shall inure to the benefit
of and shall be binding upon the Issuer, the Borrower and their respective
successors and assigns.
Section 11.8. Severability. In the event any provision of this Loan
Agreement or the Note shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof or thereof.
Section 11.9. Amendments, Changes and Modifications. Subsequent to the
issuance of the Bonds and prior to Payment of the Bonds, this Loan Agreement and
the other Bond Documents may not be effectively amended, changed, modified,
altered or terminated except in accordance with the Indenture.
Section 11.10. Execution in Counterparts. This Loan Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument, and no one counterpart
of which need be executed by all parties, except that, to the extent that this
Loan Agreement shall constitute personal property under the Uniform Commercial
Code of Maryland, no security interest in this Loan Agreement may be created or
perfected through the transfer or possession of any counterpart of this Loan
Agreement other than the original counterpart, which shall be the counterpart
containing the receipt therefor executed by the Trustee following the signatures
to this Loan Agreement.
Section 11.11. Applicable Law. This Loan Agreement shall be governed by and
construed in accordance with the laws of the State.
Section 11.12. No Charge Against Issuer Credit. No provision hereof shall be
construed to impose a charge against the general credit of the Issuer or any
personal or pecuniary liability upon any commissioner, official, employee or
agent of the Issuer.
Section 11.13. Issuer Not Liable. Notwithstanding any other provision of
this Loan Agreement (a) the Issuer shall not be liable to the Borrower, the
Trustee, any Bondholder or any other Person for any failure of the Issuer to
take action under this Loan Agreement unless the Issuer (i) is requested in
writing by an appropriate Person to take such action, (ii) is assured of payment
of or reimbursement for any expense in such action, and (iii) is afforded, under
the existing circumstances, a reasonable period to take such action, and (b)
except with respect to any action for specific performance or any action in the
nature of a prohibitory or mandatory injunction, neither the Issuer nor any
commissioner of the Issuer nor any other official, employee or agent of the
Issuer shall be liable to the Borrower, the Trustee, any Bondholder or any other
Person for any action taken by the Issuer or by its officers, servants, agents
or employees, or for any failure to take action under this Loan Agreement or the
other Bond Documents to which the Issuer is a party. In acting under this Loan
Agreement, or in refraining from acting under this Loan Agreement, the Issuer
may conclusively rely on the advice of its counsel.
Section 11.14. Expenses. The Borrower agrees to pay all reasonable fees
and expenses incurred in connection with the preparation, execution,
delivery, modification, waiver, and amendment of this Loan Agreement, the
other Bond Documents and related documents,
40
<PAGE>
and the fees and expenses of Co-Bond Counsel, Counsel for the Issuer and, in
connection with any amendments, any Counsel, if any, for any Bondholder who
owns more than 25% of the aggregate principal amount of the Bonds
Outstanding. The Borrower also agrees to pay all expenses incurred by the
Trustee or the Issuer in collection of any indebtedness incurred hereunder in
the Event of Default by the Borrower, provided that the amount of any legal
fees so incurred shall be without regard to any statutory presumption.
Section 11.15. Amounts Remaining with the Trustee. Any amounts remaining in
the Bond Fund or otherwise in trust with the Trustee under the Indenture or this
Loan Agreement shall, after Payment of the Bonds and all Administrative Expenses
in accordance with this Loan Agreement, be disbursed by the Trustee in
accordance with the provisions of the Indenture or otherwise as may be required
by law.
Section 11.16. Execution in Counterparts. This Loan Agreement may be
executed in multiple counterparts, each of which shall be regarded for all
purposes as an original, and such counterparts shall constitute but one and the
same instrument, and no one counterpart of which need be executed by all
parties.
Section 11.17. Effective Date. This Loan Agreement has been dated as of the
date first written solely for the purpose of convenience of reference and shall
become effective upon its execution and delivery, on the date of initial
issuance of the Bonds, by the parties hereto. All representations and warranties
set forth herein shall be deemed to have been made on such date.
[SIGNATURES ON FOLLOWING PAGE]
41
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Loan
Agreement to be executed in their respective legal names by their duly
authorized representatives and their respective seals to be hereunto affixed,
and the signatures of duly authorized persons to be attested, all as of the date
first above written.
MARYLAND INDUSTRIAL DEVELOPMENT
FINANCING AUTHORITY
ATTEST:
/s/ Stephen J. Lynch /s/ Thomas H. Mullaney
- ------------------------- --------------------------------------
Stephen J. Lynch, By: Thomas H. Mullaney,
Acting Executive Director Chairman
(SEAL)
CHESAPEAKE BIOLOGICAL LABORATORIES,
INC.
ATTEST:/WITNESS
/s/ J.T. Janssen By: /s/John C. Weiss, III
- ------------------------- --------------------------------------
CFO/Treasurer John C. Weiss III, President
- -------------------------
(CORPORATE SEAL)
42
<PAGE>
EXHIBIT A
AFTER THE ENDORSEMENT OF THIS NOTE AS HEREIN PROVIDED, THIS NOTE MAY NOT BE
ASSIGNED, PLEDGED, ENDORSED OR OTHERWISE TRANSFERRED EXCEPT TO A SUCCESSOR OF
THE TRUSTEE UNDER THE TRUST INDENTURE REFERRED TO IN THE LOAN AGREEMENT REFERRED
TO HEREIN.
PROMISSORY NOTE
$_________________ November __, 1996
FOR VALUE RECEIVED,__________, a _______ corporation (the "Borrower"), by
this promissory note promises to pay to the order of _________________________
(the "Issuer") the principal sum of________________________ and No/100
Dollars ($__________) which principal amount shall be due and payable in
_____________ consecutive quarterly installments on the first Business Day of
each February, May, August and November, commencing the first Business Day of
November, 1998, as more specifically set forth below:
[INSERT SCHEDULE FROM INDENTURE]
The Borrower further agrees to pay interest on the unpaid principal amount
from the date of authentication and delivery of the Bonds (as defined in the
Loan Agreement referred to below) until the principal amount and all interest
thereon is paid in full which shall be paid on the first Business Day of each
February, May, August and November (the "Interest Payment Dates"), at the rate
of interest equal to the Variable Rate (as defined in the Indenture hereinafter
mentioned) or the Fixed Rate (as defined in the Indenture).
This Promissory Note is the "Note" referred to in the Loan Agreement dated
as of November 1, 1996 (the "Loan Agreement"), between the Borrower and the
Issuer and is entitled to the benefits thereof and subject to the conditions
thereof. Terms not otherwise defined herein shall have the definitions set forth
in the Loan Agreement.
Under the Loan Agreement, the Issuer has loaned to the Borrower the proceeds
received from the sale of the Issuer's $7,000,000 Maryland Industrial
Development Financing Authority Economic Development Revenue Bonds (Chesapeake,
Biological Laboratories, Inc. Facility), 1996 Issue, dated as of the date hereof
(the "Bonds"). The Bonds have been issued, concurrently with the execution and
delivery of this Note, pursuant to, and are secured by, the Trust Indenture
among the Issuer, First Union National Bank of Virginia, as Trustee (the
"Trustee") and Branch Banking and Trust Company, as Credit Facility Trustee (the
"Credit Facility Trustee") dated as of November 1, 1996 (the "Indenture"). The
Bonds bear interest at the Variable Rate prior to the Conversion Date (as
defined in the Indenture) and at the Fixed
<PAGE>
Rate on or subsequent to the Conversion Date. Such interest is payable on the
Interest Payment Dates. This Note shall bear interest at the Variable Rate
and the Fixed Rate during the same periods as such rates are borne by the
Bonds.
Each payment of principal of and interest on this Note will be sufficient to
enable the Issuer to pay when due the total amount of principal of (whether at
maturity, upon acceleration or otherwise), premium, if any, and interest on the
Bonds. To the extent that principal of, premium, if any, or interest on the
Bonds shall be paid, there shall be credited against unpaid principal of or
interest on this Note, as the case may be, an amount equal to the principal of
or interest on the Bonds so paid. The principal of, premium, if any, and
interest on this Note are payable in immediately available funds of any coin or
currency of the United States of America which on the respective dates of
payment thereof shall be legal tender for the payment of public and private
debts.
In addition, the Borrower agrees to pay when due in immediately available
funds all other amounts at the time the Issuer may be required to pay the same
pursuant to the Bonds or the Indenture.
The obligation of the Borrower to make the payments required hereunder shall
be absolute and unconditional without any defense, recoupment or right of
set-off by reason of any default by the Issuer under the Loan Agreement or for
any other reason.
Upon the occurrence of an Event of Default specified in the Loan Agreement,
the unpaid principal hereof and accrued interest and additional interest hereon
may become forthwith due and payable as provided in the Loan Agreement, and in
the event the Borrower shall fail to pay any amount required to be paid under
this Note when due, the Borrower shall pay interest on such amount at a rate per
annum equal to the Overdue Rate (as defined in the Loan Agreement) or the
maximum rate permitted by law, whichever is lower.
The Borrower may at its option, and may under certain circumstances be
required to, prepay all or any part of the unpaid principal of this Note upon
the terms provided in the Loan Agreement.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, THE BORROWER AUTHORIZES THE
CLERK OR ANY ATTORNEY DESIGNATED BY THE BANK, MIDFA OR ANY CLERK OF ANY COURT
OF RECORD TO APPEAR FOR IT IN ANY COURT OF RECORD AND CONFESS JUDGMENT
AGAINST IT WITHOUT PRIOR HEARING, IN FAVOR OF THE BANK OR MIDFA FOR AND IN
THE AMOUNT EQUAL TO SUCH OF THE OBLIGATIONS OF THE BORROWER WHICH HAVE BEEN
DUE AND PAYABLE UNDER THE PROVISIONS OF THIS NOTE, PLUS INTEREST ACCRUED AND
UNPAID THEREON, ALL OTHER AMOUNTS THEN DUE AND PAYABLE HEREUNDER, COSTS OF
SUIT AND AN ATTORNEY'S FEE IN AN AMOUNT EQUAL TO FIFTEEN PERCENT (15%) OF
SUCH OBLIGATIONS PLUS ALL ACCRUED AND UNPAID INTEREST THEREON, PROVIDED,
HOWEVER, (A) IF THE ACTUAL ATTORNEY'S FEES INCURRED BY THE BANK OR MIDFA ARE
LESS THAN 15% OF SUCH OBLIGATION (PLUS ALL ACCRUED AND UNPAID INTEREST
2
<PAGE>
THEREON), THE BANK OR MIDFA WILL REFUND (TO THE EXTENT ACTUALLY COLLECTED) TO
THE BORROWER AN AMOUNT EQUAL TO THE DIFFERENCE BETWEEN 15% OF SUCH OBLIGATION
(PLUS ALL ACCRUED AND UNPAID INTEREST THEREON) AND THE AMOUNT OF SUCH ACTUAL
ATTORNEY'S FEES (AFTER ALL OF SUCH OBLIGATIONS HAVE BEEN PAID IN FULL), OR
(B) IF THE ACTUAL ATTORNEY'S FEES INCURRED BY THE BANK OR MIDFA OR OTHER
HOLDER HEREOF EXCEED 15% OF SUCH OBLIGATIONS (PLUS ALL ACCRUED AND UNPAID
INTEREST THEREON, WHETHER BY REASON OF JUDGMENT BEING CONTESTED OR OTHERWISE,
THE BORROWER WILL PAY TO THE BANK OR MIDFA ON DEMAND THE AMOUNT OF ANY SUCH
EXCESS. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE
BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISE THEREOF, OR BY ANY
IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
ENTERED PURSUANT THERETO. SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR
MORE OCCASIONS, FROM TIME TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS. AS
OFTEN AS THE BANK OR MIDFA SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL OF
WHICH THIS NOTE SHALL BE A SUFFICIENT WARRANT.
The Borrower hereby promises to pay all costs of collection, including
reasonable attorneys' fees and disbursements, without regard to any statutory
presumption, in the case of a default under this Note or the Loan Agreement. The
Borrower hereby waives presentment, protest and notice of protest or dishonor.
This Note shall be construed in accordance with the laws of the State of
Maryland.
IN WITNESS WHEREOF, the Borrower has caused this instrument to be executed
in its corporate name by its duly authorized officers and its corporate seal to
be affixed hereto all as of the date first above written.
CHESAPEAKE BIOLOGICAL LABORATORIES,
INC.
ATTEST:
___________________________ By:_______________________________
____________Secretary John C. Weiss, III, President
(CORPORATE SEAL)
3
<PAGE>
ENDORSEMENT
Pay to the order of First Union National Bank of Virginia, as Trustee for
the benefit of the Bondholders under the Trust Indenture dated as of November 1,
1996, between the Issuer, the Trustee and Branch Banking and Trust Company, as
Credit Facility Trustee, without recourse. This endorsement is given and made
without any warranty as to the authority and genuineness of the signature of the
maker of the foregoing Promissory Note.
This the day of November, 1996.
MARYLAND INDUSTRIAL DEVELOPMENT
FINANCING AUTHORITY
By:_____________________________
Title:__________________________
<PAGE>
RECEIPT
Receipt of the foregoing original counterpart of the Loan Agreement, dated
as of November 1, 1996, between the Maryland Industrial Development Financing
Authority and Chesapeake Biological Laboratories, Inc., is hereby acknowledged.
FIRST UNION NATIONAL BANK
OF VIRGINIA,
as Trustee
By:_____________________________
Title:__________________________
<PAGE>
EXHIBIT B
(Facility Site)
<PAGE>
LETTER OF CREDIT
AND
REIMBURSEMENT AGREEMENT
by and between
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Dated as of November 1, 1996
------------------------------------------------
$7,000,000
Maryland Industrial Development Financing Authority
Economic Development Revenue Bonds
(Chesapeake Biological Laboratories, Inc. Facility)
1996 Issue
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is not a part of the Agreement
but rather is for convenience of reference only.)
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE I DEFINITIONS..................,,.................
1.1 Definitions.....................................
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE BORROWER..
2.1 Incorporation...................................
2.2 Power and Authority.............................
2.3 Financial Condition.............................
2.4 Title to Assets.................................
2.5 Contingent Liabilities..........................
2.6 Litigation......................................
2.7 Taxes...........................................
2.8 Contract or Restriction Affecting Borrower......
2.9 Trademarks, Franchises and Licenses.............
2.10 No Default......................................
2.11 Governmental Authority..........................
2.12 No Untrue Statements............................
2.13 ERISA Requirements..............................
2.14 Pollution and Environmental Control; Hazardous
Substances.....................................
2.15 Facility Site...................................
2.16 Labor Relations.................................
ARTICLE III REIMBURSEMENT AND OTHER PAYMENTS................
3.1 Letter of Credit................................
3.2 Reimbursement and Other Payments................
3.3 Tender Advances.................................
3.4 Commission and Fees.............................
3.5 Increased Costs Due to Change in Law............
3.6 Computation.....................................
3.7 Payment Procedure...............................
3.8 Business Days...................................
3.9 Reimbursement of Expenses.......................
3.10 Extension of Expiration Date....................
3.11 Obligations Absolute............................
ARTICLE IV SECURITY........................................
4.1 Security........................................
4.2 Additional Liens................................
4.3 Casualty and Liability Insurance Required.......
4.4 General Requirements Applicable to Insurance....
4.5 Advances by Bank................................
4.6 Borrower to Make up Deficiency in Insurance
Coverage.......................................
4.7 Eminent Domain..................................
4.8 Application of Net Proceeds of Insurance and
Eminent Domain.................................
4.9 Parties to Give Notice..........................
ARTICLE V AFFIRMATIVE COVENANTS...........................
5.1 Repayment of Obligations........................
5.2 Performance Under Reimbursement Agreement and
Security Instruments...........................
5.3 Financial and Business Information about the
Borrower.......................................
5.4 Notice of Certain Events........................
5.5 Corporate Existence.............................
5.6 Payment of Indebtedness; Performance of Other
Obligations....................................
5.7 Payment of Trade Accounts Payable, Etc..........
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
5.8 Maintenance of Insurance........................
5.9 Maintenance of Books and Records; Inspection....
5.10 Comply with ERISA...............................
5.11 Consolidated Omnibus Budget Reconciliation Act..
5.12 Maintenance of Properties; Conduct of Business..
5.13 [INTENTIONALLY LEFT BLANK]......................
5.14 Taxes and Liens.................................
5.15 Observe all Laws................................
5.16 Employment Count................................
5.17 Equal Employment................................
5.18 Drug and Alcohol Free Workplace.................
5.19 Appraisals......................................
5.20 Tangible Net Worth..............................
5.21 Debt to Worth Ratio.............................
5.22 EBITDA Ratio....................................
5.23 Current Ratio...................................
ARTICLE VI NEGATIVE COVENANTS..............................
6.1 Merger and Dissolution..........................
6.2 Acquisitions....................................
6.3 Indebtedness....................................
6.4 Liens and Encumbrances..........................
6.5 Disposition of Assets...........................
6.6 Restricted Investments..........................
6.7 Sale and Leaseback..............................
6.8 New Business....................................
6.9 Subsidiaries or Partnerships....................
6.10 Guaranties......................................
6.11 Transactions Affecting the Collateral...........
6.12 Hazardous Wastes................................
6.13 Fiscal Year.....................................
6.14 Management......................................
ARTICLE VII CONDITIONS TO ISSUANCE OF LETTER OF CREDIT......
7.1 Conditions on Issuance..........................
7.2 Additional Conditions Precedent to Issuance of
the Letter of Credit...........................
7.3 Conditions Precedent to Each Tender Advance.....
ARTICLE VIII DEFAULT.........................................
8.1 Events of Default...............................
8.2 No Remedy Exclusive.............................
8.3 Anti-Marshalling Provisions.....................
8.4 Confession of Judgment..........................
ARTICLE IX MISCELLANEOUS...................................
9.1 Indemnification.................................
9.2 Transfer of Letter of Credit....................
9.3 Reduction of Letter of Credit...................
9.4 Liability of the Bank...........................
9.5 Successors and Assigns..........................
9.6 Notices.........................................
9.7 Amendment.......................................
9.8 Effect of Delay and Waivers.....................
9.9 Counterparts....................................
9.10 Severability....................................
9.11 Cost of Collection..............................
9.12 Set Off.........................................
9.13 Governing Law...................................
9.14 References......................................
9.15 Taxes, Etc......................................
9.16 CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL...
9.17 Indirect Means..................................
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
9.18 Entire Agreement.................................
9.19 Authority to Act on Behalf of the Bank...........
ARTICLE X ACQUISITION OF FACILITY..........................
10.1 Covenants by Borrower With Respect to Acquisition
of Facility.....................................
10.2 Enforcement of Remedies Against Contractors and
Subcontractors and Their Sureties...............
10.3 Application of Proceeds of the Bonds.............
10.4 Conditions Precedent to the Bank's Approval of
Requisitions for Disbursements from Facility
Fund............................................
10.5 Financing Sign on Property; Publicity............
10.6 Establishment of Completion Date.................
Annex 1--Provisions for Alternative Dispute Resolution
Exhibit A--Irrevocable Letter of Credit............................. A-1
Exhibit B--List of Subsidiaries..................................... B-1
Exhibit C--Borrower's Counsel Opinion............................... C-1
Exhibit D--Bond Counsel Reliance Letter............................. D-1
Exhibit E--Project Cost Letter...................................... E-1
</TABLE>
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<PAGE>
LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
THIS LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of November 1,
1996 (the "Agreement" or "Reimbursement Agreement"), is by and between
CHESAPEAKE BIOLOGICAL LABORATORIES, INC., a Maryland Corporation (the
"Borrower") and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association organized and existing under the laws of the United States with its
principal offices located in Charlotte, North Carolina (the "Bank");
W I T N E S S E T H:
WHEREAS, arrangements have been made pursuant to a Trust Indenture dated as
of November 1, 1996 between the Maryland Industrial Development Financing
Authority (the "Issuer"), First Union National Bank of Virginia (in such
capacity, the "Trustee") and Branch Banking and Trust Company, as Credit
Facility Trustee (the "Credit Facility Trustee") (as amended, the "Indenture")
for the issuance and sale by the Issuer of its Maryland Industrial Development
Financing Authority Economic Development Revenue Bonds (Chesapeake Biological
Laboratories, Inc. Facility) 1996 Issue in the original aggregate principal
amount of [$7,000,000] (the "Bonds"); and
WHEREAS, the proceeds from the sale of the Bonds have been loaned to the
Borrower pursuant to a Loan Agreement dated as of November 1, 1996, between the
Issuer and the Borrower (as amended or supplemented, the "Loan Agreement") to
finance (a) the acquisition by the Borrower of approximately 3.5 acres of land
located at 1111 South Paca Street, Baltimore, Maryland together with the
improvements located thereon (such land and all improvements thereon being
hereinafter referred to as the "Real Property"), (b) the renovation of, and
construction of improvements on, the Real Property and (c) the acquisition of
certain equipment to be used at the Real Property (the "Equipment") (such Real
Property, improvements and Equipment being hereinafter collectively referred to
as the "Facility"); and
WHEREAS, pursuant to the Borrower's Term Loan Promissory Note dated as of
November 1, 1996 (as amended or supplemented, the "Creditor Note") in the
principal amount of $1,500,000 payable by the Borrower to the Mayor and City
Council of Baltimore, by and through the Department of Housing and Community
Development, c/o City of Baltimore Development Corporation (the "Creditor" or
the "City"), the Creditor made a loan to the Borrower in the principal amount of
$1,500,000 (the "Creditor Loan"), the proceeds of which will be used to finance
certain of the costs of the acquisition of the Real Property;
<PAGE>
WHEREAS, in order to enhance the marketability of the Bonds, the Borrower
has requested that the Bank issue an irrevocable direct-pay letter of credit in
the form attached hereto as Exhibit A (such letter of credit or any successor or
substitute letter of credit issued by the Bank herein individually and
collectively called the "Letter of Credit") in an amount of up to $7,280,000, of
which $7,000,000 will support the principal of the Bonds, and $280,000 will
support up to 120 days' interest on the Bonds at an assumed rate of 12% per
annum; and, the Bank has agreed to issue the Letter of Credit pursuant to this
Reimbursement Agreement; and
WHEREAS, as a condition precedent to the issuance of the Letter of Credit,
the Bank has required that the obligations of the Borrower under this
Reimbursement Agreement be partially insured by the Maryland Industrial
Development Financing Authority (in such capacity, "MIDFA") pursuant to an
Insurance Agreement dated as of November 1, 1996 by and among the Borrower,
MIDFA and the Bank (the "MIDFA Insurance Agreement").
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, including the covenants, terms and conditions hereinafter
appearing, and to induce the Bank to issue the Letter of Credit, the Borrower
does hereby covenant and agree with the Bank as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. All words and terms defined in Article I of the Loan
Agreement shall have the same meanings in this Agreement, unless otherwise
specifically defined herein. The terms defined in this Article I have, for all
purposes of this Agreement, the meanings specified hereinabove or in this
Article, unless defined elsewhere herein or the context clearly requires
otherwise.
"Acquisition" or "acquisition" has the meaning specified for such term in
Article 1.1 of the Loan Agreement.
"Affiliate" shall mean, with respect to any Person, any other person (i)
directly or indirectly controlling (including, but not limited to, all directors
and officers of such person), controlled by, or under direct or indirect common
control with, such person or (ii) that directly or indirectly owns more than 5%
of the voting securities of such Person. A person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership or voting securities, by contract or
otherwise.
-2-
<PAGE>
"Agreement" shall mean this Letter of Credit and Reimbursement Agreement, as
the same may from time to time be amended, modified or supplemented in
accordance with the terms hereof.
"Bankruptcy Code" means 11 U.S.C. Section 101 et seq., as amended.
"Bond Documents" means, collectively, the Loan Agreement, the Note, the
Indenture, the Bonds, the Remarketing Agreement, the Tender Agency Agreement,
the Placement Agreement and the Placement Memorandum, as the same may be
amended, modified or supplemented from time to time in accordance with their
respective terms.
"Business Day" shall mean any day not a Saturday, Sunday or legal holiday,
on which commercial banks in Charlotte, North Carolina are open for business.
"Collateral" means all real and personal property of the Borrower with
respect to which the Bank has been granted a lien or security interest pursuant
to the Security Instruments.
"Collateral Pledge Agreement" means the Collateral Pledge Agreement dated as
of November 1, 1996 by and between the Borrower and the Bank.
"Commitment Letter" means that certain commitment letter from the Bank to
the Borrower dated July 9, 1996 (as amended by the letter dated August 30,
1996), and accepted and executed by the Borrower on or before the date of
issuance of the Bonds.
"Consistent Basis" means, in reference to the application of Generally
Accepted Accounting Principles, that the accounting principles observed in the
period referred to are comparable in all material respects to those applied in
the preceding period, except as to any changes consented to by the Bank.
"Creditor Security Agreement" means the Purchase Money Mortgage dated as of
November 1, 1996 from the Borrower to the Creditor, as the same may be amended,
modified or supplemented from time to time in accordance with the terms thereof.
"Eminent Domain" means the taking of title to, or the temporary use of, the
Collateral or any part thereof pursuant to eminent domain or condemnation
proceedings, or any voluntary conveyance of any part of the Collateral during
the pendency of, or as a result of a threat of, such proceedings.
"Event of Default" shall have the meaning specified in Article VIII hereof.
"Environmental Report" means that certain Phase I Environmental Site
Assessment, dated February 9, 1996, as amended to date, prepared by Mancor
Environmental, Inc.
-3-
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, including any rules and regulations promulgated thereunder.
"Expiration Date" means November 21, 1999, the expiration date of the Letter
of Credit, as such date may be extended pursuant to the terms of Section 3.10
hereof.
"Funded Debt" shall mean all indebtedness of a Person that by its terms or
by the terms of any instrument or agreement relating thereto matures more than
one year from, or is renewable or extendable at the option of the debtor to a
date more than one year (including an option of the debtor under a revolving
credit or similar arrangement obligating the lender or lenders to extend credit
over a period of one year or more) from, the date of creation thereof.
"Generally Accepted Accounting Principles" means those principles of
accounting set forth in pronouncements of the Financial Accounting Standards
Board and its predecessors or pronouncements of the American Institute of
Certified Public Accountants or those principles of accounting which have other
substantial authoritative support and are applicable in the circumstances as of
the date of application, as such principles are from time to time supplemented
or amended.
"Indebtedness for Money Borrowed" means all indebtedness in respect of money
borrowed, including (without limitation) the deferred purchase price of any
property or asset or indebtedness evidenced by a promissory note, bond, guaranty
or similar written obligation for the payment of money (including but not
limited to, conditional sales or similar title retention agreements).
"Mortgage" or "Deed of Trust" means the Deed of Trust and Security Agreement
dated as of November 1, 1996 from the Borrower to certain individual trustees
for the benefit of the Bank and the Issuer, as amended, restated, modified or
supplemented from time to time.
"Note" shall mean the promissory note of the Borrower, dated as of November
1, 1996 in the principal amount of $7,000,000, issued by the Borrower to the
Issuer, as such promissory note may be further amended, restated, modified or
supplemented.
"Officer's Certificate" means the Certificate of the President or Chief
Financial Officer of the Borrower.
"Permitted Liens" shall mean liens in favor of the Bank and any of the
following liens securing any indebtedness of the Borrower and its Subsidiaries
on their property, real or personal, whether now owned or hereafter acquired:
(a) Liens of carriers, warehousemen, mechanics and materialmen incurred
in the ordinary course of business for sums not yet due and payable or that
are being contested in good faith and with due diligence in appropriate
proceedings and for which bonds have been posted or other security
acceptable to the Bank provided, such bonds
-4-
<PAGE>
or other security to be in amounts sufficient to pay off the liens during
the pendency of any controversies relating to them;
(b) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or liens to secure the performance of
letters of credit, bids, tenders, statutory obligations, leases and
contracts (other than for borrowed funds) entered into in the ordinary
course of business or to secure obligations on surety or appeal bonds;
(c) Liens for current taxes, assessments or other governmental charges
that are not delinquent or remain payable without any penalty or that are
being contested in good faith and with due diligence by appropriate
proceedings but do not in the Bank's judgment adversely affect the Bank's
rights or the priority of the Bank's lien in the Collateral, and if
reasonably requested by the Bank, the Borrower shall establish reserves
satisfactory to the Bank with respect thereto;
(d) Liens arising under or in connection with the Creditor Security
Agreement.
(e) Liens arising under or in connection with the Mortgage.
(f) Liens arising under or in connection with the Security Agreement.
(g) Liens arising under or in connection with the Revolving Credit
Facility Agreement.
(h) Encumbrances described in the Commitment for Title Insurance (No.
118) issued by Chicago Title Insurance Company with respect to the
Mortgage.
(i) Liens on any property, or interest therein, hereafter acquired by
the Borrower, which lien is created contemporaneously with such acquisition
to secure or provide for the payment or financing of any part of the
purchase price thereof, provided that (A) the indebtedness secured by any
such lien so created, assumed or existing shall not exceed 100% of the cost
of the property covered thereby to the person acquiring the same, and (B)
each such lien shall attach only the property so acquired and fixed
improvements thereon, and (C) the acquisition to which any such lien
relates shall not result in a default under any other provisions of this
Agreement.
"Person" means an individual, partnership, corporation, limited liability
company, trust, unincorporated organization, association, joint venture or a
government or agency or political subdivision or instrumentality thereof.
- 5 -
<PAGE>
"Pledge Agreement" means the Pledge Agreement dated as of November 1, 1996
from the Borrower to the Bank, as amended, restated or supplemented from time
to time.
"Property" means the Property as defined in the Mortgage.
"Reimbursement Rate" means the fluctuating rate of interest which is at all
times equal to the Prime Rate plus 2% per annum provided, however, that if an
Event of Default shall have occurred and be continuing, the Reimbursement Rate
shall be equal to the fluctuating rate of interest which is at all times equal
to the Prime Rate plus 4% per annum.
"Revolving Credit Facility" means the revolving line of credit facility in
the principal amount of $750,000 made available by First Union National Bank of
Maryland ("FUNBMD") to the Borrower pursuant to a Loan and Security Agreement
dated September 2, 1994, as amended, restated, modified or supplemented from
time to time (the "Revolving Credit Facility Agreement") by and between FUNBMD
and the Borrower.
"Security Agreement" means the Security Agreement dated as of November 1,
1996 between the Borrower and the Bank, as amended, restated, modified or
supplemented from time to time.
"Security Instruments" means, collectively, the Mortgage, the Pledge
Agreement, the Security Agreement and any and all other agreements or
instruments now or hereafter executed and delivered by the Borrower or any
other Person in connection with, or as security for the payment or performance
of, the Letter of Credit or this Agreement, as such agreements may be amended,
modified or supplemented from time to time in accordance with their respective
terms.
"State" means the State of Maryland.
"Subordination Agreement" means the Subordination Agreement dated as of
November 1, 1996, by and among the Borrower, the Creditor and the Bank, as
amended, restated, or supplemented from time to time.
"Subsidiary" shall mean, as to any Person, (i) any corporation more than 50%
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time. Unless the context
indicates otherwise, all references herein to Subsidiaries are references to
Subsidiaries of the Borrower.
- 6 -
<PAGE>
"Tender Advance" has the meaning assigned to that term in Section 3.3 of
this Agreement.
"Tender Draft" has the meaning assigned to that term in the Letter of
Credit.
"Termination Date" means the last day a drawing is available under the
Letter of Credit.
"Trustee" means any Person or group of Persons at the time serving as
trustee under the Indenture.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower represents and warrants to the Bank and MIDFA (which
representations and warranties shall survive the delivery of the documents
mentioned herein and the issuance of the Letter of Credit) that:
2.1 Incorporation. Borrower is a corporation duly organized, existing and
in good standing under the laws of State of Maryland, and has the power to
own its properties and to carry on its business as now being conducted, and,
is duly qualified and in good standing as a foreign entity to do business in
every jurisdiction in which the failure to be so qualified would have a
natural adverse effect on the business of the Borrower.
2.2 Power and Authority. Borrower is duly authorized under all applicable
provisions of law to execute, deliver and perform this Agreement, and all
corporate action on its part required for the lawful execution, delivery and
performance hereof has been duly taken; and this Agreement, upon the due
execution and delivery hereof, will be the valid and binding obligation of
Borrower enforceable in accordance with its terms subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting creditors' rights generally and to principles of equity,
regardless of whether applied in a proceeding in equity or law. Neither the
execution of this Agreement, nor the fulfillment of or compliance with its
provisions and terms, will (A) conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a violation of or default
under the Articles of Incorporation or Bylaws of the Borrower or any other
organizational documents of Borrower or any Subsidiary, or any agreement or
instrument to which Borrower or any Subsidiary is now a party or to the best
knowledge of the Borrower any applicable law, regulation, judgment, writ,
order or decree to which Borrower or any Subsidiary or any of their
respective properties are subject, or (B) create any lien, charge or
encumbrance upon any of the property or assets of the Borrower pursuant to
the terms of any agreement or instrument to which the Borrower is a party or
by which it or any of its properties, are bound, except pursuant to the
Security Instruments and the Creditor Security Agreement.
- 7 -
<PAGE>
2.3 Financial Condition. The financial statement of Borrower for the
fiscal year ended as of March 31, 1996 (as supplemented by the financial
statement for the second quarter ending September 30, 1996), copies of which
have been furnished to the Bank, are correct and complete in all material
respects and fairly presents the financial condition of Borrower as at the
dates of such financial statements and the results of its operations for such
periods. The Borrower does not have any material direct or contingent
liabilities as of the date of this Agreement which are not provided for or
reflected in or referred to in such financial statement or in notes thereto.
Such financial statements have been prepared in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis maintained
throughout the period involved. There has been no material adverse change in
the business, properties or condition, financial or otherwise, of Borrower
since the date of the March 31, 1996 year end financial statement except as
may be set forth in the September 30, 1996 second quarter financial statement.
2.4 Title to Assets. Borrower has good and marketable title to its
properties and assets, including the properties and assets reflected in the
financial statements and notes thereto described in Section 2.3 hereof,
except for such assets as have been disposed of since the date of said
financial statements in the ordinary course of business or as are no longer
useful in the conduct of its businesses, and all such properties and assets
are free and clear of all liens, mortgages, pledges, encumbrances or charges
of any kind except liens reflected in such financial statements or otherwise
now or hereafter permitted hereunder or pursuant hereto.
2.5 Contingent Liabilities. Borrower has not guaranteed any obligations of
others and is not, to the best of its knowledge, contingently liable in any
manner for any repayment of any borrowings, direct or indirect, except as
otherwise permitted hereunder or as disclosed in the financial statements and
notes thereto described in Section 2.3 hereof or as otherwise disclosed to
the Bank from time to time.
2.6 Litigation. There are no pending or, to the best of its knowledge,
threatened actions, suits or proceedings before any court, arbitrator or
governmental or administrative body or agency which may materially adversely
affect the properties, business or condition, financial or otherwise, of
Borrower except as disclosed in the financial statements and notes thereto
described in Section 2.3 hereof or as otherwise disclosed to the Bank in
writing from time to time.
2.7 Taxes. Borrower has filed all tax returns required to be filed by it
and all taxes due with respect thereto have been paid, and no controversy in
respect of additional taxes, state, federal or foreign, of Borrower is
pending, or, to the knowledge of Borrower, threatened, except as otherwise
disclosed to the Bank in writing from time to time.
2.8 Contract or Restriction Affecting Borrower. Borrower is not a party to
nor is it bound by any contract or agreement or subject to any charter or
other corporate restrictions, or subject to the renegotiation of any
contract, which does or may materially and adversely affect the business,
properties or condition, financial or otherwise, of Borrower, except for any
contract, agreement or restrictions disclosed or reflected in the financial
statements and notes thereto described in Section 2.3 hereof or as otherwise
disclosed to the Bank from time to time.
- 8 -
<PAGE>
2.9 Trademarks, Franchises and Licenses. Borrower owns, possesses, or has
the right to use all necessary patents, licenses, franchises, trademarks,
trademark rights, trade names, trade name rights and copyrights to conduct
its businesses as now conducted, without known conflict with any patent,
license, franchise, trademark, trade name, or copyright of any other Persons,
except as disclosed to the Bank in writing from time to time.
2.10 No Default. Borrower is not in default in the performance, observance
or fulfillment of any of its material obligations, covenants or conditions
contained in any agreement or instrument to which it is a party.
2.11 Governmental Authority. Borrower has received the written approval of
all federal, state, local and foreign governmental authorities, if any,
necessary to carry out the terms of this Agreement, and no further
governmental consents or approvals are required in the making or performance
of this Agreement by the Borrower, except for building and other permits and
approvals applicable to the construction and operation of the Facility, which
will be obtained as and when required, and in the case of building permits,
prior to the commencement of the work for which they are required.
2.12 No Untrue Statements. Neither this Agreement nor any reports,
schedules, certificates, information, exhibits, agreements or instruments
heretofore or simultaneously with the execution of this Agreement delivered
to the Issuer, the Bank or the Trustee by Borrower in connection with the
negotiation of this Agreement or the issuance and sale of the Bonds contains
any material misrepresentation or untrue statement of any material fact or
omits to state any material fact necessary to make this Agreement or any such
reports, schedules, certificates, information, exhibits, agreements or
instruments in light of the circumstances under which made not materially
misleading.
2.13 ERISA Requirements. Borrower has not incurred any material
accumulated funding deficiency within the meaning of ERISA, or incurred any
material liability to the Pension Benefit Agreement Corporation established
under ERISA (or any successor thereto under ERISA) in connection with any
employee pension benefit plan established or maintained by it or by any
Person under common control with any of them (within the meaning of Section
414(c) of the Internal Revenue Code of 1986, as amended, or of Section
4001(b) of ERISA), or in which employees of any of them are entitled to
participate. No Reportable Event (as defined in ERISA) in connection with any
such plan has occurred or is continuing, except as disclosed in writing to
the Bank from time to time.
2.14 Pollution and Environmental Control; Hazardous Substances. The
Borrower has obtained (or, in respect of the Borrower's proposed operations
at the Facility Site, will obtain) all permits, licenses and other
authorizations which are required under, and is in
- 9 -
<PAGE>
material compliance with, all Federal, state, and local laws and
regulations relating to pollution, reclamation or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic
materials or wastes into air, water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
substances, materials or wastes. Neither the Borrower, nor to the Borrower's
best knowledge any previous owner of the Facility Site, has disposed of any
hazardous substances on any portion of the Facility Site except as otherwise
disclosed in the Environmental Report. As used in this subparagraph,
"hazardous substances" shall have the meaning set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601, et seq., and the regulations adopted pursuant to such act.
2.15 Facility Site. The construction and operation of the Facility, as
described in the plans and specifications therefor heretofore furnished to
the Bank, complies in all respects with presently existing or amended zoning
and other land use restrictions affecting the Facility Site, including
without limitation any restrictive covenants.
2.16 Labor Relations. The Borrower is not engaged in any unfair labor
practice that could have a material adverse effect on the Borrower. There is
(i) no significant unfair labor practice complaint pending against the
Borrower, to the best knowledge of the Borrower, threatened against it,
before the National Labor Relations Board, and no significant grievance or
significant arbitration proceedings arising out of or under any collective
bargaining agreement is so pending against the Borrower or, to the best
knowledge of the Borrower, threatened against it, (ii) no significant strike,
labor dispute, slowdown or stoppage pending against the Borrower or, to the
best knowledge of the Borrower, threatened against the Borrower and (iii) to
the best knowledge of the Borrower, no union representation question existing
with respect to the employees of the Borrower and, to the best knowledge of
the Borrower, no union organizing activities are taking place.
ARTICLE III
REIMBURSEMENT AND OTHER PAYMENTS
3.1 Letter of Credit. The Bank agrees, on the terms and conditions
hereinafter set forth, to issue and deliver the Letter of Credit in favor of
the Credit Facility Trustee in substantially the form of Exhibit A attached
hereto upon fulfillment of the applicable conditions set forth in Article VII
hereof. The Bank agrees that any and all payments under the Letter of Credit
will be made with the Bank's own funds.
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<PAGE>
3.2 Reimbursement and Other Payments. Except as otherwise provided in
Section 3.3 below, the Borrower shall pay to the Bank:
(a) on or before 3:00 P.M. on the date that any amount is drawn under
the Letter of Credit, a sum (together with interest on such sum from the
date such amount is drawn until the same is paid, at the rate per annum
provided in clause (b) of this Section 3.2) equal to such amount so drawn
under the Letter of Credit plus, to the extent permitted by applicable law,
any and all reasonable charges and expenses which the Bank may pay or incur
relative to the Letter of Credit;
(b) on demand, interest on any and all amounts remaining unpaid by the
Borrower when due hereunder from the date such amounts become due until
payment thereof in full, at a fluctuating interest rate per annum equal at
all times to the lesser of the then applicable Reimbursement Rate or the
highest lawful rate permitted by applicable law;
(c) on demand, any and all reasonable expenses incurred by the Bank in
enforcing any rights under this Agreement and the other Security
Instruments; and
(d) on demand all charges, commissions, costs and expenses set forth in
Sections 3.4, 3.5 and 3.9 hereof.
3.3 Tender Advances.
(a) If the Bank shall make any payment of that portion of the purchase price
corresponding to principal and interest of the Bonds drawn under the Letter of
Credit pursuant to a Tender Draft and the conditions set forth in Section 7.3
shall have been fulfilled, such payment shall constitute a tender advance made
by the Bank to the Borrower on the date and in the amount of such payment (a
"Tender Advance"); provided that if the conditions of said Section 7.3 have not
been fulfilled, the amount so drawn pursuant to the Tender Draft shall be
payable in accordance with the terms of Section 3.2(a) above. Notwithstanding
any other provision hereof, the Borrower shall repay the unpaid amount of each
Tender Advance, together with all unpaid interest thereon, on the earlier to
occur of: (i) such date as any Bonds purchased pursuant to a Tender Draft are
resold as provided in paragraph 3.3(d) hereof; (ii) on the date one year
following the date of such Tender Advance; or (iii) the Termination Date. The
Borrower may prepay the outstanding amount of any Tender Advance in whole or in
part, together with accrued interest to the date of such prepayment on the
amount prepaid. The Borrower shall notify the Bank prior to 11:00 A.M.
Charlotte, North Carolina time on the date of such prepayment of the amount to
be prepaid.
(b) The Borrower shall pay interest on the unpaid amount of each Tender
Advance from the date of such Tender Advance until such amount is paid in full,
payable monthly, in arrears, on the first day of each month during the term of
each
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Tender Advance and on the date such amount is paid in full, at a fluctuating
interest rate per annum in effect from time to time equal to the Prime Rate,
provided that the unpaid amount of any Tender Advance which is not paid when
due shall bear interest at the lower of the then applicable Reimbursement
Rate or the highest rate permitted by applicable law, payable on demand and
on the date such amount is paid in full.
(c) Pursuant to the Pledge Agreement the Borrower has agreed that, in
accordance with the terms of the Indenture, Bonds purchased with proceeds of any
Tender Draft shall be delivered by the Tender Agent to the Bank or its designee
to be held by the Bank or its designee in pledge as collateral securing the
Borrower's payment obligations to the Bank hereunder. Bonds so delivered to the
Bank or its designee shall be registered in the name of the Borrower, as
provided for in Section 3 of the Pledge Agreement.
(d) Prior to or simultaneously with the resale of Pledged Bonds, the
Borrower shall prepay the then outstanding Tender Advances (in the order in
which they were made) by paying to the Bank an amount equal to the sum of (A)
the amounts advanced by the Bank pursuant to the corresponding Tender Drafts
relating to such Bonds, plus (B) the aggregate amount of accrued and unpaid
interest on such Tender Advances. Such payment shall be applied by the Bank in
reimbursement of such drawings (and as prepayment of Tender Advances resulting
from such drawings in the manner described above), and, upon receipt by the Bank
of a certificate completed and signed by the Trustee in substantially the form
of Annex F to the Letter of Credit, the Borrower irrevocably authorizes the Bank
to rely on such certificate and to reinstate the Letter of Credit in accordance
therewith. Funds held by the Tender Agent as a result of sales of the Pledged
Bonds by the Remarketing Agent shall be paid to the Bank by the Tender Agent to
be applied to the amounts owing by Borrower to the Bank pursuant to this
paragraph (d). Upon payment to the Bank of the amount of such Tender Advance to
be prepaid, together with accrued interest on such Tender Advance to the date of
such prepayment on the amount to be prepaid, the principal amount outstanding of
Tender Advances shall be reduced by the amount of such prepayment and interest
shall cease to accrue on the amount prepaid.
3.4 Commission and Fees.
(a) The Borrower shall pay to the Bank a fee or commission at the rate of
1.125% per annum on the amount available to be drawn under the Letter of Credit
(computed on the date that such commission is payable) from and including the
date of issuance of the Letter of Credit until the Termination Date, payable:
(i) as to the first year of the initial period for which the Letter of Credit is
issued ending November 21, 1999, on such date of issuance; and (ii) thereafter
payable annually in advance on November 1 of each year.
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(b) The Borrower shall pay to the Bank, upon transfer of the Letter of
Credit in accordance with its terms, a transfer fee of $1,000.
(c) The Borrower shall pay to the Bank, upon each drawing under the Letter
of Credit in accordance with its terms, a fee of $100 per drawing.
3.5 Increased Costs Due to Change in Law. In the event of any change in
any existing or future law, regulation, ruling or other interpretation having
influence over the Bank which shall either: (a) impose, modify or make
applicable any reserve, special deposit, capital requirement, assessment or
similar requirement against the Letter of Credit; or (b) impose on the Bank
any other condition regarding the Letter of Credit, and the result of any
event referred to in clause (a) or (b) above shall be to increase the cost
(including a reasonable allocation of resources) or decrease the yield to the
Bank of issuing or maintaining the Letter of Credit (which increase in cost
shall be the result of the Bank's reasonable allocation of the aggregate of
such cost increases or yield decreases resulting from such events), then,
upon demand by the Bank, the Borrower shall immediately pay to the Bank, from
time to time as specified by the Bank, additional amounts which shall be
sufficient to compensate the Bank for such increased cost or decreased yield.
A statement of charges submitted by the Bank shall be conclusive, absent
manifest error, as to the amount owed.
3.6 Computation. All payments of interest, commission and other charges
under this Agreement shall be computed on the per annum basis of a year of
360 days and calculated for the actual number of days elapsed.
3.7 Payment Procedure. All payments made by the Borrower under this
Agreement shall be made to the Bank in lawful currency of the United States
of America and in immediately available funds at the Bank's office in
Charlotte, North Carolina before 12:00 Noon (Charlotte, North Carolina time)
on the date when due, except that the time for payments made pursuant to
Section 3.2(a) shall be on or before 3:00 p.m.
3.8 Business Days. If the date for any payment hereunder falls on a day
which is not a Business Day, then for all purposes of this Agreement the same
shall be deemed to have fallen on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of
payments of interest or commission, as the case may be.
3.9 Reimbursement of Expenses. The Borrower will pay all reasonable legal
fees (computed without regard to any statutory presumption) incurred by the
Bank in connection with the preparation, execution and delivery of this
Agreement, the Letter of Credit, the Security Instruments, any and all other
agreements and transactions contemplated hereby and thereby and by the Bond
Documents (including any amendments hereto or thereto or consents or waivers
hereunder or thereunder) and will also pay all fees, charges or taxes for the
recording or filing of Security Instruments. The Borrower will also pay for
all reasonable out-of-pocket expenses of the Bank in connection with the
administration of the Letter of Credit, this Agreement and the Security
Instruments. The Borrower will, upon request, promptly
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reimburse the Bank for all amounts expended, advanced or incurred by the Bank
to collect or satisfy any obligation of the Borrower under this Agreement or
any Security Instrument, or to enforce the rights of the Bank under this
Agreement or any Security Instrument, which amounts will include, without
limitation, all court costs, reasonable attorneys' fees, fees of auditors and
accountants and investigation expenses incurred by the Bank in connection
with any such matters.
3.10 Extension of Expiration Date. The Bank hereby agrees that the Letter
of Credit shall automatically be extended for successive one-year terms from
the then applicable Expiration Date unless (i) the Bank shall have notified
the Borrower and the Trustee in writing at least 120 days prior to the
Expiration Date, as extended from time to time pursuant to this Section 3.10,
that the Bank will not extend such applicable Expiration Date or (ii) the
Letter of Credit is otherwise terminated in accordance with its terms.
3.11 Obligations Absolute. The obligations of the Borrower under this
Agreement shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without limitation, the following
circumstances:
(a) any lack of validity or enforceability of the Letter of Credit, the
Bonds, any of the other Bond Documents, any of the Security Instruments or
any other agreement or instrument related thereto;
(b) any amendment or waiver of or any consent to departure from the
terms of the Letter of Credit, the Bonds, any of the other Bond Documents,
any of the Security Instruments or any other agreement or instrument related
thereto;
(c) the existence of any claim, set off, defense or other right which
either the Borrower or the Issuer may have at any time against the Credit
Facility Trustee, any beneficiary or any transferee of the Letter of Credit
(or any Person for whom the Credit Facility Trustee, any such beneficiary or
any such transferee may be acting), the Bank or any other Person, whether in
connection with this Agreement, the Security Instruments, the Letter of
Credit, the Bond Documents, the Facility or any unrelated transaction;
(d) any statement, draft or other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect, or any statement therein being untrue or inaccurate in any respect
whatsoever, provided the Company shall be under no obligation to make any
payment hereunder resulting from the Bank's negligence in accepting any such
forged or fraudulent draft or document; or
(e) the surrender or impairment of any security for the performance or
observance of any of the terms of this Agreement.
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ARTICLE IV
SECURITY
4.1 Security. As security for the full and timely payment and performance
by the Borrower of its respective obligations hereunder, the Borrower shall
on the date hereof deliver to the Bank the Security Instruments, conveying to
the Bank duly perfected liens upon and security interests in the Collateral
related thereto, subject only to Permitted Liens. As additional security for
such obligations, the Borrower hereby assigns and pledges to the Bank, its
successors and assign, and grants to the Bank, its successors and assigns, a
continuing security interest in and lien on the following:
(a) The interest of the Borrower in the Facility Fund, in the Bond Fund
and in all subaccounts created and maintained under any of such funds.
(b) The interest of the Borrower in any and all funds, securities,
instruments, documents, and other property which are at any time paid to,
deposited with, under the control of, or in the possession of the Bank or
any of its agents, branches, affiliates, correspondents or others acting on
its behalf (this security interest and lien is intended to be in addition to
any right of set-off or banker's lien that the Bank may otherwise enjoy
under applicable law).
The Borrower agrees, that with respect to the security described in this
Section, the Bank, its successors and assigns, shall have all of the rights and
remedies of a secured party under the Maryland Uniform Commercial Code;
provided, however, that Borrower shall nevertheless be free to withdraw from
time to time or otherwise obtain access to any of the funds described in
subparagraph (a) above (other than the funds pledged under the Collateral Pledge
Agreement), except upon the occurrence of an Event of Default which has occurred
and is continuing.
4.2 Additional Liens. The Bank hereby waives its right to take or accept
as additional security for the payment or performance by the Borrower of its
obligations under this Agreement any lien or security interest in or upon any
property, whether real, personal or mixed owned by the Borrower or the Issuer
unless the Trustee shall be granted a lien or security interest in or upon
such property having equal or greater priority with the lien or security
interest in favor of the Bank; provided, however, the provisions of this
Section 4.2 shall not apply at any time following the expiration or
termination of the Letter of Credit, and provided further that any such lien
or security interest may be first for the benefit of the Bank and then for
the benefit of the Trustee.
4.3 Casualty and Liability Insurance Required. The Borrower will keep the
Collateral continuously insured against such risks as are customarily insured
against by businesses of like size and type engaged in the same or similar
operations including, without
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limiting the generality of any other covenants contained herein or in the
Bond Documents or Security Instruments:
(a) casualty insurance on the Collateral in an amount not less than the
full insurable value thereof, against loss or damage by theft, fire and
lightning and other hazards ordinarily included under uniform broad form
standard extended coverage policies, limited only as may be provided in the
standard broad form of extended coverage endorsement at the time in use in
the State of Maryland.
(b) general comprehensive liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Collateral
(such coverage to include provisions waiving subrogation against the Bank)
in amounts not less than $1,000,000 with respect to bodily injury to any
one person, $1,000,000 with respect to bodily injury to two or more persons
in any one accident and $1,000,000 with respect to property damage
resulting from any one occurrence;
(c) liability insurance with respect to the operation of its facilities
under the workers' compensation laws of the State of Maryland;
(d) business interruption insurance with respect to a material
interruption in the operation of its facilities; and
(e) if at any time the Facility Site is in an area that has been
identified by the Secretary of Housing and Urban Development as having
special flood and mud slide hazards, the Borrower shall purchase and
maintain a flood insurance policy satisfactory to the Bank.
provided, however, that the insurance so required may be provided by blanket
policies now or hereafter maintained by the Borrower.
4.4 General Requirements Applicable to Insurance.
(a) Each insurance policy obtained in satisfaction of the requirements
of Section 4.3 hereof:
(i) shall be by such insurer (or insurers) as shall be financially
responsible, qualified to do business in the State, and of recognized
standing;
(ii) shall be in such form and have such provisions (including, without
limitation, the loss payable clause, the waiver of subrogation clause, if
any, the deductible amount, if any, and the standard mortgagee endorsement
clause), as are generally considered standard provisions for the type of
insurance involved and are acceptable in all respects to the Bank and MIDFA;
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(iii) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at
least 30 days prior written notice to the Bank and MIDFA;
(iv) shall provide that losses thereunder, prior to the occurrence
of an Event of Default (or event which, with notice or lapse
of time or both would constitute an Event of Default)
hereunder shall be adjusted with the insurer by the Borrower
at its expense on behalf of the insured parties and the
decision of the Borrower as to any adjustment shall be final
and conclusive; and
(v) without limiting the generality of the foregoing, all insurance
policies carried on the Collateral shall name the Bank, MIDFA
and the Borrower as loss payees and a parties insured
thereunder, as their interests may appear, and any loss
thereunder shall be made payable and shall be applied as
provided in Section 4.8 hereof).
(b) Prior to expiration of any such policy, the Borrower shall furnish
the Bank and MIDFA with evidence satisfactory to the Bank that the policy
or certificate has been renewed or replaced or is no longer required by
this Agreement.
4.5 Advances by Bank. In the event the Borrower shall fail to maintain, or
cause to be maintained, (i) the full insurance coverage required pursuant to
Section 4.3 or (ii) the Collateral in good repair and good operating condition,
the Bank may (but shall be under no obligation to), after 10 days written
notice to the Borrower and the Issuer and the failure of the Borrower to obtain
the required insurance or to commence (and complete with due diligence) the
making of the required repairs, renewals and replacements, contract for the
required policies of insurance and pay the premiums on the same or make any
required repairs, renewals and replacements; and the Borrower agrees to
reimburse the Bank to the extent of the amounts so advanced with interest
thereon at a rate per annum equal to the Reimbursement Rate or the maximum rate
permitted by law, whichever is lower, from the date of advance to the date of
reimbursement. Any amounts so advanced by the Bank shall become an additional
obligation of the Borrower secured by the Security Instruments.
4.6 Borrower to Make up Deficiency in Insurance Coverage. The Borrower
agrees that to the extent that the Borrower shall not carry insurance required
by Section 4.3 hereof, it shall pay promptly to the Bank, for application in
accordance with the provisions of Section 4.8(b)(ii) hereof, such amount as
would have been received as Net Proceeds (as hereinafter defined) by the Bank,
under the provisions of Section 4.8(b)(ii) hereof had such insurance been
carried to the extent required.
4.7 Eminent Domain. In the event that title to, or the temporary use of,
the Collateral or any part thereof shall be taken by Eminent Domain, the Net
Proceeds received as a result of such Eminent Domain shall be applied as
provided in Section 4.8(b) hereof.
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4.8 Application of Net Proceeds of Insurance and Eminent Domain.
(a) The Net Proceeds of the insurance carried pursuant to the
provisions of Sections 4.3(c), 4.3(d) and, if practicable, 7.1(c) hereof
shall be applied by the Borrower toward extinguishment of the defect or
claim or satisfaction of the liability with respect to which such insurance
proceeds may be paid.
(b) The Net Proceeds of the insurance carried with respect to the
Collateral pursuant to the provisions of Sections 7.1(c) (if not applied
pursuant to clause (a) of this Section 4.8), 4.3(a) and 4.3(b) hereof
(excluding the Net Proceeds of any business interruption insurance, which
shall be paid to the Borrower), and the Net Proceeds resulting from Eminent
Domain shall be paid and applied as follows:
(i) if Bonds shall then be outstanding under the Indenture and no
drawing under the Letter of Credit shall theretofore have been
presented which has not been reimbursed by the Borrower (other
than a Tender Advance), or if the obligations under the Note are
then outstanding and no Event of Default has occurred hereunder
or under the Note and is then continuing, then in the manner and
at the times provided therefor in Section 6.8 of the Loan
Agreement; and
(ii) in all other cases, to the payment or reduction, as the case may
be, of the obligations of the Borrower and the Issuer hereunder,
with such allocations to principal, interest, commissions,
charges and expenses as the Bank may elect.
"Net Proceeds" when used with respect to any insurance proceeds or award
resulting from, or other amount received in connection with, Eminent Domain,
shall mean the gross proceeds from such proceeds, award or other amount, less
all expenses (including attorneys' fees) incurred in the realization thereof.
4.9 Parties to Give Notice. In case of any material damage to or
destruction of all or any part of the Collateral, the Borrower shall give
prompt notice thereof to the Bank. In case of a taking or proposed taking of
all or any part of the Collateral or any right therein by Eminent Domain, the
Borrower shall give prompt notice thereof to the Bank and MIDFA. Each such
notice shall describe generally the nature and extent of such damage,
destruction, taking, loss, proceeding or negotiations.
ARTICLE V
AFFIRMATIVE COVENANTS
Until all the obligations of the Borrower hereunder to be performed and
paid shall have been performed and paid in full, and for so long as the Letter
of Credit shall be outstanding,
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the Borrower covenants and agrees that, unless the Bank and MIDFA consent
otherwise in writing:
5.1 Repayment of Obligations. The Borrower will promptly repay the payment
obligations of the Borrower hereunder and under the Security Instruments when
due, according to the terms of this Agreement and the Security Instruments.
5.2 Performance Under Reimbursement Agreement and Security Instruments.
The Borrower will, and will cause each of its Subsidiaries to, perform all
obligations required to be performed by each of them under the terms of this
Agreement and the Security Instruments and any other agreements now or hereafter
existing or entered into between the Borrower, its Subsidiaries and the Bank,
subject to any applicable notice and cure provisions contained therein.
5.3 Financial and Business Information about the Borrower. The Borrower
shall deliver to the Bank and MIDFA:
(a) As soon as practicable and in any event within 45 days after the
close of each fiscal quarter of the Borrower, beginning with the close of
the quarter ending December 31, 1996, (i) balance sheets and statements of
income and cash flows for or relating to the quarter then ended, all
prepared in accordance with Generally Accepted Accounting Principles
(subject to normal year-end adjustments, absence of notes, treatment of
accruals and certain other variations consistent with past practices, none
of which shall be in the aggregate material), applied on a Consistent
Basis, and certified by the chief executive officer and chief financial
officer of the Borrower;
(b) As soon as practicable and in any event within 120 days after the
close of each fiscal year of the Borrower, beginning with the close of the
current fiscal year, an audited consolidated balance sheet of Borrower and
its Subsidiaries as of the close of such fiscal year (and unaudited
consolidating balance sheets for the Borrower and its Subsidiaries) and
audited consolidated statements of income and cash flows for the fiscal
year then ended (and unaudited consolidating statements of income and cash
flow), prepared by an independent certified public accountant reasonably
acceptable to the Bank in accordance with Generally Accepted Accounting
Principles, applied on a Consistent Basis, and accompanied by a report
thereon by such certified public accountants and, with respect to such
audited financial statements, containing an opinion that is not qualified
with respect to scope limitations imposed by Borrower or with respect to
accounting principles followed by Borrower not in accordance with Generally
Accepted Accounting Principles;
(c) Concurrently with the delivery of the financial statements
described above in subsection (b), a certificate from the independent
certified public accountants that in making their examination of the
financial statements of the Borrower and its Subsidiaries, they obtained no
knowledge of the occurrence or existence of any
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condition or event which constitutes or would constitute, upon the giving
of notice or lapse of time or both, any Event of Default, or a statement
specifying the nature and period of existence of any such condition or
event disclosed by their examination, accompanied by a financial covenant
compliance worksheet, in form reasonably satisfactory to the Bank and
MIDFA;
(d) Concurrently with the delivery of the financial statements
described in subsections (a) and (b) above, (A) a certificate from the
president or chief executive officer and chief financial officer of the
Borrower certifying to the Bank and MIDFA that, to the best of their
knowledge after review of this Agreement and appropriate inquiry, (i) the
Borrower has kept, observed, performed and fulfilled (in all material
respects) each and every covenant, obligation and agreement binding upon
the Borrower contained in this Agreement or the Security Instruments, and
(ii) no Event of Default, or any event which with the giving of notice or
lapse of time or both would constitute an Event of Default, has occurred
or, if such event has occurred, specifying any such non-observance,
non-performance, non-compliance or Event of Default, and (B) a financial
covenant compliance worksheet, in form satisfactory to the Bank and MIDFA;
(e) Promptly upon issuance, each report that the Borrower shall from
time to time render to any governmental agency (other than sales tax
reports, employee withholding reports, state tax reports, state tax returns
and similar routine reports to any governmental agency) or their
shareholders;
(f) Promptly upon the Borrower's receipt thereof, copies of any
management letter or other written communications from certified public
accountants, any consulting report, marketing report or any other report
management may request of any Person from time to time, other than routine
reports received in the ordinary course of business or deemed by the
Borrower to be not material to the operations or plans of the business of
the Borrower or any of its Subsidiaries; and
(g) Upon the Bank's or MIDFA's request, such other information about
the Collateral, the financial condition and operations of the Borrower and
its Subsidiaries as the Bank or MIDFA may from time to time reasonably
request.
5.4 Notice of Certain Events. The Borrower shall promptly, after any
senior officer of the Borrower learns or obtains knowledge of the occurrence
thereof, give written notice to the Bank and MIDFA of:
(a) any litigation or proceeding brought against the Borrower or any
of its Subsidiaries which may have a material and adverse effect on the
Borrower and its Subsidiaries as a whole, whether or not the claim is
considered by the Borrower to be covered by insurance, and the Borrower
shall, if requested by the Bank or MIDFA, set up such reserves as the Bank
reasonably determines are necessary to protect the Bank against loss;
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(b) any written notice of a violation received by the Borrower or any
of its Subsidiaries from any governmental regulatory body or law
enforcement authority which, if such violation were established, might have
a material and adverse effect on the business of the Borrower or any of its
Subsidiaries or the value of the Collateral;
(c) any labor controversy that has resulted in a strike or other work
action materially affecting the Borrower or any of its Subsidiaries;
(d) any attachment, judgment, lien, levy or order (other than
Permitted Liens having an amount or value in excess of $100,000) that may
be placed on or assessed against or threatened against the Borrower, any of
its Subsidiaries, or the Collateral;
(e) any other matter that has resulted in a material and adverse
change in the financial condition of the Borrower and its Subsidiaries as
a whole;
(f) the removal of inventory, other than by consumption or sale in the
ordinary course of business, from the places where inventory is located on
the date hereof to other places, with information as to the new places
where such inventory shall be maintained;
(g) the acquisition or leasing of material items of new equipment, or
the removal of material items of equipment from the places where such items
or equipment is located on the date hereof to other places, with
information as to the places such new or removed equipment shall be
maintained;
(h) the acquisition or leasing by the Borrower or any of its
Subsidiaries of any material additional real property, or the transfer or
termination of tenancy of any material existing personal or real property,
and the Borrower shall, if requested by the Bank or MIDFA, deliver such
other information relating to any such acquisition, leasing, transfer or
termination of tenancy as the Bank or MIDFA may reasonably request.
(i) any material changes, additions or deletions as to the material
contracts of the Borrower or its Subsidiaries; and
(j) any breach or violation of or noncompliance with any covenant or
condition of this Agreement.
5.5 Corporate Existence. The Borrower and its Subsidiaries shall maintain
and preserve their corporate existence and all rights, privileges and franchises
now enjoyed.
5.6 Payment of Indebtedness; Performance of Other Obligations. The Borrower
and its Subsidiaries shall pay all material Indebtedness for Money Borrowed
before such indebtedness shall become past due, all taxes, assessments and other
governmental charges that
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may be levied or assessed upon the Borrower or its Subsidiaries or the
Collateral when due and all other material obligations in accordance with
customary trade practices, and comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official
applicable to the Collateral or any part thereof or to the operation of the
business of the Borrower and its Subsidiaries; provided, however, that the
Borrower and its Subsidiaries may in good faith by appropriate proceedings
and with due diligence contest any such indebtedness, taxes, assessments,
governmental charges, acts, rules, regulations, orders and directions that
do not in the Bank's reasonable judgment materially and adversely affect the
value of the Collateral or the priority of the Bank's lien in the Collateral,
and if requested by the Bank or MIDFA, shall establish reserves reasonably
satisfactory to the Bank. The Borrower and its Subsidiaries shall also observe
and remain in compliance with all laws, ordinances, governmental rules and
regulations to which it is subject and obtain all licenses, permits, franchises
or other governmental authorizations necessary to the ownership of its
properties or the conduct of its business, and all covenants and conditions of
all agreements and instruments to which the Borrower or any of its Subsidiaries
is a party, which failure to comply or failure to obtain would materially and
adversely affect the business, prospects, profits, properties or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole.
5.7 Payment of Trade Accounts Payable, Etc. The Borrower and its
Subsidiaries shall pay all of its trade accounts that are payable or accrued as
of the date hereof (except for trade accounts that are by their terms payable on
a date later than 90 days after the date hereof and trade accounts that the
Borrower or one of its Subsidiaries disputes in good faith by appropriate
proceedings and with due diligence) within 90 days after the date hereof and
promptly deliver to the Bank and MIDFA evidence satisfactory to the Bank and
MIDFA of such payment.
5.8 Maintenance of Insurance. The Borrower and its Subsidiaries shall
maintain and pay for insurance upon all Collateral in accordance with Sections
4.3 and 4.4 of this Agreement, including builder's risk insurance if applicable,
wherever located, covering casualty, hazard, public liability, product
liability, business interruption and such other risks and in such amounts and
with such insurance companies as shall be reasonably satisfactory to the Bank
and MIDFA, and such amounts shall not be less than the amounts required pursuant
to Section 4.3, and deliver certified copies of such insurance policies to the
Bank and MIDFA with satisfactory loss payable endorsements naming the Bank and
MIDFA as loss payees, additional insureds and mortgagees thereunder, as
appropriate. To the extent the provisions of this Section 5.8 are inconsistent
with the provisions of the Mortgage or the Security Agreement, the provisions of
the Mortgage or the Security Agreement, as the case may be, shall apply.
5.9 Maintenance of Books and Records; Inspection. The Borrower and its
Subsidiaries shall maintain adequate books, accounts and records, and prepare
all financial statements required under this Agreement in accordance with
Generally Accepted Accounting Principles (subject, in the case of unaudited
interim statements, to normal year-end adjustments,
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absence of notes, treatment of accruals and certain other variations consistent
with past practices, none of which shall be in the aggregate material) and in
material compliance with the regulations of any governmental regulatory body
having jurisdiction over it; and permit employees or agents of the Bank and/or
MIDFA at any reasonable time to inspect the properties of the Borrower and its
Subsidiaries, and to examine or audit the books of the Borrower and its
Subsidiaries, accounts and records and make copies and memoranda of them. The
Borrower and its Subsidiaries shall permit any representative of the Bank and/or
MIDFA to visit and inspect any of the properties of the Borrower and its
Subsidiaries, to examine all books of accounts, records, reports and other
papers, to make copies and extracts therefrom, and to discuss the affairs,
finances and accounts of the Borrower with its officers, employees and
independent public accountants and attorneys (and by this provision the Borrower
and its Subsidiaries authorize said accountants to discuss the finances and
affairs of the Borrower and its Subsidiaries), all at such reasonable times and
as often as may be reasonably requested, but in any event at least twice during
each fiscal year of the Borrower provided, however, that, except in an apparent
emergency situation, neither Bank nor MIDFA, nor their agents or
representatives, may enter any areas of the Property which are proprietary
areas or areas designed for laboratory or related manufacturing activity which
would be disturbed or destroyed as a result of entrance by unauthorized persons
(collectively, the "Clean Areas") without at least three (3) days prior written
notice to Borrower, and then only upon reasonable conditions established by
Borrower to maintain the integrity of the Clean Areas.
5.10 Comply with ERISA. The Borrower and its Subsidiaries shall at all
times make prompt payment of contributions required to meet the minimum funding
standards set forth in ERISA with respect to any employee benefit plan; promptly
after the filing thereof, furnish to the Bank and MIDFA copies of any annual
report required to be filed under ERISA in connection with each employee benefit
plan; not withdraw from participation in, permit the termination or partial
termination of, or permit the occurrence of any other event with respect to any
employee benefit plan that could result in liability to the Pension Benefit
Guaranty Corporation; notify the Bank and MIDFA as soon as practicable of any
"reportable event" (as defined in Section 4043(b) of ERISA) and of any
additional act or condition arising in connection with any employee benefit plan
which the Borrower or any of its Subsidiaries believe might constitute grounds
for the termination thereof by the Pension Benefit Guaranty Corporation or for
the appointment by the appropriate United States district court of a trustee to
administer such plan; and furnish to the Bank and MIDFA upon the Bank's or
MIDFA's request, such additional information about any employee benefit plan as
may be reasonably requested. Neither the Borrower nor any of its Subsidiaries
will permit the occurrence of any "prohibited transaction" (as defined in
ERISA).
5.11 Consolidated Omnibus Budget Reconciliation Act. Each of the employee
benefit plans of the Borrower and its Subsidiaries shall at all times satisfy
the requirements set forth in Section 4980B of the Internal Revenue Code of
1986, as amended, and all regulations from time to time promulgated thereunder,
and such other provisions of the Internal Revenue Code that replace or
complement such Section.
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5.12 Maintenance of Properties; Conduct of Business. The Borrower and its
Subsidiaries shall conduct their business in an orderly, efficient and customary
manner, keep its properties used in the operations of its business in good
working order and condition (normal wear and tear excepted), and from time to
time make all needed repairs to, renewals of or replacements of its properties
(except to the extent that any of such properties is obsolete or is being
replaced) so that the efficiency of such property shall be fully maintained and
preserved. The Borrower and its Subsidiaries shall file or cause to be filed in
a timely manner all reports, applications, estimates and licenses that shall be
required by any governmental authority and which, if not timely filed, would
have a material and adverse effect on the Borrower or any of its Subsidiaries or
the Collateral.
5.13 [INTENTIONALLY LEFT BLANK]
5.14 Taxes and Liens. Promptly pay, or cause to be paid, all taxes,
assessments or other governmental charges which may lawfully be levied or
assessed upon the income or profits of the Borrower or upon any property,
real, personal or mixed, belonging to the Borrower or upon any part thereof,
and also any lawful claims for labor, material and supplies which, if unpaid,
might become a lien or charge against any such property; provided, however,
the Borrower shall not be required to pay or cause to be paid any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
actively contested in good faith by proper proceedings and, if requested by
the Bank or MIDFA, reserves with respect thereto acceptable to the Borrower's
independent certified public accountants shall be established and maintained;
but provided further that any such tax, assessment, charge, levy or claim
shall be paid forthwith upon the commencement of proceedings to foreclose any
lien securing the same unless a surety bond satisfactory to the Bank is
obtained and delivered to the Bank and MIDFA.
5.15 Observe all Laws. Conform to and duly observe all laws, regulations
and other valid requirements of any regulatory authority with respect to the
conduct of its business.
5.16 Employment Count. Upon request, but not more frequently than twice
annually, supply the employment ocunt at the Borrower's premises to MIDFA.
5.17 Equal Employment. Prohibit discrimination on the basis of (i)
political or religious opinion or affiliation, marital status, race, color,
creed, or national origin, or (ii) sex or age, except when sex or age
constitutes a bona fide occupational qualification, or (iii) the physical or
mental disability of a qualified individual with a disability. Upon the
request of MIDFA or the Department of Business and Economic Development
("DBED"), the Borrower will submit to MIDFA or DBED information relating to
its employment practices and operations, with regard to the above on a form
to be prescribed by DBED.
5.18 Drug and Alcohol Free Workplace. Comply with the State of Maryland's
policy concerning drug and alcohol free workplaces, as set forth in COMAR
01.01.1989.18 and 21.11.08 or similar regulations as adopted by DBED and
remain in compliance so long as MIDFA's insurance remains in effect.
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5.19 Appraisals. Permit the Bank and/or MIDFA from time to time, at the
Borrower's reasonable expense, to order an appraisal of the Facility to be
performed by an appraiser or appraisers selected by the Bank and/or MIDFA, in
their sole discretion; provided, however, that the Borrower shall only be
obligated to pay for one appraisal of the Facility in any twelve month period
unless an Event of Default has occurred and is continuing. The Borrower
further agrees (a) to fully cooperate with such appraisers, (b) to provide
such appraisers with reasonable access to the Facility and with any
information regarding the Facility as is reasonably requested, and (c) to
permit the Bank and MIDFA, their agents and representatives, to disclose to
such appraisers any and all information it may have with regard to the
Facility, the Borrower and the transaction described herein as the Bank and
MIDFA, in their reasonable discretion, determines is necessary to provide for
an accurate appraisal of the Facility.
5.20 Tangible Net Worth. Maintain a tangible net worth (including
subordinated debt) of not less than (i) $4,250,000 from December 31, 1996 to
and including March 31, 1997, and (ii) $4,500,000 as of each quarter-end
hereafter, measured quarterly (determined in accordance with Generally
Accepted Accounting Principles on a Consistent Basis).
5.21 Debt to Worth Ratio. Maintain at all times a ratio of debt to
tangible net worth (including subordinated debt) not greater than 2.25 to
1.0, measured quarterly (determined in accordance with Generally Accepted
Accounting Principles on a Consistent Basis).
5.22 EBITDA Ratio. Maintain at all times a ratio of EBITDA (earnings
before interest, taxes, depreciation and amortization) plus operating lease
and rental expenses (as shown on the most recent financial statements of the
Borrower) to principal and interest due under indebtedness of the Borrower
plus operating and lease expenses of not less than 1.20 to 1.0, measured
quarterly (determined in accordance with Generally Accepted Accounting
Principles on a Consistent Basis).
5.23 Current Ratio. Maintain at all times a ratio of current assets to
current liabilities of not less than 2.5 to 1.0, measured quarterly
(determined in accordance with Generally Accepted Accounting Principles on a
Consistent Basis).
Notwithstanding anything herein to the contrary, the value of the
"Collateral" (as described in the Collateral Pledge Agreement) shall be included
as a current asset of the Borrower in determining compliance of the Borrower for
the covenants contained in Sections 5.20, 5.21, 5.22 and 5.23 hereof.
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ARTICLE VI
NEGATIVE COVENANTS
Until all the obligations to be performed and paid hereunder shall have
been performed and paid in full, and for so long as the Letter of Credit
shall be outstanding, unless the Bank and MIDFA shall otherwise consent in
writing, the Borrower will not, and will not permit any Subsidiary to, either
directly or indirectly:
6.1 Merger and Dissolution. Liquidate, windup or dissolve, or enter
into any consolidation, merger, share exchange, syndicate or other
combination, or sell, lease or dispose of, in a single transaction or a
series of related transactions, its business or assets as a whole or such
part as in the opinion of the Bank or MIDFA constitutes a substantial portion
of its business or assets or change its name.
6.2 Acquisitions. Acquire the business or all or a substantial portion of
the assets of any Person, whether by purchase of stock, assets or otherwise.
6.3 Indebtedness. Create, incur or suffer to exist any Indebtedness for
Money Borrowed or the equivalent (including any indebtedness incurred as a
general partner or as a joint venturer) except for: (a) the obligations owed
to the Bank under this Agreement; (b) the obligations owed to the Issuer
under the Loan Agreement; (c) current trade accounts payable or accrued by
the Borrower or any of its Subsidiaries in the ordinary course of its
business, provided that the same shall be paid when due in accordance with
customary trade terms unless contested by appropriate proceedings; (d)
indebtedness secured by Permitted Liens; (e) any indebtedness of the Borrower
to the Bank under the Bank Loan and Security Agreement (as defined in the
Subordination Agreement)
6.4 Liens and Encumbrances. Create, assume or suffer to exist any deed
of trust, mortgage, encumbrance (other than a lien of attachment, judgment or
execution or other involuntary lien) or security interest (including the
interest of a conditional seller of goods) securing a charge or obligation,
on or of any of its property, real or personal, whether now owned or
hereafter acquired, including without limitation any raw materials inventory
or work in process, except for the liens and security interests in favor of
the Bank created by this Agreement and the Security Instruments and Permitted
Liens.
6.5 Disposition of Assets. Sell, lease, transfer, convey or otherwise
dispose of any of its assets or property, including without limitation, the
Collateral, except for sales of inventory in the ordinary course of business
and the sale of equipment and other assets in the ordinary course if replaced
with equipment and/or other assets of equivalent value provided that any such
sale of equipment or other assets must be approved by the Bank (such consent
not to be unreasonably withheld).
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6.6 Restricted Investments. Except for Government Obligations, purchase,
invest in or otherwise acquire, directly or indirectly, any stock, evidence
of indebtedness, or other obligation or security or any interest whatsoever
in any other Person, or make or permit to exist any loans, advances or
extensions of credit to, or any investment in cash or by delivery of property
in, any Person.
6.7 Sale and Leaseback. Enter into any arrangement with any Person
providing for the leasing by the Borrower of any asset that has been sold or
transferred by the Borrower to such Person.
6.8 New Business. Engage in any business other than the business in
which the Borrower is currently engaged or a business reasonably related
thereto or make any material change thereto, if such action substantially
affects the material financial condition of the Borrower and its Subsidiaries
taken as a whole.
6.9 Subsidiaries or Partnerships. Create any new Subsidiary or transfer
any assets to a Subsidiary, or become a partner or joint venturer in any
partnership or joint venture.
6.10 Guaranties. Guarantee or otherwise, in any way, become liable with
respect to the obligations or liabilities of any Person except guaranties
issued in favor of the Bank and endorsements in the ordinary course of the
Borrower's business.
6.11 Transactions Affecting the Collateral. Enter into any transaction
that materially and adversely affects the Collateral or the Borrower's
ability to repay any Indebtedness for Money Borrowed or the obligations
hereunder.
6.12 Hazardous Wastes. Permit, in violation of any federal, state or
local laws, regulations or orders, any hazardous or toxic wastes,
contaminants, oil, radioactive or other materials the removal of which is
required or the maintenance of which is restricted, prohibited or penalized
by any federal, state or local agency, authority or governmental unit to be
brought on to any real property owned by the Borrower, or if so brought or
found located thereon, shall be immediately removed, with proper disposal,
and all required environmental cleanup procedures shall be diligently
undertaken pursuant to all such laws, ordinances and regulations, and the
Borrower's obligations hereunder shall survive any foreclosure of the
Mortgage. The Bank shall have the right (at the expense of the Borrower not
to exceed $200) to obtain an updated environmental report for the Property
once every twenty-four (24) months after the date hereof. In the event that
the Bank has a legitimate reason to believe that a violation of applicable
environmental laws has occurred, the Bank may (at the expense of the
Borrower) obtain a complete environmental report for the Property from a
qualified environmental engineer selected by the Bank.
6.13 Fiscal Year. Change its fiscal year from a March 31 year end
without the prior written consent of the Bank and MIDFA, which consent shall
not be unreasonably withheld.
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6.14 Management. Fail to notify the Bank and MIDFA of any change in the
senior executive management of the Borrower at the time that such change
occurs.
ARTICLE VII
CONDITIONS TO ISSUANCE OF LETTER OF CREDIT
7.1 Conditions on Issuance. On or prior to the date hereof, the Borrower
shall have furnished to the Bank and MIDFA, in form satisfactory to the Bank
and MIDFA, the following:
(a) two executed counterparts of this Agreement;
(b) executed counterparts of each of the Bond Documents (except for
the Note and the Bonds, as to which a specimen copy may be furnished) and
the Security Instruments;
(c) a mortgagee title insurance policy dated the date of Closing
together with evidence that all premiums in respect of such policy have
been paid, which policy shall: (i) be in an amount not less than
[$7,280,000]; (ii) ensure that the Mortgage creates a valid first lien on
the property covered by such Mortgage free and clear of all defects and
encumbrances (except those acceptable to the Bank); (iii) name the Bank and
MIDFA as insured parties thereunder; (iv) be the form of ALTA Loan
Policy-1992 (amended 10-17-92) or other form approved by the Bank and
MIDFA; and (v) contain such endorsements and effective coverage as the Bank
and MIDFA may reasonably request;
(d) a physical survey containing maps or plats of the perimeter or
boundaries of the Facility Site certified to the Bank, MIDFA and the title
insurance company, in a manner acceptable to each of them, dated a date
satisfactory to the Bank, MIDFA and the title insurance company, by an
independent professional licensed land surveyor satisfactory to the Bank
and the title insurance company, which survey shall indicate the following:
(i) the locations on such site of all the buildings, structures and other
improvements and the established building setback lines insofar as the
foregoing affect the perimeter or boundary of such property; (ii) the lines
of streets abutting the site and width thereof; (iii) all access and other
easements appurtenant to the site or necessary or desirable to use the
site; (iv) all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the site,
whether recorded, apparent from a physical inspection of the site or
otherwise known to the surveyor; (v) any encroachment on any adjoining
property by the building structures and improvements on the site; and (vi)
if the site is described as being on a filed map, a legend relating the
survey to said map, all informed satisfactory to the
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Bank and MIDFA; together with certification from an independent
professional licensed land surveyor satisfactory to the Bank and MIDFA
as to the location of the Facility or any property covered by the Mortgage
in any "special flood hazard" area within the meaning of the Federal Flood
Disaster Protection Act of 1973, or such other form of survey acceptable to
the Bank and MIDFA;
(e) evidence of compliance with the insurance requirements contained
herein (upon which there shall be affixed appropriate loss payable
clauses);
(f) opinions dated the date hereof addressed to, and in form and
substance acceptable to, the Bank and MIDFA from the Issuer's counsel and
Bond Counsel, as to such matters as the Bank and MIDFA may reasonably
require;
(g) an opinion of counsel for the Borrower dated the date hereof
addressed to the Bank and MIDFA, and substantially in the form attached
hereto as Exhibit C, or otherwise in form and substance reasonably
acceptable to, the Bank;
(h) a certified copy of the corporate resolutions or the Borrower's
Board of Directors authorizing this transaction;
(i) (i) a copy of the Articles of Incorporation of the Borrower,
certified as of a date no earlier than 30 days prior to the date of
issuance of the Bonds by the Maryland State Department of Assessments and
Taxation; and (ii) a certificate dated no earlier than 30 days prior to the
date of issuance of the Bonds of the Maryland State Department of
Assessments and Taxation as to the good standing of the Borrower;
(j) an opinion from Miles & Stockbridge and Chewanney A. Brown,
Esquire, Co-Bond Counsel, or a letter in substantially the form of
Exhibit D hereto consenting to the Bank's reliance on certain opinions
delivered by such counsel in form and substance satisfactory to the Bank
and its counsel;
(k) copies of all governmental approvals required in connection with
this transaction, including resolution of the Issuer authorizing the
issuance of the Bonds;
(l) evidence of payment to the Bank of the initial annual letter of
credit commission pursuant to Section 3.4 of this Agreement;
(m) evidence satisfactory to the Bank and MIDFA that any documents
(including, without limitation, financing statements) required to be
recorded or filed in order to create, in favor of the Bank, a perfected
lien on and security interest all real and personal property covered by the
Mortgage and the Security Agreement have been properly (or will be
promptly) recorded or filed in each office in each jurisdiction required in
order to create, in favor of the Bank, a perfected lien on and security
interest in the respective Collateral described therein; and the Bank and
MIDFA shall have
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received evidence of all such recordation and acknowledgment copies of all
such filings (or, in lieu thereof, the Bank and MIDFA shall have received
other evidence satisfactory to the Bank and MIDFA that all such filings
have been or will be made), and the Bank and MIDFA shall have received
evidence that all necessary recordation and filing fees and all documentary
taxes or other expenses related to such filings are recordations have been
or will be paid in full;
(n) an executed counterpart of the Commitment Letter;
(o) a reliance letter from the company which prepared the
Environmental Report authorizing the Bank and MIDFA to rely upon the
Environmental Report to the same extent as if the Environmental Report had
been addressed to the Bank and MIDFA;
(p) those documents and information relating the Facility as
specifically set forth in the Commitment Letter;
(q) such other documents, instruments and certifications as the Bank
or MIDFA may reasonably require; and
(r) an executed counterpart of the MIDFA Insurance Agreement.
7.2 Additional Conditions Precedent to Issuance of the Letter of Credit.
(a) The obligation of the Bank to issue the Letter of Credit shall be
subject to the further conditions precedent that on the date of issuance
the following statements shall be true and the Bank and MIDFA shall have
received a certificate signed by an authorized officer of the Borrower,
dated the date of issuance, stating that:
(i) The representations and warranties contained in Article II of
this Agreement, Section 2.2 of the Loan Agreement, and in the
Security Instruments are correct in all material respects on
and as of the date of issuance of the Letter of Credit as
though made on and as of such date; and
(ii) No event has occurred or would result from the issuance of
the Letter of Credit, which constitutes an Event of Default
or would constitute an Event of Default but for the
requirement that notice be given or time elapse or both; and
(b) there shall have been no introduction of or change in, or in the
interpretation of, any law or regulation that would make it unlawful or
unduly burdensome for the Bank to issue the Letter of Credit, no outbreak
or escalation of hostilities or other calamity or crisis affecting the
Bank, no suspension of or material limitation on trading on the New York
Stock Exchange or any other national securities
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exchange, no declaration of a general banking moratorium by United States
or North Carolina banking authorities, and no establishment of any new
restrictions on transactions in securities or on banks materially
affecting the free market for securities or the extension of credit by
banks.
7.3 Conditions Precedent to Each Tender Advance. Each payment made by the
Bank under the Letter of Credit pursuant to a Tender Draft shall constitute a
Tender Advance hereunder only if on the date of such payment the following
statements shall be true:
(i) The representations and warranties contained in Article II of
this Agreement, Section 2.2 of the Loan Agreement, and in the Security
Instruments are correct in all material respects on and as of the date of
such Tender Advance as though made on and as of such date; and
(ii) No event has occurred or would result from such Tender Advance,
which constitutes an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse or
both.
Unless the Borrower shall have previously advised the Bank in writing or the
Bank has actual knowledge that one or more of the above statements is no longer
true, the Borrower shall be deemed to have represented and warranted, on the
date of payment by the Bank under the Letter of Credit pursuant to a Tender
Draft, that on the date of such payment the above statements are true and
correct.
ARTICLE VIII
DEFAULT
8.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement, whereupon all obligations of the Borrower
hereunder, whether then owing or contingently owing, will, at the option of the
Bank or its successors or assigns, immediately become due and payable by the
Borrower without presentation, demand, protest or notice of any kind, all of
which are hereby expressly waived, and the Borrower will pay the reasonable
attorneys' fees incurred by the Bank, or its successors or assigns, in
connection with such Event of Default or recourse against any Collateral held by
the Bank, or its successors or assigns, as security for the obligations
hereunder:
(a) Failure of the Borrower to pay when due (i) any payment of
principal, interest, commission, charge or expense referred to in Article
III hereof, except for amounts owed by the Borrower pursuant to a Tender
Advance under Section 3.3 and (ii) any payment of principal or interest
referred to in Section 3.3 hereof; or
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(b) The occurrence of an "event of default" or an "Event of Default"
(beyond any applicable cure period) under any of the Security Instruments
or any of the Bond Documents or the Creditor Security Agreement or any of
the documents executed in connection with the Creditor Security Agreement;
(c) The Borrower defaults (beyond any applicable cure period) in the
payment of principal or interest on any other Indebtedness for Money
Borrowed (other than the indebtedness to the Bank arising hereunder) beyond
any period of grace provided with respect thereto, or in the performance of
any other agreement, term or conditions contained in any agreement under
which any such obligation is created, if the effect of such default is to
cause, or permit the holder or holders of such obligation to cause such
obligation to become due prior to its stated maturity, and the acceleration
of such obligation would have a material and adverse effect on the business
or financial condition of the Borrower; or
(d) Any representation, warranty, certification or statement made by
the Borrower herein, or in any writing furnished by or on behalf of the
Borrower in connection with the loan by the Issuer under the Loan Agreement
or pursuant to this Agreement, or any of the Security Instruments shall
have been false, misleading or incomplete in any material respect on the
date as of which made; or
(e) The Borrower defaults in the performance or observance of any
agreement, covenant, term or condition binding on it in Articles V (other
than Sections 5.6, 5.7, 5.9, 5.10, 5.11, 5.12, 5.15, 5.16, 5.17, 5.18 or
5.19) and VI hereof; or
(f) The commencement of the liquidation or dissolution of the
Borrower, or suspension of the business of the Borrower or filing by the
Borrower of a voluntary petition in bankruptcy or a voluntary petition or
an answer seeking reorganization, arrangement, readjustment of its debts or
for any other relief under the Bankruptcy Reform Act of 1978, as amended
(the "Bankruptcy Code"), or under any other insolvency act or law, state or
Federal, now or hereafter existing, or any other action of Borrower
indicating its consent to, approval of, or acquiescence in any such
petition or proceeding, or the application by the Borrower for (or the
consent or acquiescence to) the appointment of a receiver or a trustee of
the Borrower or an assignment for the benefit of creditors, the inability
of the Borrower or the admission by the Borrower in writing of its
inability to pay its debts as they mature; or
(g) The filing of an involuntary petition against the Borrower in
bankruptcy or seeking reorganization, arrangement, readjustment of its
debts or for any other relief under the Bankruptcy Code or under any other
insolvency act or law, state or federal, now or hereafter existing, or the
involuntary appointment of a receiver or trustee of the Borrower or for all
or a substantial part of its property, and the continuance of any of such
action for (90) days undismissed or undischarged; or the issuance of an
order for attachment, execution or similar process against any substantial
part of the property of
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the Borrower and the continuance of any such order for (90) days
undismissed or undischarged; or
(h) The entry of an order in any proceedings against the Borrower
decreeing the dissolution or split-up of the Borrower; or
(i) The entry of a final judgment against the Borrower, which with
other outstanding final judgments against the Borrower exceeds an aggregate
of $100,000, if within thirty (30) days after entry thereof such judgment
shall not have been discharged or bonded or execution thereof stayed
pending appeal, or if within thirty (30) days after the expiration of any
such stay such judgment shall not have been discharged or bonded; or
(j) There occurs any abandonment or change in ownership of the
Facility; or
(k) The dissolution of termination of the existence of the Borrower;
(l) The Borrower defaults in the performance or observance of any
provision of this Agreement (other than those described above in this
Section 8.1) and such default is not cured within 30 days after notice
thereof is sent to the Borrower;
then upon the occurrence of an Event of Default and at any time thereafter,
the Bank may (A) pursuant to Section 902 of the Indenture, advise the Credit
Facility Trustee that an Event of Default has occurred and instruct the
Credit Facility Trustee to declare the principal of all Bonds then
outstanding and interest thereon to be immediately due and payable, and (B)
proceed hereunder, and under any of the Security Instruments and, to the
extent therein provided, under the Bond Documents, in such order as it may
elect and the Bank shall have no obligation to proceed against any Person or
exhaust any other remedy or remedies which it may have and without resorting
to any other security, whether held by or available to the Bank.
8.2 No Remedy Exclusive. No remedy herein conferred upon or reserved to
the Bank is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder, under the Security
Instruments, or now or hereafter existing at law or in equity or by statute.
8.3 Anti-Marshalling Provisions. The right is hereby given by the
Borrower to the Bank to make releases (whether in whole or in part) of all or
any part of the Collateral under the Security Instruments agreeable to the
Bank without notice to, or the consent, approval or agreement of other
parties and interests, including junior lienors, which releases shall not
impair in any manner the validity of or priority of the liens and security
interest in the remaining Collateral conferred under such documents, nor
release the Borrower from liability
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for the obligations hereby secured. Notwithstanding the existence of any
other security interest in the Collateral held by the Bank, the Bank shall
have the right to determine the order in which any or all of the Collateral
shall be subjected to the remedies provided herein, or in the Security
Instruments. The Borrower hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein or therein.
8.4 Confession of Judgment. Upon the occurrence of an Event Default, the
Borrower authorizes the clerk or any attorney designated by the Bank or any
clerk of any court of record to appear for it in any court of record and
confess judgment against it without prior hearing, in favor of the Bank for
and in the amount equal to such of the obligations of the Borrower which have
been due and payable under Section 8.1 hereof plus interest accrued and
unpaid thereon, all other amounts then due and payable hereunder, costs of
suit and an attorney's fee in an amount equal to fifteen percent (15%) of
such obligations plus all accrued and unpaid interest thereon, provided,
however, (a) if the actual attorney's fees incurred by the Bank are less than
15% of such obligations (plus all accrued and unpaid interest thereon), the
Bank will refund (to the extent actually collected) to the Borrower an amount
equal to the difference between 15% of such obligations (plus all accrued and
unpaid interest thereon) and the amount of such actual attorney's fees (after
all of such obligations have been paid in full), or (b) if the actual
attorney's fees incurred by the Bank or other holder hereof exceed 15% of
such obligations (plus all accrued and unpaid interest thereon, whether by
reason of judgment being contested or otherwise, the Borrower will pay to the
Bank on demand the amount of any such excess. The authority and power to
appear for and enter judgment against the Borrower shall not be exhausted by
one or more exercises thereof, or by any imperfect exercise thereof, and
shall not be extinguished by any judgment entered pursuant thereto. Such
authority and power may be exercised on one or more occasions, from time to
time, in the same or different jurisdictions, as often as the Bank shall deem
necessary or desirable, for all of which this Note shall be a sufficient
warrant.
ARTICLE IX
MISCELLANEOUS
9.1 Indemnification. The Borrower hereby indemnifies and holds the Bank
harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever which the Bank may incur (or which may be
claimed against the Bank by any Person): (i) by reason of or in connection
with the execution and delivery or transfer of, or payment or failure to pay
under, the Letter of Credit, provided that the Borrower shall not be required
to indemnify the Bank for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (A) the willful
misconduct or gross negligence of the Bank in connection with paying drafts
presented under the Letter of Credit or (B) the Bank's willful or negligent
failure to pay under the Letter of Credit (other than in connection
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with a court order) after the presentation to it by the Credit Facility
Trustee or a successor corporate fiduciary under the Indenture of a sight
draft and certificate strictly complying with the terms and conditions of the
Letter of Credit; or (ii) by reason of or in connection with the execution,
delivery or performance of any of the Related Documents or any transaction
contemplated by any thereof. In addition, if the Borrower has generated,
stored, or disposed of any hazardous substances on the Facility Site, the
Borrower agrees to indemnify the Bank against any liability, cost and
expense, including reasonable attorneys' fees, arising out of or resulting
from any such generation, storage, disposal or location. Anything herein to
the contrary notwithstanding, nothing in this Section 9.1 is intended or
shall be construed to limit the Borrower's reimbursement obligation contained
in Article III hereof. Without prejudice to the survival of any other
obligation of the Borrower, the indemnities and obligations of the Borrower
contained in this Section 9.1 shall survive the payment in full of amounts
payable pursuant to Article III and the Termination Date.
9.2 Transfer of Letter of Credit. The Letter of Credit may be
transferred and assigned in accordance with the terms of the Letter of Credit.
9.3 Reduction of Letter of Credit.
(a) The Letter of Credit is subject to reduction pursuant to its
terms.
(b) If the amount available to be drawn under the Letter of Credit
shall be permanently reduced in accordance with the terms thereof, then
the Bank shall have the right to require the Credit Facility Trustee to
surrender the Letter of Credit to the Bank and to issue on such date, in
substitution for such outstanding Letter of Credit, a substitute
irrevocable letter of credit, substantially in the form of the Letter of
Credit but with such changes therein as shall be appropriate to give effect
to such reduction, dated such date, for the amount to which the amount
available to be drawn under the Letter of Credit shall have been reduced.
9.4 Liability of the Bank. The Borrower, to the extent permitted by
applicable law, assumes all risks of the acts or omissions of the Trustee,
the Credit Facility Trustee and any beneficiary or transferee of the Letter
of Credit with respect to its use of the Letter of Credit. Neither the Bank
nor any of its officers, directors, employees, agents or consultants shall be
liable or responsible for:
(a) the use which may be made of the Letter of Credit or for any acts
or omissions of the Credit Facility Trustee or any beneficiary or
transferee in connection therewith;
(b) the validity, sufficiency or genuineness of documents, or of any
endorsement(s) thereon, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged;
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(c) payment by the Bank against presentation of documents which do not
comply with the terms of the Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of
Credit; or
(d) any other circumstances whatsoever in any way related to the
making or failure to make payment under the Letter of Credit;
except only that the Borrower shall have a claim against the Bank, and the
Bank shall be liable to the Borrower, to the extent but only to the extent,
of any direct, as opposed to consequential damages suffered by the Borrower
which the Borrower proves were caused by (i) willful misconduct or gross
negligence of the Bank in determining whether documents presented under the
Letter of Credit complied with the terms of the Letter of Credit or (ii)
willful failure of the Bank to pay under the Letter of Credit after the
presentation to it by the Credit Facility Trustee or a successor trustee
under the Indenture of a sight draft and certificate strictly complying with
the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Bank may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
9.5 Successors and Assigns. This Agreement shall be binding upon the
Borrower, its successors and assigns and all rights against the Borrower
arising under this Agreement shall be for the sole benefit of the Bank, its
successors and assigns, all of whom shall be entitled to enforce performance
and observance of this Agreement to the same extent as if they were parties
hereto. The Bank will not sell or assign the obligations of the Borrower
hereunder to any competitor of the Borrower, as reasonably determined by the
Bank.
9.6 Notices. All notices, requests and demands to or upon the respective
parties hereto shall be deemed to have been given or made when hand delivered
or mailed first class, certified or registered mail, postage prepaid,
addressed as follows or to such other address as the parties hereto shall
have been notified pursuant to this Section 9.6:
Borrower: Chesapeake Biological Laboratories, Inc.
6000 Metro Drive
Baltimore, Maryland 21215
Attention: John C. Weiss, III, President
With a
copy to: Douglas M. Fox, Esquire
Ballard, Spahr, Andrews & Ingersoll
Suite 1900
300 East Lombard Street
Baltimore, Maryland 21202
Bank: First Union National Bank of North Carolina
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Two First Union Center, T-7
Charlotte, North Carolina 28288
Attention: International Operations
except in cases where it is expressly herein provided that such notice,
request or demand is not effective until received by the party to whom it
is addressed, in which event said notice, request or demand shall be
effective only upon receipt by the addressee.
9.7 Amendment. This Agreement may be amended, modified or discharged only
upon an agreement in writing of the Borrower and the Bank.
9.8 Effect of Delay and Waivers. No delay or omission to exercise any
right or power accruing upon any default, omission or failure of performance
hereunder shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle the Bank to
exercise any remedy now or hereafter existing at law or in equity or by statute,
it shall not be necessary to give any notice, other than such notice as may
be herein expressly required. In the event any provision contained in this
Agreement should be breached by any party and thereafter waived by the other
party so empowered to act, such waiver shall be limited to the particular
breach hereunder. No waiver, amendment, release or modification of this
Agreement shall be established by conduct, custom or course of dealing, but
solely by an instrument in writing duly executed by the parties thereunto duly
authorized by this Agreement.
9.9 Counterparts. This Agreement may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 Severability. The invalidity or unenforceability of any one or more
phrases, sentences, clauses or Sections contained in this Agreement shall not
affect the validity or enforceability of the remaining portions of this
Agreement, or any part thereof.
9.11 Cost of Collection. The Borrower shall be liable for the payment of
all fees and expenses, including attorneys' fees (computed without regard to any
statutory presumption), reasonably incurred in connection with the enforcement
of this Agreement.
9.12 Set Off. Upon the occurrence of an Event of Default hereunder, the
Bank is hereby authorized, without notice to the Borrower, to set off,
appropriate and apply any and all monies, securities and other properties of the
Borrower hereafter held or received by or in transit to the Bank from or for the
Borrower, against the obligations of the Borrower irrespective of whether the
Bank shall have made any demand hereunder or under any Security Instrument;
provided, however, that the Bank hereby waives any such right, and any other
right which it may have at law or otherwise to set off and apply such deposits
at any time held, if, when and after there shall be a drawing under the Letter
of Credit during the pendency of any
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proceeding by or against the Borrower or the Issuer seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of either of them or
either of their debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, custodian, trustee or other similar official
for either of them or for any substantial part of either of their property.
9.13 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland. The Borrower hereby
acknowledges that the Letter of Credit shall be governed by and construed in
accordance with Uniform Customs and Practice for Documentary Credits (1993
revisions), International Chamber of Commerce Publication No. 500.
9.14 References. The words "herein", "hereof", "hereunder" and other words
of similar import when used in this Agreement refer to this Agreement as a
whole, and not to any particular article, section or subsection.
9.15 Taxes, Etc. Any taxes (excluding income taxes) payable or ruled
payable by federal or state authority in respect of the Letter of Credit, this
Agreement or the Security Instruments shall be paid by the Borrower upon demand
by the Bank, together with interest and penalties, if any.
9.16 CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL. THE BORROWER HEREBY
CONSENTS TO THE JURISDICTION OF ANY STATE COURT WITHIN BALTIMORE CITY,
MARYLAND OR ANY FEDERAL COURT LOCATED WITHIN THE STATE OF MARYLAND, FOR ANY
PROCEEDING TO WHICH THE BANK IS A PARTY AND CONSENTS THAT ALL SERVICE OF
PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO THE BORROWER AT
THE ADDRESS INDICATED IN SECTION 9.6 OR AT SUCH OTHER ADDRESS AS THE
BORROWER MAY HAVE DESIGNATED IN WRITING TO THE BANK, AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE
PREPAID AND PROPERLY ADDRESSED. TO THE EXTENT PERMITTED BY LAW, THE BORROWER
VOLUNTARILY AND KNOWINGLY WAIVES TRIAL BY JURY AND WAIVES ANY OBJECTION WHICH
IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY PROCEEDING INSTITUTED HEREUNDER, OR ARISING
OUT OF OR IN CONNECTION WITH THIS REIMBURSEMENT AGREEMENT, OR ANY PROCEEDING
TO WHICH THE BANK IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT
OF OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE BANK OR THE BORROWER, AND THE
BORROWER CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
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RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. IN THE EVENT THAT THE
BORROWER'S WAIVER OF JURY TRIAL HEREIN SHALL BE DETERMINED TO BE INVALID OR
UNENFORCEABLE AS A MATTER OF LAW, THE BORROWER AND THE BANK AGREE THAT THE
PROVISIONS OF ANNEX 1 TO THE REIMBURSEMENT AGREEMENT SHALL GOVERN AS TO THE
MATTERS SET FORTH THEREIN. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF
THE BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION AND PROCEEDING AGAINST THE
BORROWER OR THE COLLATERAL IN THE COURTS OF ANY JURISDICTION THAT HAS
JURISDICTION OVER THE BORROWER OR THE COLLATERAL.
9.17 Indirect Means. Any act which the Borrower is prohibited from doing
shall not be done indirectly through a Subsidiary or by any other indirect
means.
9.18 Entire Agreement. This Agreement and the other Letter of Credit
Documents shall completely and fully supersede all other prior agreements
(including, the Commitment Letter), both written and oral, between the Bank and
the Borrower relating to the Letter of Credit and the obligations of the
Borrower to the Bank in regard thereto.
9.19 Authority to Act on Behalf of the Bank. With respect to the
acquisition of the Facility and disbursement of funds therefor, the Bank
hereby authorizes FUNBMD to take any actions as may be necessary to carry
out the purposes of this Agreement, including, without limitation, the
giving or withholding of consents or approvals related to disbursements
from the Facility Fund, on behalf of the Bank.
ARTICLE X
ACQUISITION OF FACILITY
10.1 Covenants by Borrower With Respect to Acquisition of Facility. With
respect to the acquisition of the Facility, the Borrower hereby covenants and
agrees with the Bank and MIDFA that:
(a) Time of Completion. It will cause the acquisition of the Facility to
be prosecuted with diligence and continuity in accordance with the Plans and
Specifications and will complete, on or before December 31, 1997 (the
"Projected Completion Date"), (i) the renovation of and construction of
improvements on the Real Property (collectively, the "Improvements") in
accordance with the Plans and Specifications, and (ii) the purchase and
installation of the Equipment in the Plant all of which shall be completed
free and clear of liens, security interests or claims (except for Permitted
Liens.)
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(b) Building Permits. All necessary building and other governmental
permits have been obtained with respect to the Facility or will be obtained
prior to commencing the particular work for which they are required.
(c) Plans and Specifications; Changes in Construction Contracts. The
Plans and Specifications are satisfactory to the Borrower, have been
approved (or will be prior to commencing the particular work for which
approvals are required), to the extent required by applicable law or any
effective restrictive covenant, respectively, by all local authorities and
the beneficiary of any such covenant; the Plans and Specifications to be
approved have also been approved by the Borrower, the Bank, and the Bank's
inspector for the Facility (the "Inspector"); all construction, if any,
heretofore performed on the Improvements has been performed within the
perimeter of the Real Property in accordance with the Plans and
Specifications and in accordance with any restrictive covenants applicable
thereto; there are no material structural defects in the Improvements; and
no material violation of any law exists with respect to the Property. The
Borrower shall not permit any changes in the Plans and Specifications (after
they have been delivered to the Bank) or any change orders in the
construction contracts for the Facility (after they have been delivered to
the Bank) which would increase the amount thereof without the prior written
consent of the Bank and any governmental authorities having jurisdiction if
such consent is required.
(d) Inspection. The Borrower will permit the Bank and its
representatives (including but not limited to the Inspector) to enter upon
any of the Real Property, to inspect the Facility and all materials to be
used in the acquisition thereof, and to examine all detailed plans and
drawings which are or may be kept at the site, and will cooperate, and cause
the contractors of the Borrower to cooperate, with the Bank and the
Inspector in connection with any such inspections.
(e) Delivery of Certain Documents to Bank. The Borrower will deliver to
the Bank, on demand, copies of any contracts, bills of sale, statements,
receipted vouchers or agreements, under which the Borrower claims title to
any materials, fixtures or articles incorporated in any of the Facility or
subject to the lien of the Security Instruments.
(f) Correction of Defects. The Borrower, upon demand by the Bank, will
commence and proceed promptly and diligently to correct any structural
defect in the Facility or any departure from the Plans and Specifications
not approved as herein provided. The Bank shall determine in its reasonable
discretion whether the Borrower is acting promptly and diligently. No
approval by the Bank of any disbursement by the Trustee from the Facility
Fund will constitute a waiver of the Bank's right to require compliance with
this covenant with respect to any such defects or departures from the Plans
and Specifications.
(g) Identification of Contractors, Subcontractors and Suppliers. At the
Bank's request, the Borrower will deliver to the Bank the names of all
persons with whom it intends to contract for the acquisition of the Facility
or for the furnishing of labor or materials therefor, and a copy of each
contract, subcontract and agreement relating thereto, and obtain
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the approval of the Bank prior to executing any contract or any subcontract with
respect to the acquisition of the Facility.
(h) Books and Records. During the acquisition of the Facility, the
Borrower will keep adequate records and books of account with respect to the
Facility and will permit the Bank, by its agents, accountants and attorneys,
to visit and inspect the Facility and examine such records and books of
account and to discuss the affairs, finances and accounts pertaining thereto
with representatives and agents of the Borrower at such reasonable times as
may be requested by the Bank.
(i) Compliance with Restrictions etc. The Borrower will comply (in all
material respects) with all applicable building restrictions, zoning
ordinances, building codes, environmental protection requirements and other
governmental requirements applicable to the Facility.
(j) Payment of Contractors. The Borrower will promptly pay or cause to
be paid all of the contractors, subcontractors and materialmen performing
work in connection with the Facility the amounts justly due to them, and
receive the disbursements from the Facility Fund, and apply such
disbursements solely for the purpose of paying the costs of the completion
of the Facility.
No person contracting with the Borrower with respect to the
acquisition of the Facility shall have the right to be reimbursed by the Bank
or the Trustee under any circumstances whatsoever. The participation of the
Bank and the Trustee in the transactions contemplated hereby shall not in any
way be construed as obligating the Bank or the Trustee to any person or
entity for the payment of any expense incurred with respect to the
acquisition of the Facility.
(k) Location Surveys. As soon as the footings and foundations (if
any) of any new Improvements to be constructed as part of the Facility are in
(if deemed necessary by the Bank), the Borrower shall cause to be delivered
to the Bank a location survey prepared by surveyor approved by the Bank
showing the location of such new Improvements in relation to the boundary
lines thereof and setback restrictions applicable thereto and stating that
such location is in compliance with all setback and other applicable
restrictions. As construction of such new Improvements progresses, and upon
their completion, the Borrower will supply such further location surveys as
the Bank may reasonably require from time to time to assure itself that such
new Improvements do not extend beyond such boundary lines and setback and
other restrictions.
10.2 Enforcement of Remedies Against Contractors and Subcontractors and
Their Sureties. The Borrower covenants that it will take such action and
institute such proceedings as shall be necessary to cause and require all
contractors, subcontractors, and material suppliers to complete their contracts
related to the Facility diligently in accordance
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with the terms of such contracts, including (without limitation) the correcting
of any defective work.
10.3 Application of Proceeds of the Bonds.
(a) General. Pursuant to Section 401 of the Indenture, the proceeds of
the Bonds will be deposited into the Facility Fund and will be disbursed from
the Facility Fund to the Borrower or for the account of the Borrower to pay the
costs of the acquisition of the Facility, or to reimburse the Borrower for the
payment of the costs of the acquisition of the acquisition of the Facility,
approved by the Bank, as the acquisition of the Facility progresses.
Disbursements shall be made only against requisitions in the form attached to
the Indenture as Exhibit A and made a part thereof, which requisitions must be
signed by an authorized officer of the Borrower and approved by the Bank
pursuant to the procedures set forth herein and in the Indenture.
The Bank, subject to the terms and provisions hereof, will approve
disbursements of the proceeds of the Bonds from the Facility Fund as follows:
(i) A portion of such proceeds may be advanced to pay the
costs of issuance of the Bonds.
(ii) A portion of such proceeds may be advanced to pay for
costs of the acquisition of the Real Property and the renovation and
construction of the Improvements.
(iii) A portion of such proceeds may be advanced to pay for
the costs of the acquisition of the Equipment.
(iv) A portion of such proceeds may be advanced to pay for
other costsof the Facility approved by the Bank and the Trustee. Notwithstanding
anything herein to the contrary, the disbursements for costs of the Facility
shall be consistent with Exhibit E attached hereto (which is the second page
of a letter dated November 6, 1996 from the Bank to the Borrower, MIDFA and
the City), subject to such further adjustments as may be approved by MIDFA
and the Bank.
The amount of the difference, if any, between the total amount of
the costs of the Facility and the aggregate amount of the disbursements from the
Facility Fund permitted by this paragraph shall be paid by the Borrower from
sources other than the proceeds of the Bonds.
(b) Amounts Remaining After Completion. Upon completion of the
Facility all moneys remaining in the Facility Fund shall be transferred to the
Bond Fund and applied in accordance with Section 4.4 of the Loan Agreement.
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(c) Disbursement Procedure. Except for transfers from the Facility
Fund to the Bond Fund, all requisitions for disbursements of moneys on deposit
in the Facility Fund shall be subject to the prior written approval of the Bank,
and no disbursements will be made from the Facility Fund except upon a
requisition approved in writing by the Bank. The Bank shall have a period of ten
(10) Business Days within which to approve any requisition and shall not be
required to approve requisitions more than once each month. All disbursements
from the Facility Fund, except for transfers from the Facility Fund to the
Bond fund will be made by the Trustee, at the Bank's direction, directly to the
Borrower; provided, however, that notwithstanding any provision of any of the
Bond Documents or the Letter of Credit Documents, the Bank may, in its sole
discretion, require that all disbursements from the Facility Fund be made
directly to the Borrower or to any contractor, or to subcontractors, laborers,
materialmen or persons furnishing labor, services, materials or equipment used
or to be used on or in connection with the acquisition of the Facility, or to
any combination thereof, or to pay any loan fees, taxes, inspection fees,
recording charges, legal fees and any other outstanding amounts due relating to
Facility and the full cost of its completion. Any such disbursement or payment
shall be deemed to have been made to the Borrower or for its account. Upon
receipt of any funds requested by requisition, the Borrower immediately shall
apply such funds to payment of the costs of the acquisition of the Facility for
which such funds are requested by the requisition.
(d) Disbursements for Costs of the Facility Other than the Direct
Costs of Construction and Renovation. Requisitions for costs of the acquisition
of the Facility, other than the direct costs of construction and renovation,
must (i) include an itemization of the costs for which payment is requested,
(ii) have attached thereto invoices evidencing such costs, (iii) indicate that
the delivery and installation of any Equipment for which payment is
requested has been completed, and (iv) at the Bank's request, have attached
thereto any additional documents or information (including any financing
statements or amendments to financing statements and all filing fees necessary
for the filing thereof) reasonably required by the Bank in order to create or
perfect, or continue the perfection of, the Bank's security interest in any
Equipment or other property.
(e) Disbursements for the Direct Costs of Construction and Renovation.
Requisitions for direct costs of construction and renovation of the Facility
must (i) include the AIA approved progress payment form, which must be signed by
the Borrower and the Borrower's architect, engineer or construction manager and
(ii) be approved by the Inspector, not to be unreasonably delayed, conditioned
or withheld. Disbursements for direct costs of construction and renovation of
the Facility (pursuant to any construction contracts in excess of $200,000)
shall be subject to retention (the "Retainage") in an amount equal to ten
percent (10%) of the value of the work performed and materials in place with
respect to such work; provided that, (A) as each contractor, subcontractor or
materialman completes its work and delivers a waiver of liens to the Bank, the
Retainage with respect to that contractor, subcontractor or materialman will be
released, and (B) at such time as the Improvements shall have been 50% completed
in accordance with the Plans and Specifications, the Retainage shall be reduced
to an amount equal to five percent (5 %) of the value of the work performed. The
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Retainage with respect to the Facility may be released upon compliance with the
conditions set forth in paragraph (f) of this Section 10.3.
(f) Final Disbursement for the Direct Costs of Construction and
Renovation. The final disbursement for direct costs of construction and
renovation, and the Retainage with respect to the Facility will be withheld
until the Bank has been furnished with and approved (i) a copy of the Completion
Certificate signed by the Borrower and the Borrower's architect or the
Borrower's engineer or the Borrower's construction manager stating that the
construction and renovation of the Facility has been completed pursuant to and
in compliance with (A) the applicable Plans and Specifications, and (B) all
applicable zoning and building laws, ordinances, and regulations; (ii) final
waivers of liens from all materialmen, contractors and subcontractors; (iii) a
copy of the "as built" survey with respect to the Facility; (iv) evidence of
hazard insurance meeting the requirements of Section 6.3 of the Loan Agreement
covering the Facility (if any new improvements are constructed on the Real
Property; (v) a copy of the permanent use and occupancy certificate authorizing
use and occupancy of the Facility in such form as those governmental agencies
having jurisdiction customarily issue upon completion of improvements and
readiness thereof for use in Baltimore City, Maryland; and (vi) an updated
title insurance policy, if required by the Bank.
(g) Disbursements for Materials not Incorporated in the Property. The
Bank will not approve requisitions for disbursements from the Facility Fund for
materials which are not physically incorporated into the Plant, other than for
materials actually delivered to the site and stored in a place secured and
insured against theft, vandalism and other damage, all in a manner satisfactory
to the Bank.
(h) Deficiency. If at any time, either on the date of the execution
and delivery of this Agreement (the "Closing Date") or thereafter, moneys on
deposit in the Facility Fund are, in the opinion of the Bank, in its sole
discretion, insufficient to pay for all costs of the Facility, the Borrower
shall (i) complete, or cause to be completed, the Facility and pay or finance,
or cause to be paid or financed, that portion of the costs of the Facility as
may be in excess of the moneys available therefor in the Facility Fund, and (ii)
immediately, upon receipt of notice from the Bank, pay to the Bank, from funds
other than the proceeds of the Bonds, for deposit in the Facility Fund, a sum of
money which, when added to the moneys then on deposit in the Facility Fund, will
be sufficient to pay all costs of the Facility not yet paid. Neither the Issuer
nor the Bank make any warranty, either express or implied, that the proceeds of
the Bonds will be sufficient to pay all of the costs of the Facility. If the
Borrower finances any portion of the costs of the Facility pursuant to the
provisions of this Section from sources other than the proceeds of the Bonds, it
shall not be entitled to any reimbursement therefor from the Issuer, from the
Trustee, from the Bank, or from any Bondholder, nor shall it be entitled to any
abatement or diminution of any payments required by the Bond Documents or the
Letter of Credit Documents.
(i) No Liability to Third Parties. Neither the issuance of the Bonds
nor the loan of the proceeds thereof to the Borrower shall in any way be
construed as obligating the
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Issuer or the Bank or the Trustee to any person for the payment of any expense
incurred with respect to the Facility, and no person contracting with the
Borrower in connection with the construction of the Facility shall be reimbursed
by the Issuer or the Bank or the Trustee under any circumstances whatsoever.
Neither the Bank nor the Trustee nor the Issuer shall in any event be
responsible or liable to any person other than the Borrower for the disbursement
of or failure to disburse proceeds of any of the Bonds, or any part thereof,
and neither any contractor, subcontractor nor material or equipment supplier
shall have any right or claim against the Bank, the Trustee or the Issuer under
this Letter of Credit Agreement or in connection with the administration hereof.
10.4 Conditions Precedent to the Bank's Approval of Requisitions for
Disbursements from Facility Fund. The Bank shall not be obligated to approve
any requisition for disbursement until it shall have received a requisition
meeting the requirements of Section 402 of the Indenture, and until all of the
following conditions precedent shall have been fully met and complied with in
all respects:
(a) No Event of Default. No Event of Default shall have occurred
and be continuing hereunder.
(b) Sufficient Time to Complete Facility. There shall be
sufficient time in the opinion of the Bank to complete the Facility not later
than the Projected Completion Date.
(c) Permits. The Borrower shall have delivered to the Bank copies
of all permits required for the work for which a requisition has been submitted.
(d) Waivers of Liens: Receipts. The Borrower shall have furnished
to the Bank waivers of liens and receipts of payment as to each contractor and
each subcontractor for all work performed to the date of the last previous
requisition and waivers of liens as to each supplier for materials included in
the last previous requisition, within 30 days from the date of funding of the
last previous requisition, or prior to the next requisition, whichever shall
first occur.
(e) Delivery of Contracts. The Borrower shall have delivered to
the Bank copies of any contracts, public works agreements and other agreements
executed by the Borrower in connection with the construction or renovation
of the Facility, all of which must have been approved by the Bank.
(f) Title Continuation Report. At the option of the Bank, the
title insurance company insuring the title to the Real Property shall have
issued a title continuation or endorsement showing that the fee simple title to
the Real Property is clear of liens (other than Permitted Liens) to the date of
such disbursement and that no financing statements affecting the Property, or
any part thereof, other than in favor of the Issuer, the Bank and the Trustee,
or in connection with Permitted Liens, have been filed.
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(g) Compliance with Plans and Specifications. The Borrower shall
have delivered to the Bank three sets of Plans and Specifications, signed and
sealed by the Borrower's architect and approved by the Bank. The Borrower shall
have certified to the Bank, and the Inspector shall have confirmed, that all
construction work which has been completed on the Facility with respect to which
the requisition is being submitted is in conformity with the applicable Plans
and Specifications. Upon the request of the Bank, the Borrower will specify
the nature of any deviations from such Plans and Specifications.
(h) Proper Application of Prior Disbursements. The Bank shall have
received, upon the Bank's request, evidence satisfactory to it that all prior
disbursements have been properly applied to costs of the Facility.
(i) Location Surveys. With respect to any new construction (if
requested by the Bank), the Bank shall have received a current location
survey showing (i) that all new construction is within the property lines and
in compliance with all applicable setbacks, location and area requirements, and
(ii) that there is no change in conditions which could adversely affect the
security for any of the obligations of the Borrower under this Agreement.
(j) Sufficient Funds to Complete Project. The sum of the funds
being requisitioned, plus all prior disbursements by the Trustee, plus the
aggregate of all retentions and undisbursed funds shall be sufficient, in the
sole opinion of the Bank, to complete the Facility in accordance with the
applicable Plans and Specifications. In the event that the Borrower is required
to deposit moneys in the Facility Fund in order to pay the costs of completing
the Facility pursuant to Section 10.3(h) hereof, the Borrower shall have made
such deposit.
(k) Quality and Quantity of Construction. The Bank shall have
received (i) evidence acceptable to the Bank in its sole discretion that
construction work performed and materials in place to the date of the
requisition are satisfactory both as to quality and quantity, and that the
subsoil is suitable for the continued construction of the Facility (ii) a
certification from the Inspector that the work performed is in compliance with
all applicable governmental requirements.
(l) Documents Required Prior to Disbursements for Equipment.
Notwithstanding any other provision of this Agreement, prior to any disbursement
of the proceeds of the Bonds for costs of each item of Equipment, the Bank must
have received and approved all of the following items:
(i) a specific description of such equipment, including name
of manufacturer, manufacturer's I.D. number or serial number and any other
information reasonably requested by the Bank in order to sufficiently
describe the equipment being financed so that the Bank's security interest in
such equipment is adequately described and may be or will be adequately
perfected, upon delivery to Borrower of such item of Equipment.
46
<PAGE>
(ii) an amendment to this Agreement, if necessary in the sole
opinion of the Bank, pursuant to which the Borrower specifically grants to the
Bank a security interest in such equipment (or Borrower's interest therein in
respect of equipment on order but not yet received), and
(iii) a financing statement or amendment to financing
statement, if necessary in the sole opinion of the Bank, together with all
filing fees therefor, to be filed among the appropriate financing statement
records in order to perfect such security interest.
(m) Final Disbursement. If the disbursement is the final disbursement
for the costs of the Facility, in order to obtain the Bank's approval of such
disbursement (including the Retainage), in addition to the satisfaction of all
conditions set forth in this Section, the Borrower shall have provided the
Completion Certificate, appropriately completed, and the accompanying documents
described therein.
(n) Construction and Engineer's Contracts. The Borrower shall cause
the contractors (selected by the Bank), and the engineer of the Borrower each to
execute an agreement to complete which will provide, among other things, that
upon request by the Bank, they will continue to provide the services called for
by their contracts with the Borrower following an Event of Default. The Borrower
will cause to agree to give the Bank and MIDFA notice of a default and an
opportunity to cure under their contracts with the Borrower and to acknowledge
the existence of the Bank's interests in the Facility.
10.5 Financing Sign on Property; Publicity. The Borrower authorizes the
Bank to place signs at the Property at any reasonable locations selected by the
Bank and MIDFA (during the construction of the Facility), and to prepare and
furnish news releases to the news media or any other publications selected by
the Bank and MIDFA advertising the fact that financial assistance for the
Facility has been obtained from the Bank and MIDFA, and the details of such
financial assistance (but in no event any confidential information regarding
Borrower or its business). Any sign placed on the Property by the Borrower which
identifies the Facility shall identify the Bank and MIDFA as the parties
providing financing for the Facility. Any such news releases must be first
approved by the Borrower, which will not unreasonably withhold its approval.
10.6 Establishment of Completion Date. The Completion Date shall be
established by the delivery to the Trustee by the Borrower of the Completion
Certificate (appropriately completed) executed by the Borrower and approved in
writing by the Bank. The Completion Certificate delivered to the Bank shall have
attached thereto the items described in Section 10.3(f) hereof.
Notwithstanding the foregoing, the Completion Certificate shall state that
it is given without prejudice to any rights against third parties which may
exist at the date of such Completion Certificate or which may subsequently come
into being. It shall be the duty of the
47
<PAGE>
Borrower to cause the Completion Certificate to be furnished as soon as the
construction and renovation of the Facility shall have been completed.
IN WITNESS WHEREOF , the Borrower and the Bank have caused this Agreement
to be executed in their respective names and their respective seals to be
hereunto affixed and attested by their duly authorized representatives, all as
of the date first above written.
THE BORROWER:
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
By: /s/ John C. Weiss, III
--------------------------------
ATTEST:/WITNESS Title: John C. Weiss, III
President
/s/ J.T. Janssen
- ----------------------
Treasurer/Secretary
(CORPORATE SEAL)
THE BANK:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By: /s/ John Wooten
----------------------------------
Name: John Wooten
Title: AVP
48
<PAGE>
Annex 1 to Reimbursement Agreement
First Union National Bank of North
Carolina, Bank and Chesapeake Biological
Laboratories, Inc., Borrower /
---------
$
-------------
Letter of Credit
---------------------------------------
PROVISIONS FOR ALTERNATIVE DISPUTE RESOLUTION
1. Arbitration. Except as otherwise specifically set forth in the
Reimbursement Agreement or agreed to in writing by the Borrower and the Bank,
and except as expressly provided otherwise in Section 3 below, in the event that
the Borrower's waiver of trial by jury contained in Section 9.16 of the
Reimbursement Agreement is determined to be invalid or unenforceable as a matter
of law, then any action, dispute, claim or controversy between the parties,
whether sounding in contract, tort, or otherwise, arising under the
Reimbursement Agreement or any proceeding to which the Bank is a party,
including any actions based upon, arising out of, or in connection with any
course of conduct, course of dealing, statement (whether oral or written), or
actions of the Bank or the Borrower ("Dispute" or "Disputes"), shall be resolved
by arbitration as set forth in this Annex. Such Disputes shall be resolved by
binding arbitration in accordance with Title 9 of the United States Code, as
amended, and the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), as in effect from time to time (the "Rules"). In the event
of any inconsistency between the Rules and the provisions of this Annex, the
provisions of this Annex shall supersede the Rules. All statutes of limitations
that would otherwise be applicable shall apply to any arbitration proceeding
hereunder. In any arbitration proceeding subject to the provisions of this
Annex, the arbitrator is specifically empowered to decide (by documents only, or
with a hearing, at the arbitrator's sole discretion) pre-hearing motions that
are substantially similar to pre-hearing motions to dismiss and motions for
summary adjudication. Judgment upon the award rendered may be entered in any
court having jurisdiction. Whenever an arbitration is required, the parties
shall select an arbitrator in the manner provided in Section 4 below.
2. Judicial Reference. If a Dispute is not submitted to arbitration as
provided in Section 1 above for any reason, but becomes the subject of a
judicial action, at any point in the proceeding, any party may elect to have any
specific questions of fact or law, or all questions of fact or law, determined
by a reference in accordance with Rule 53 of the North Carolina Rules of Civil
Procedure (or the equivalent rule of another State, as applicable). A party
shall not waive the right to request such judicial reference for any remaining
questions of fact or law to be decided by virtue of the party's initiating or
participating in judicial or other proceedings or by failure to request such a
reference up to any point in a judicial proceeding. Whenever such an election is
made, the parties shall designate to the court a single referee selected in the
manner provided in Section 4 below. Judgment upon the award rendered shall be
entered in the court in which such proceeding was commenced.
3. Remedies. No provision of, nor the exercise of any rights under, Sections
1 or 2 above shall limit or otherwise affect the right of the Bank (1) to
proceed and foreclose against any of the Collateral by the exercise of a power
of sale available under the Security Instruments and applicable law, (2) to
exercise any self help remedies available under the Reimbursement Agreement or
Security Instruments and applicable law, including, without limitation, set off,
or to exercise any other nonjudicial rights and remedies available to it under
any of the Security Instruments or Reimbursement Agreement and applicable law,
or (3) to obtain provisional or ancillary remedies, including, without
limitation, injunctive relief and the appointment of a receiver, from a court
having jurisdiction before, during or after the pendency of any arbitration or
referral. The Bank's pursuit of provisional or ancillary remedies, or its
exercise of self help and other nonjudicial remedies, shall not constitute a
waiver of its right to submit the Dispute to arbitration or judicial reference.
4. Selection of Arbitrator or Referee. Whenever an arbitration is required
under Section 1 above or a referral is required under Section 2 above, the
arbitrator or referee shall be selected in accordance with this Section 4.
Except as otherwise provided, the arbitrator or referee shall be an attorney or
retired judge selected in accordance with the Rules of the AAA. Any arbitrator
or referee selected under this Section 4 shall be knowledgeable in the subject
matter of the Dispute. Qualified retired judges shall be selected
<PAGE>
through panels maintained by AAA, or any North Carolina Superior Court (or a
court, of an equivalent or higher level, of another State) or private
organization providing such services. A single arbitrator who is an attorney but
is not a retired judge shall have the power to render a maximum award of
$100,000. Where any party makes timely written request prior to appointment of
the arbitrator, or where the claim of any party exceeds $100,000, the arbitrator
shall be a retired judge formerly sitting on the bench in a North Carolina
Superior Court or any higher State court (or a court, of an equivalent level, of
another State), or a retired Federal court judge formerly sitting on the bench
in a United States Court of Appeals or any Federal District Court. A single
arbitrator who is a retired judge shall have the power to render a maximum award
of $1,000,000. Where any party seeks an award in excess of $1,000,000, the
Dispute shall be decided by a majority vote of three arbitrators, at least one
of whom shall meet the requirements for retired judges set forth herein. For
purposes of this Section 4, the computation of the maximum award an arbitrator
may make shall include any amounts awarded for arbitration fees, attorneys fees
and all other related costs provided by Section 5 below.
<PAGE>
5. Miscellaneous. The Reimbursement Agreement shall be interpreted, and the
resolution of all Disputes and the rights and liabilities of the parties shall
be determined, in accordance with the internal laws (as opposed to conflicts of
law provisions) of the State of North Carolina; provided that any arbitration
questions arising under this Annex on dispute resolution shall be governed in
accordance with Title 9 of the United States Code, as amended. This Annex is
incorporated into and made a part of the Reimbursement Agreement by this
reference, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior discussions, arrangements, negotiations
and other communications on dispute resolution. To the extent any provision of
this Annex is prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Annex. Capitalized terms used herein without definition shall have the meanings
assigned to them in the Reimbursement Agreement. The provisions of this Annex
shall survive any termination or expiration of the Reimbursement Agreement until
payment in full of the obligations thereunder, unless the parties otherwise
expressly agree in writing. The arbitrator shall have the power to award to the
prevailing party recovery of all costs, expenses and fees incurred by it
(including reasonable attorneys' fees, administrative fees, arbitrators' fees,
and court costs), and in particular, but without limitation of the foregoing,
shall have the power to award to either party hereto, whether or not such party
shall be the prevailing party in an arbitration, recovery of all costs, expenses
and fees incurred by it (including reasonable attorneys' fees, administrative
fees, arbitrators' fees, and court costs), but only to the extent payable or
reimbursable by the other party under the applicable provisions of the
Reimbursement Agreement.
<PAGE>
EXHIBIT A
---------
IRREVOCABLE LETTER OF CREDIT
----------------------------
A-1
<PAGE>
EXHIBIT B
---------
SUBSIDIARIES
B-1
<PAGE>
EXHIBIT C
---------
[FORM OF BOND COUNSEL RELIANCE LETTER]
November 1, 1996
First Union National Bank of
North Carolina
One First Union Center, CORP-3
301 South College Street
Charlotte, North Carolina 28288
RE: Maryland Industrial Development Financing Authority Economic Development
Revenue Bonds (Chesapeake Biological Laboratories, Inc. Facility) 1996
Issue in the principal amount of $7,000,000
Ladies and Gentlemen:
Reference is made to the Trust Indenture dated as of November 1, 1996
between, the Maryland Industrial Development Financing Authority (the "Issuer"),
First Union National Bank of Maryland, as Trustee, and Branch Banking and Trust
Company, as Credit Facility Trustee, pursuant to which the Maryland Industrial
Development Financing Authority Economic Development Revenue Bonds (Chesapeake
Biological Laboratories, Inc. Facility) 1996 Issue in the principal amount of
$7,000,000 (the "Bonds") were issued as of the date hereof.
Delivered herewith is a signed copy of our opinion of even date herewith
relating to the validity of the Bonds and to other matters as set forth therein.
Please be advised that you are entitled to rely upon such opinion as if such
opinion had also been addressed to you. Terms defined in such opinion are used
herein with the same meanings.
VERY TRULY YOURS,
C-1
<PAGE>
COLLATERAL PLEDGE AGREEMENT
THIS COLLATERAL PLEDGE AGREEMENT (this "Agreement") is made as of this 1st
day of November, 1996, by and between CHESAPEAKE BIOLOGICAL LABORATORIES, INC.,
a Maryland corporation (the "Borrower") and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, a national banking association (the "Bank"); Witnesseth:
RECITALS
Pursuant to a Trust Indenture of even date herewith (as amended, modified,
supplemented or restated from time to time, the "Indenture") among the Maryland
Industrial Development Financing Authority (the "Issuer") and First Union
National Bank of Virginia, as Trustee and Branch Banking and Trust Company, as
Credit Facility Trustee (collectively, in such capacities, the "Bond Trustee"),
the Issuer has issued and sold its Maryland Industrial Development Financing
Authority Economic Development Revenue Bonds (Chesapeake Biological
Laboratories, Inc. Facility) 1996 Issue in the original aggregate principal
amount of $7,000,000 (the "Bonds"). The proceeds of the sale of the Bonds will
be loaned (such loan of the proceeds of the Bonds being hereinafter referred to
as the "Loan") by the Issuer to the Borrower pursuant to a Loan Agreement of
even date herewith (as amended, modified, supplemented or restated from time to
time, the "Loan Agreement") between the Issuer and the Borrower, and used by the
Borrower to finance (a) the acquisition by the Borrower of approximately 3.5
acres of land located at 1111 South Paca Street, Baltimore, Maryland together
with all improvements thereon (the "Real Property"), (b) the renovation of such
improvements and the construction of other improvements on the Real Property,
and (c) the acquisition of certain equipment to be used at the Real Property
(such Real Property, improvements and equipment being herewith collectively
referred to as the "Facility"). As used herein, the term "Property" means the
Real Property and the improvements to be made thereto as part of the Facility.
As used herein, the term "Bond Documents" means the Indenture, the Loan
Agreement, the Bonds and any other documents now or hereafter executed by the
Issuer, the Bond Trustee, the Borrower or any other party to evidence, secure or
in connection with the Bonds, as the same may be amended, modified or
supplemented from time to time in accordance with their respective terms. As
used herein, the term "Bond Obligations" means the obligations of the Borrower
to (a) pay the principal of, and interest on the Loan, when and as the same
becomes due and payable, (b) pay all other payments required by the Bond
Documents to be paid by the Borrower to the Issuer, to the Bank, to the Bond
Trustee or to others, when
<PAGE>
and as the same shall become due and payable, and (c) timely perform, observe
and comply with all of the terms, covenants, conditions, stipulations, and
agreements express or implied, which the Borrower is required by any of the
Bond Documents to perform or observe.
In order to enhance the marketability of the Bonds, the Borrower and the
Issuer have requested that the Bank issue to the Bond Trustee an irrevocable
letter of credit (such letter of credit and all amendments and supplements
thereto, or any successor or substitute letter of credit issued by the Bank with
respect thereto being hereinafter called the "Letter of Credit") in an amount
not to exceed $7,280,000. Pursuant to a Letter of Credit and Reimbursement
Agreement of even date herewith (the "Letter of Credit Agreement") by and
between the Borrower and the Bank, the Bank has agreed to issue the Letter of
Credit.
As a condition precedent to the issuance of the Letter of Credit, the Bank
has required that the obligations of the Borrower under the Letter of Credit
Agreement be partially insured by the Maryland Industrial Development Financing
Authority (in such capacity, "MIDFA") pursuant to an Insurance Agreement dated
as of even date herewith by and among MIDFA, the Bank and the Borrower (the
"MIDFA Insurance Agreement")
As used herein, the term "Letter of Credit Documents" means the Letter of
Credit, the Letter of Credit Agreement and any other documents now or
hereafter executed by the Borrower or any other party to evidence, secure or
in connection with the Letter of Credit, as the same may be amended, modified
or supplemented from time to time in accordance with their respective terms.
As used herein, the term "Letter of Credit Obligations" means the obligations
of the Borrower under the Letter of Credit Documents to (a) pay all payments
required by the Letter of Credit Documents, when and as the same become due
and payable, including without limitation, all drafts drawn under the Letter
of Credit, and (b) timely perform, observe and comply with all of the terms,
covenants, conditions, stipulations and agreements, express or implied, which
the Borrower is required by the Letter of Credit Documents to observe or
perform. As a condition precedent to issuing the Letter of Credit, the Bank
has required, among other things, that the Borrower secure the payment and
performance of the Letter of Credit Obligations by the execution and delivery
of this Collateral Pledge Agreement.
The Bank and the Borrower have entered into an ISDA Master Agreement of even
date herewith (the "Swap Agreement") providing for an interest rate swap
arrangement for the Loan (the Swap Agreement and any other documents now or
hereafter executed in connection therewith including without limitation any
other "swap agreement," as defined in 11 U.S.C. 101, executed in substitution
2
<PAGE>
for the Swap Agreement are hereinafter collectively referred to as the "Swap
Documents"). As used herein, the term "Swap Obligations" means any and all
obligations, whether absolute or contingent, now or hereafter due or becoming
due or owing by the Borrower to the Bank under the Swap Documents. As a
condition precedent to making the interest rate swap arrangement available to
the Borrower under the Swap Agreement, the Bank has required that the
Borrower secure the payment and performance of the Swap Obligations by the
execution and delivery of this Collateral Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower agrees as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. Definitions. The terms defined in the Preamble and Recitals
hereto shall have the respective meanings specified therein, and the following
terms shall have the following meanings:
"Collateral" has the meaning set forth in Section 2.1.
"Default" has the meaning set forth in Article V.
"Enforcement Costs" means any and all funds, costs, expenses and charges of
any nature whatsoever (including, without limitation, attorney's fees and
expenses) reasonably advanced, paid or incurred by or on behalf of the Bank
under or in connection with the administration or enforcement of this Agreement,
including, without limitation, (a) the compliance of the Borrower with any
covenant, warranty, representation or agreement of the Borrower made in or
pursuant to this Agreement or any of the other Financing Documents, (b) the
collection or enforcement of any of the Obligations, this Agreement and any of
the other Financing Documents, and (c) the exercise, preservation, maintenance,
protection, operation, management, collection, sale or other disposition of, or
realization upon, all or any part of the Collateral, the Security Interest and
the rights and remedies of the Bank hereunder, under the other Financing
Documents, under applicable law and otherwise.
"Event of Default" means an event which, with the giving of notice or the
lapse of time, or both, could or would constitute a Default under the provisions
of this Agreement.
"Financing Documents" means Letter of Credit Documents and the Swap
Documents.
3
<PAGE>
"Lien" means any mortgage, deed of trust, pledge, security interest,
assignment, encumbrance, judgment, lien, claim or charge of any kind in, on,
of or in respect of, any asset or property or any rights to any asset or
property, including, without limitation, (a) any interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to any such asset or property, and (b) the
filing of, or any agreement to give, any financing statement relating to any
such asset or property under the Uniform Commercial Code of any jurisdiction.
"Obligations" means the Letter of Credit Obligations and the Swap
Obligations.
"Person" means and includes an individual, a corporation, a partnership, a
joint venture, a trust, an unincorporated association, a government or political
subdivision or agency thereof, or any other entity.
"Prime Rate" means the floating and fluctuating per annum rate of interest
of the Bank at any time or from time to time established and declared by the
Bank in its sole and absolute discretion as its prime rate. The Prime Rate does
not necessarily represent the lowest rate of interest charged by the Bank to
borrowers.
"Security Interests" means the security interests and other Liens in the
Collateral granted hereunder.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Maryland.
"VIC" means the Variable Investment Contract dated as of November 1, 1996 by
and between the First Union National Bank of North Carolina (in such capacity,
hereinafter referred to as "FUNBNC") and the Borrower, pursuant to which the
Borrower has delivered to FUNBNC the principal amount of $700,000 (the "Invested
Monies") to be invested by FUNBNC pursuant to the terms of the VIC.
SECTION 1.2. Rules of Construction. Unless otherwise defined herein and
unless the context otherwise requires, all terms used herein which are
defined by the UCC shall have the same meanings assigned to them by the UCC
unless and to the extent varied by this Agreement. The words "hereof",
"herein", and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and section, subsection, schedule, and exhibit
references are references to sections or subsections of, or schedules or
exhibits to, as the case may be, this Agreement unless otherwise specified.
As used herein, the singular number shall include the plural, the plural the
singular, and the use of the
4
<PAGE>
masculine, feminine or neuter gender shall include all genders, as the
context may require.
ARTICLE II
THE COLLATERAL
SECTION 2.1. The Pledge. In order to secure the full and punctual payment of
the Obligations in accordance with the terms thereof, and to secure the
performance of this Agreement and the other Financing Documents, the Borrower
hereby transfers, pledges, assigns, sets over, delivers and grants to the Bank a
continuing lien and security interest in and to all of the following property of
the Borrower, both now owned and existing and hereafter created, acquired and
arising (all being collectively referred to as the "Collateral") and all right,
title and interest of the Borrower in and to the Collateral:
(a) Invested Monies, etc. (i) the Invested Monies, (ii) all other monies
and funds now or hereafter delivered to or on deposit with the Bank pursuant
to the VIC and all rights for or to payment thereof, and (iii) all interest,
dividends, cash, income or other property now or hereafter payable or
distributable under, or, to or by reason of, the VIC or the money and funds
on deposit with the Bank pursuant to the VIC or represented thereby; and
(b) Proceeds. All cash and non-cash proceeds and products of the portion of
the Collateral described in clause (a) above.
SECTION 2.2. Security Interests Security Only. The Security Interests are
granted as security only and shall not subject the Bank to, or transfer or in
any way affect or modify, any obligation or liability of the Borrower with
respect to any of the Collateral or any transaction in connection therewith.
SECTION 2.3. Delivery, Etc. The Borrower shall deliver or promptly cause to
be delivered to the Bank (a) the VIC which shall be accompanied by an
acknowledgment duly executed and delivered by FUNBNC and in form and content
satisfactory to the Bank under which, among other things, FUNBC will accept and
confirm notice of the Bank's Security Interest in the Collateral free and clear
of any other Liens and agree not to permit any withdrawals from, liens against,
or releases or further transfers, pledges or assignments of, the Collateral
without the prior written consent of the Bank, and (b) all other instruments,
agreements and papers comprising, representing, evidencing or in connection with
the Collateral or any part thereof accompanied by proper instruments of
transfer, assignment or endorsement duly executed by the Borrower.
5
<PAGE>
SECTION 2.4. Record Owner of Collateral. The Bank shall have the right in
its sole and absolute discretion to hold the VIC or other instrument or document
representing or evidencing the Invested Monies and any other certificates,
notes, instruments or securities now or hereafter included in the Collateral in
its own name, the name of its nominee or the name of the Borrower. The Borrower
will promptly give to the Bank copies of any notices or other communications
received by it with respect to Collateral registered in the name of the
Borrower.
SECTION 2.5. Interest etc, until Event of Default.
(a) Unless and until an Event of Default shall have occurred and is
continuing, the Borrower shall be entitled to receive and retain any and all
interest, income or dividends paid in cash on the Invested Monies.
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of the Borrower to receive interest, income or dividends which the
Borrower is authorized to receive pursuant to paragraph (a) of this Section 2.5
shall cease, and all such rights shall thereupon become vested in the Bank,
which shall have the sole and exclusive right and authority to receive and
retain such interest, income or dividends. All interest, income or dividends
which are received by the Borrower contrary to the provisions of this Section
2.5 shall be received in trust for the benefit of the Bank, shall be segregated
from other property or funds of the Borrower and shall be forthwith delivered to
the Bank in the same form as so received with any necessary endorsement which
the Borrower agrees to make.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank and MIDFA that the
following statements are true, correct and complete:
SECTION 3.1. Title and Authority. The Borrower is the owner of the
Collateral and has good and marketable title to the Collateral free and clear of
any Liens. The Borrower has full power and authority to grant the Security
Interests to the Bank in the Collateral pursuant hereto and to execute, deliver
and perform its obligations in accordance with the terms of this Agreement
without the consent or approval of any Person other than any consent or approval
which has been obtained.
SECTION 3.2. Validity, Perfection and Priority of Security Interests. By
virtue of the execution and delivery of this Agreement and upon delivery to
the Bank of the Collateral (or
6
<PAGE>
certificates, instruments or other papers representing or evidencing the
Collateral) in accordance with the provisions of this Agreement, the Bank
will have a valid and perfected Lien on the Collateral subject to no prior or
other Liens. No registration, recordation or filing with any governmental
body, agency or official is required in connection with the execution and
delivery of this Agreement or necessary for the validity or enforceability of
this Agreement or for the perfection of the Security Interests.
SECTION 3.3. Survival. All representations and warranties contained in or
made under or in connection with this Agreement (a) shall survive the execution,
delivery and performance of this Agreement, and (b) shall be true, correct and
complete at all times during which any of the Obligations (or commitments
therefor) are outstanding with the same effect as if such representations and
warranties had been made at such times.
ARTICLE IV
COVENANTS OF BORROWER
The Borrower covenants and agrees with the Bank and MIDFA as follows:
SECTION 4.1. Title, Liens and Taxes. The Borrower shall, at its cost and
expense, take any and all actions necessary to defend its title to Collateral
against all Persons and to defend the Security Interest of the Bank in the
Collateral and the priority (or intended priority) thereof, against any adverse
Lien of any nature whatsoever. Except to the extent contested in good faith, the
Borrower will pay all taxes and assessments levied or placed on the Collateral
prior to the date when any interest or penalty would accrue for the nonpayment
thereof.
SECTION 4.2. Further Assurances. The Borrower shall, from time to time, at
its expense, execute, deliver, acknowledge and cause to be duly filed, recorded
or registered any statement, assignment, endorsement, instrument, paper,
agreement or other document and take any other action that from time to time may
be necessary or desirable, or that the Bank may reasonably request, in order to
create, preserve, continue, perfect, confirm or validate the Security Interests
or to enable the Bank to obtain the full benefits of this Agreement or to
exercise and enforce any of its rights, powers and remedies hereunder. The
Borrower shall pay all costs of, and incidental to, the filing, recording or
registration of any such document as well as any recordation, transfer or other
tax required to be paid in connection with any such filing, recordation or
registration.
7
<PAGE>
SECTION 4.3. Care and Protection of Collateral. The Borrower shall promptly
notify the Bank of any event causing deterioration, loss or depreciation in
value of any substantial portion of the Collateral and the amount of such loss
or depreciation. The Borrower shall perform, observe, and comply with all of the
terms and provisions to be performed, observed or complied with by it under each
contract, agreement or obligation relating to the Collateral. The Bank shall
have no duty to, and the Borrower hereby releases the Bank from all claims for
loss or damage caused by the failure of the Bank to, collect, protect, preserve
or enforce any of the Collateral or preserve rights against account debtors and
prior parties to the Collateral.
SECTION 4.4. Sale of Collateral. Without the prior written consent of the
Bank and MIDFA, the Borrower will not (a) sell, lease, assign, transfer, dispose
of, pledge or grant or permit a Lien to exist on, the Collateral or (b) withdraw
any monies or funds on deposit pursuant to the VIC, except interest, income or
dividends receivable by the Borrower under Section 2.5 hereof.
ARTICLE V
DEFAULT
The occurrence of any one or more of the following events shall constitute a
default under the provisions of this Agreement, and the term "Default" shall
mean, whenever it is used in this Agreement, any one or more of the following
events:
SECTION 5.1. Payment of Obligations. If any of the Obligations are not paid
as and when due and payable in accordance with the provisions of this Agreement,
and/or any of the other Financing Documents after giving effect to any
applicable cure or grace periods, if any;
SECTION 5.2. Perform, etc. Certain Provisions of this Agreement. The failure
of the Borrower to perform, observe or comply with any of the provisions of
Sections 4.1 and 4.4 of this Agreement;
SECTION 5.3. Perform, etc. Other Provisions of This Agreement. The failure
of the Borrower to perform, observe or comply with any of the provisions of this
Agreement other than those covered by Sections 5.1 and 5.2 above, and, such
failure is not cured to the satisfaction of the Bank within a period of thirty
(30) days after the date of written notice thereof by the Bank to the Borrower;
SECTION 5.4. Representations and Warranties. If any representation and
warranty contained herein or any statement or representation made in any
officer's certificate or any other
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information at any time given by or on behalf of the Borrower or furnished in
connection with this Agreement or any of the other Financing Documents shall
prove to be false or incorrect in any material respect on the date as of
which made; or
SECTION 5.5. Default under Other Financing Documents. The failure of the
Borrower to perform, observe or comply with any of the provisions of any of the
Financing Documents (other than this Agreement) to which the Borrower is a party
and such failure is not cured within applicable cure or grace periods, if any,
or if a "Default" (as defined and described therein) occurs under the provisions
of any of the Financing Documents (other than this Agreement) which is not cured
within applicable cure or grace periods, if any.
ARTICLE VI
RIGHTS AND REMEDIES
SECTION 6.1. Rights and Remedies of the Bank. Upon and after the occurrence
of an Event of Default, the Bank may, without notice or demand other than
expressly provided for under the provisions of this Agreement, exercise in any
jurisdiction in which enforcement hereof is sought, the following rights and
remedies, in addition to the rights and remedies available to the Bank under the
other provisions of this Agreement and the other Financing Documents, the rights
and remedies of a secured party under the UCC and all other rights and remedies
available to the Bank under applicable law, all such rights and remedies being
cumulative and enforceable alternatively, successively or concurrently:
(a) The Bank may, and is hereby irrevocably authorized by the Borrower to,
either in the Bank's name or in the name of the Borrower, irrespective of any
penalties for early termination and free of any right or equity of the Borrower
in any of the Collateral, ask for, demand, collect, withdraw, sue for, receive,
receipt and/or give acquittance for, any and all money and funds on deposit or
otherwise held by FUNBNC under or pursuant to the VIC and any interest, income
or dividends thereon and any other money and funds due or to become due under or
by reason thereof, (ii) endorse checks, drafts, orders and other instruments for
the payment of money payable to the Borrower representing any principal,
interest, income, dividend or distribution payable in respect of the Collateral
or any part thereof or on account thereof and to give full discharge for the
same, (iii) settle, compromise, prosecute or defend any action, claim or
proceeding with respect to the Collateral, (iv) terminate, surrender, convert to
cash, sell, assign, endorse, pledge or transfer the Collateral at face value,
plus the amount of any accrued interest thereon but subject to any forfeiture or
penalty provisions that may apply, or (v) make any
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agreement respecting the Collateral or otherwise deal with the Collateral as
though the Bank were the absolute owner of the Collateral; provided, however,
that nothing herein contained shall be construed as requiring or obligating
the Bank to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Bank, or to present or file any
claim or notice, or to take any action with respect to the Collateral or any
part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken by the Bank or omitted to be
taken with respect to the Collateral or any part thereof shall give rise to
any defense, counterclaim or offset in favor of the Borrower or to any claim
or action against the Bank.
(b) As an alternative to exercising the remedies herein conferred upon it
under subparagraph (a) above, the Bank may proceed by a suit or suits at law or
in equity to foreclose this Agreement and to sell or collect the Collateral or
any portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
SECTION 6.2. Application. The proceeds of collection, sale or other
disposition of all or any part of the Collateral coming into the Bank's
possession may be applied by the Bank to any of the Obligations, whether matured
or unmatured, in such order and manner as the Bank may determine in its sole
discretion.
SECTION 6.3. No Waiver, Etc. No failure or delay by the Bank to insist upon
the strict performance of any term, condition, covenant or agreement of this
Agreement or of the other Financing Documents, or to exercise any right, power
or remedy consequent upon a breach thereof, shall constitute a waiver of any
such term, condition, covenant or agreement or of any such breach, or preclude
the Bank from exercising any such right, power or remedy at any later time or
times. By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, the Bank shall not be
deemed to waive the right either to require prompt payment when due of all other
amounts payable under this Agreement or under any of the other Financing
Documents, or to declare a Default for failure to effect such prompt payment of
any such other amount. The payment by the Borrower or any other Person and the
acceptance by the Bank or any other amount due and payable under the provisions
of this Agreement or the other Financing Documents at any time during which a
Default exists shall not in any way or manner be construed as a waiver of such
Default by the Bank or preclude the Bank from exercising any right of power or
remedy consequent upon such Default.
ARTICLE VII
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MISCELLANEOUS
SECTION 7.1. Course of Dealing; Amendment. No course of dealing between the
Bank and the Borrower shall be effective to amend, modify or change any
provision of this Agreement or the other Financing Documents. The Bank shall
have the right at all times to enforce the provisions of this Agreement and the
other Financing Documents in strict accordance with the provisions hereof and
thereof, notwithstanding any conduct or custom on the part of the Bank in
refraining from so doing at any time or times. The failure of the Bank at any
time or times to enforce its rights under such provisions, strictly in
accordance with the same, shall not be construed as having created a custom in
any way or manner contrary to specific provisions of this Agreement or the other
Financing Documents or as having in any way or manner modified or waived the
same. This Agreement may not be amended, modified, or changed in any respect
except by an agreement, in writing, signed by the Bank and the Borrower.
SECTION 7.2. Waiver of Default. The Bank may, at any time and from time to
time, execute and deliver to the Borrower a written instrument waiving, on such
terms and conditions as the Bank may specify in such written instrument, any of
the requirements of this Agreement or any Event of Default or Default and its
consequences, provided, that any such waiver shall be for such period and
subject to such conditions as shall be specified in any such instrument. In the
case of any such waiver, the Borrower and the Bank shall be restored to their
former positions prior to such Event of Default or Default and shall have the
same rights as they had hereunder. No such waiver shall extend to any subsequent
or other Event of Default or Default, or impair any right consequent thereto and
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 7.3. Notices. All notices, requests and demands to or upon the
parties to this Agreement shall be deemed to have been given or made when
delivered by hand, or when deposited in the mail, postage prepaid by registered
or certified mail, return receipt requested, addressed as follows or to such
other address as may be hereafter designated in writing by one party to the
other:
Borrower: Chesapeake Biological Laboratories, Inc.
6000 Metro Drive
Baltimore, Maryland 21215
Attention: John C. Weiss, III, President
With a
copy to: Douglas M. Fox, Esquire
Ballard, Spahr, Andrews & Ingersoll
Suite 1900
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300 East Lombard Street
Baltimore, Maryland 21202
Bank: First Union National Bank of North
Carolina
Two First Union Center, T-7
Charlotte, North Carolina 28288
Attention: International Operations
except in cases where it is expressly herein provided that such notice,
request or demand is not effective until received by the party to whom it is
addressed.
SECTION 7.3. Performance for Borrower. The Borrower hereby appoints the Bank
the attorney-in-fact of the Borrower for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which the Bank may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest. Without
limiting the generality of the foregoing, the Bank shall have the right, upon
the occurrence and during the continuance of an Event of Default, with full
power of substitution either in the Bank's name or in the name of the Borrower,
(a) to ask for, demand, sue for, collect, receive, receipt and give acquittance
for any and all moneys due or to become due and under and by virtue of any
Collateral, (b) to endorse checks, drafts, orders and other instruments for the
payment of money payable to the Borrower representing any interest, dividend or
other distribution payable in respect of the Collateral or any part thereof or
on account thereof, (c) to give full discharge for all or any part of the
Collateral, (d) to settle, compromise, prosecute or defend any action, claim or
proceeding with respect to all or any part of the Collateral, (e) to sell,
assign, endorse, pledge, transfer and make any agreement respecting all or any
part of the Collateral, or (f) otherwise deal with all or any part of the
Collateral as though the Bank were the absolute owner thereof; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Bank to make any commitment or to make any inquiry as to the
nature or sufficiency of any payment received by the Bank, or to present or file
any claim or notice, or to take any action with respect to the Collateral or any
part thereof or the moneys due or become due in respect thereof or any property
covered thereby, and no action taken by the Bank or omitted to be taken with
respect to the Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of the Borrower or to any claim or action
against the Bank.
SECTION 7.4. Enforcement Costs. The Borrower shall pay to the Bank upon
demand all Enforcement Costs together with interest thereon from the date
incurred or advanced until paid in full at a
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per annum rate of interest equal at all times to the Prime Rate in effect
from time to time, plus four percent (4%) per annum. Enforcement Costs
together with interest thereon shall be included in the Obligations secured
hereby.
SECTION 7.5. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Bank in order to
carry out the intentions of the parties hereto as nearly as may be possible, (b)
the invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction, and (c) the parties hereto shall endeavor in good faith
negotiations to replace the invalid or unenforceable provisions with valid and
enforceable provisions, the economic effect of which comes as close as possible
to that of the invalid or unenforceable provisions.
SECTION 7.6. Assignment. The Bank may, without notice to, or consent of,
the Borrower, sell, assign or transfer to any Person or Persons (except for a
competitor of the Borrower as reasonably determined by the Bank) all or any
part of the Obligations, and in the event of any such assignment, the
Security Interests and rights and remedies of the Bank hereunder shall extend
to, and vest in, any such assignee or assignees who shall have the right to
enforce the provisions of this Agreement as fully as the Bank, provided that
the Bank shall continue to have the unimpaired right to enforce the
provisions of this Agreement as to so much of the Obligations that it has not
sold, assigned or transferred. The Borrower will fully cooperate with the
Bank in connection with any such assignment and will execute and deliver such
consents and acceptances to any such assignment and amendments to this
Agreement in order to effect any such assignment (including, without
limitation, the appointment of the Bank as agent for itself and all
assignees).
SECTION 7.7. Survival. All representations, warranties and covenants
contained among the provisions of this Agreement shall survive the execution and
delivery of this Agreement and all other Financing Documents.
SECTION 7.8. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Bank and their respective personal
representatives, successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Bank.
SECTION 7.9. Continuing Agreement. This Agreement and the Security Interests
shall be continuing and binding on the Borrower
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regardless of how long before or after the date hereof any of the Obligations
were or are incurred. Subject to the provisions of Section 7.14 hereof, this
Agreement and the Security Interests shall terminate when all of the
Obligations have been indefeasibly paid in full and no commitments therefor
are outstanding, at which time the Bank will reassign and deliver to the
Borrower, against receipt, such of the Collateral as still held by the Bank
(if any) and not sold or otherwise applied by the Bank pursuant to the terms
hereof. Any such reassignment shall be without recourse to or warranty by the
Bank at the expense of the Borrower.
SECTION 7.10. Applicable Law. This Agreement and the rights and obligations
of the parties hereunder shall be construed and interpreted in accordance with
the laws of the State of Maryland, both in interpretation and performance.
SECTION 7.11. Duplicate Originals and Counterparts. This Agreement may be
executed in any number of duplicate originals or counterparts, each of such
duplicate originals or counterparts shall be deemed to be an original and all
taken together shall constitute but one and the same instrument.
SECTION 7.12. Exhibits and Schedules. Any exhibits and schedules attached to
this Agreement are an integral part hereof and are hereby incorporated herein
and included in the term "this Agreement".
SECTION 7.13. Headings. Article and Section headings in this Agreement are
included herein for convenience of reference only, shall not constitute a part
of this Agreement for any other purpose and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
SECTION 7.14. Partial Releases of Collateral. The appraisal of the Property
prepared by Colliers Pinkard on September 30, 1996 (the "Original Property
Appraisal") contains the "as completed" value of the Property other than the
"as-completed" value related to the pharmaceutical build-out and validation in
that plans and specifications with respect to the pharmaceutical build-out were
not then sufficiently developed.. As used herein, the term "Margined Property
Value" means 75% of the gross market value of the Property as determined by the
Bank and MIDFA based upon a current appraisal of the Property approved by MIDFA
and the Bank. Based upon the Original Appraisal, the Bank and MIDFA determined a
then current Margined Property Value of the Property equal to $1,856,000. The
Borrower shall have the right to have subsequent reappraisals of the Property at
its sole expense by an appraiser approved by the Bank and MIDFA at the following
times:
(a) After all of the plans and specifications for the Facility, including
the pharmaceutical build-out, have been
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<PAGE>
substantially completed, a reappraisal of the Property may be performed.
(b) After the "Start-up/Commissioning" of the cGMP (current good
manufacturing practice) manufacturing area, another reappraisal may be
performed. "Start-up/Commissioning" is defined as the point in time when
"Installation Qualification" has been achieved on substantially all process
and utility equipment and systems. "Installation Qualification" provides
verification and documentation that the equipment is properly installed at
the Property, that the materials of construction meet cGMP requirements and
that the equipment is properly connected to utilities and controls according
to the vender and engineer specifications.
(c) The Borrower will also have the option to reasonably request that
additional reappraisals of the Property be performed at any time and from time
to time after the event described in subparagraphs (a) above has occurred (each
of the reappraisal in these subparagraphs (a), (b) and (c) being hereinafter
collectively referred to the "Reappraisals" and individually as a
"Reappraisal").
Notwithstanding anything herein to the contrary, the Bank agrees to release
all or parts of the Collateral from this Agreement from time to time prior to
payment in full of the Obligations subject to the final approval of MIDFA and
the Bank and satisfaction of the following terms and conditions:
(a) No Default or Event of Default shall have occurred and be continuing at
the time that a full or partial release is to be given by the Bank.
(b) The Borrower shall have submitted to the Bank and MIDFA each time that a
full or partial release is requested, a current Reappraisal of the Property by
an appraiser approved by the Bank and MIDFA. Based upon such Reappraisal (which
must be satisfactory in all respects to the Bank and MIDFA), the Bank and MIDFA
shall determine the current Margined Property Value. If the Margined Property
Value has increased from the Margined Property Value determined based upon the
Original Appraisal, the Bank will release from the lien of this Agreement an
amount of Collateral approximately equal to such increase. All costs and
expenses for obtaining any such reappraisals and releases of Collateral shall be
borne by the Borrower.
SECTION 7.15. Lien Subordination. Notwithstanding anything herein to the
contrary, the lien of the Swap Documents (including this Agreement) in and to
the Collateral is subordinate to the lien of the Letter of Credit Documents in
and to the Collateral, and the lien of the Letter of Credit Documents in and to
the Collateral
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<PAGE>
shall be deemed to be prior and senior to the lien of the Swap Documents in
and to the Collateral.
IN WITNESS WHEREOF, the Borrower has executed and delivered this Agreement
under its seal as of the day and year first written above.
WITNESS: CHESAPEAKE BIOLOGICAL LABORATORIES
/s/ Jacqueline M. Wood By:/s/ John C. Weiss, III (SEAL)
- ---------------------- -----------------------
John C. Weiss, III, President
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<PAGE>
TERM LOAN PROMISSORY NOTE
Baltimore, Maryland $1,500,000
November 21, 1996
FOR VALUE RECEIVED, the undersigned, CHESAPEAKE BIOLOGICAL LABORATORIES,
INC., a Maryland corporation (the "Borrower"), promises to pay to the order of
THE MAYOR AND CITY COUNCIL OF BALTIMORE, a body politic and corporate and a
political subdivision of the State of Maryland, by and through the DEPARTMENT OF
HOUSING AND COMMUNITY DEVELOPMENT, c/o CITY OF BALTIMORE DEVELOPMENT
CORPORATION, its successors and assigns (the "Lender"), at 36 South Charles
Street, Sixteenth Floor, Baltimore, Maryland 21201 or at such other places as
the holder of this Promissory Note may from time to time designate, the
principal sum of One Million Five Hundred Thousand Dollars ($1,500,000),
together with interest thereon at the rate or rates hereafter specified until
paid in full and any and all other sums which may be owing to the holder of this
Promissory Note by the Borrower pursuant to this Promissory Note. The following
terms shall apply to this Promissory Note.
1. Calculation of Interest. Interest shall be calculated on the basis of a
three hundred sixty (360) days per year factor applied to the actual days on
which there exists an unpaid balance hereunder.
2. Interest Rate. Interest shall accrue on the unpaid principal balance of
this Promissory Note until paid in full at a fixed annual rate of interest of
six and one-half percent (6.5%).
3. Repayment. (a) Commencing on December 21, 1996, and continuing on the
twenty-first (21st) calendar day of each successive calendar month thereafter up
to and including November 21, 1998, the Borrower shall pay to the holder monthly
installments of interest, unless this Promissory Note has been paid earlier, as
hereinafter provided.
(b) Commencing on December 21, 1998 and continuing on the twenty-first
(21st) calendar day of each successive calendar month thereafter, the Borrower
shall pay to the holder monthly installments of principal and interest in the
amount of Eleven Thousand Seven Hundred Ninety-eight Dollars and Forty-two Cents
($11,798.42) each, until November 21, 2016, which date is the final and absolute
maturity date of this Promissory Note, at which time all sums due hereunder,
including principal, interest, charges and fees, shall be paid in full.
4. Late Payment Charge. If any payment due hereunder, including any final
installment, is not received by the holder within fifteen (15) calendar days
after its due date, the Borrower shall pay a late payment charge equal to five
percent (5%) of the amount then due (including both principal and interest). The
late
<PAGE>
payment charge shall be due whether or not the holder declares this Promissory
Note in default or accelerates and demands immediate payment of the sums due
hereunder. The existence of the right by the holder to receive a late payment
charge shall not constitute a grace period or provide any right in the Borrower
to make a payment other than on its due date.
5. Application of Payments. All payments made hereunder shall be applied
first to late payment charges or other sums owed to the holder, next to accrued
interest, and then to principal, or in such other order or proportion as the
holder, in the holder's sole discretion, may elect from time to time.
6. Prepayment. The Borrower may prepay this Promissory Note in whole or in
part at any time or from time to time without premium or additional interest.
All prepayments under this Promissory Note shall be applied to the outstanding
principal balance in the inverse order of scheduled maturities.
7. Rights Upon Default. Upon a default in the payment of any sum due
hereunder, or a default in the performance of any of the covenants, conditions
or terms of the Purchase Money Mortgage dated as of the date hereof by and
between the Borrower and the Lender (the "Agreement"), or any other agreement or
document executed by or on behalf of the Borrower for the benefit of the Lender
or any holder (collectively with the Loan Agreement, the "Loan Documents"), and
the expiration of any applicable cure period, in addition to all other rights or
remedies available to the holder under the Loan Documents or under applicable
law, the holder of this Promissory Note shall have the following rights:
7.1. Acceleration. The holder of this Promissory Note, in the holder's
sole discretion and without notice or demand, may declare the entire unpaid
principal balance plus accrued interest and all other sums due hereunder
immediately due and payable. Reference is made to the Loan Documents for further
and additional rights on the part of the holder to declare the entire unpaid
principal balance plus accrued interest and all other sums due hereunder
immediately due and payable.
7.2. Default Interest Rate. The holder of this Promissory Note, in the
holder's sole discretion and without notice or demand, may raise the rate of
interest accruing on the unpaid principal balance by two percent (2%), above
the rate of interest otherwise applicable, independent of whether the holder
elects to accelerate the unpaid principal balance as a result of such default,
unless prior to the imposition of the default rate of interest, the Borrower
cures such event to the satisfaction of the holder hereof. If the default rate
of interest is imposed by the holder, the default rate shall remain in effect,
even though after being imposed the event authorizing the imposition thereof has
been cured, until this Promissory Note is paid in full, unless the default is
cured to the holder's satisfaction and the holder in
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<PAGE>
writing agrees to reinstate the regular interest rate. Any individual waiver of
the holder's right to impose the default rate of interest or to retain the
default rate of interest after imposition thereof shall not be considered a
waiver of this section or any future right of the holder to impose the default
rate of interest pursuant to this Section.
7.3. Confession of Judgment. THE BORROWER AUTHORIZES ANY ATTORNEY
ADMITTED TO PRACTICE BEFORE ANY COURT OF RECORD IN THE UNITED STATES, OR THE
CLERK OF SUCH COURT, TO APPEAR ON BEHALF OF THE BORROWER IN ANY COURT IN ONE OR
MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF OR PROTHONOTARY OR OTHER COURT
OFFICIAL, AND TO CONFESS JUDGMENT AGAINST THE BORROWER IN FAVOR OF THE HOLDER OF
THIS PROMISSORY NOTE IN THE FULL AMOUNT DUE ON THIS PROMISSORY NOTE (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, AND PROVIDED
THAT IN ANY EVENT THE AMOUNT COLLECTED OR REALIZED IN RESPECT OF SUCH ATTORNEYS
FEES SHALL NOT EXCEED THE ACTUAL ATTORNEYS FEES REASONABLY INCURRED IN THE
ENFORCEMENT OF THIS NOTE, PLUS COURT COSTS, ALL WITHOUT PRIOR NOTICE OR
OPPORTUNITY OF THE BORROWER FOR PRIOR HEARINGS. THE BORROWER AGREES AND CONSENTS
THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE CIRCUIT COURT OF ANY COUNTY
OF THE STATE OF MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR IN THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF MARYLAND. THE BORROWER WAIVES THE BENEFIT OF
ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF COURT WHICH MAY BE LAWFULLY WAIVED
CONFERRING UPON THE BORROWER ANY RIGHT OR PRIVILEGE OF EXEMPTION, HOMESTEAD
RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY PROCEEDINGS, OR OTHER RELIEF FROM
THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A JUDGMENT OR RELATED PROCEEDINGS ON
A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST
THE BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, OR BY ANY
IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR
MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS
OFTEN AS THE HOLDER SHALL DEEM NECESSARY, CONVENIENT, OR PROPER.
8. Interest Rate After Judgment. If judgment is entered against the Borrower
on this Promissory Note, the amount of the judgment entered (which may include
principal, interest, fees, and costs) shall bear interest at the higher of the
maximum interest rate imposed upon judgments by applicable law or the above
described default interest rate, to be determined on the date of the entry of
the judgment.
9. Expenses of Collection And Attorneys' Fees. Should this Promissory Note
be referred to an attorney for collection, whether or not judgment has been
confessed or suit has been filed, the Borrower shall pay all the holder's
reasonable costs, fees and expenses, including reasonable attorneys' fees,
resulting from such referral.
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<PAGE>
10. Waiver of Defenses. In the event any one or more holders of this
Promissory Note transfer this Promissory Note for value, the Borrower agrees
that all subsequent holders of this Promissory Note who take for value and
without actual knowledge of a claim or defense of the Borrower against a prior
holder shall not be subject to any claims or defenses which the Borrower may
have against a prior holder, all of which are waived as to the subsequent
holder, and that all such subsequent holders shall have all rights of a holder
in due course with respect to the Borrower even though the subsequent holder may
not qualify, under applicable law, absent this section, as a holder in due
course. The Borrower shall retain all rights and claims which the Borrower may
have against prior holders despite any such transfers and the waiver of defenses
provided in this section as to subsequent holders.
11. Waiver of Protest. The Borrower, and all parties to this Promissory
Note, whether maker, endorser, or guarantor, waive presentment, notice of
dishonor and protest.
12. Extensions of Maturity. All parties to this Promissory Note, whether
maker, endorser, or guarantor, agree that the maturity of this Promissory Note,
or any payment due hereunder, may be extended at any time or from time to time
without releasing, discharging, or affecting the liability of such party.
13. Manner and Method of Payment. All payments called for in this Promissory
Note shall be made in lawful money of the United States of America. If made by
check, draft, or other payment instrument, such check, draft, or other payment
instrument shall represent immediately available funds. In the holder's
discretion, any payment made by a check, draft, or other payment instrument
shall not be considered to have been made until such time as the funds
represented thereby have been collected by the holder. Should any payment date
fall on a non-banking day, the Borrower shall make the payment on the next
succeeding banking day.
14. Notices. Any notice or demand required or permitted by or in connection
with this Promissory Note shall be given in the manner specified in the
Agreement for the giving of notices under the Agreement. Notwithstanding
anything to the contrary, all notices and demands for payment from the holder
actually received in writing by the Borrower shall be considered to be effective
upon the receipt thereof by the Borrower regardless of the procedure or method
utilized to accomplish delivery thereof to the Borrower.
15. Assignability. This Promissory Note may be assigned by the Lender or any
holder at any time or from time to time.
16. Joint and Several Liability. If more than one person or entity is
executing this Promissory Note as a Borrower, all liabilities under this
Promissory Note shall be joint and several with respect to each of such persons
or entities.
4
<PAGE>
17. Binding Nature. This Promissory Note shall inure to the benefit of and
be enforceable by the Lender and the Lender's successors and assigns and any
other person to whom the Lender or any holder may grant an interest in the
Borrower's obligations hereunder, and shall be binding and enforceable against
the Borrower and the Borrower's personal representatives, successors and
assigns.
18. Invalidity of Any Part. If any provision or part of any provision of
this Promissory Note shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Promissory Note and this
Promissory Note shall be construed as if such invalid, illegal or unenforceable
provisions or part thereof had never been contained herein, but only to the
extent of its invalidity, illegality, or unenforceability.
19. Choice of Law. The laws of the State of Maryland (excluding, however,
conflict of law principles) shall govern and be applied to determine all issues
relating to this Promissory Note and the rights and obligations of the parties
hereto, including the validity, construction, interpretation, and enforceability
of this Promissory Note and its various provisions and the consequences and
legal effect of all transactions and events which resulted in the issuance of
this Promissory Note or which occurred or were to occur as a direct or indirect
result of this Promissory Note having been executed.
20. Consent To Jurisdiction; Agreement As To Venue. The Borrower irrevocably
consents to the exclusive jurisdiction of the courts of the State of Maryland in
the City of Baltimore and of the United States District Court for the District
of Maryland, if a basis for federal jurisdiction exists. The Borrower agrees
that venue shall be proper in the circuit court for the City of Baltimore of the
State of Maryland selected by the Lender or in the United States District Court
for the District of Maryland if a basis for federal jurisdiction exists and
waives any right to object to the maintenance of a suit in any of the state or
federal courts of the State of Maryland on the basis of improper venue or of
inconvenience of forum.
21. Unconditional Obligations. The Borrower's obligations under this
Promissory Note shall be the absolute and unconditional duty and obligation of
the Borrower and shall be independent of any rights of set-off, recoupment or
counterclaim which the Borrower might otherwise have against the holder of this
Promissory Note, and the Borrower shall pay absolutely the payments of
principal, interest, fees and expenses required hereunder, free of any
deductions and without abatement, diminution or set-off.
22. Seal and Effective Date. This Promissory Note is an instrument executed
under seal and is to be considered effective
5
<PAGE>
and enforceable as of the date set forth on the first page hereof, independent
of the date of actual execution and delivery.
23. Tense; Gender; Defined Terms; Section Headings. As used herein, the
singular includes the plural and the plural includes the singular. A reference
to any gender also applies to any other gender. Defined terms are entirely
capitalized throughout. The section headings are for convenience only and are
not part of this Promissory Note.
24. Actions Against Lender. Any action brought by the Borrower against the
Lender which is based, directly or indirectly, on this Promissory Note or any
matter in or related to this Promissory Note, including but not limited to the
making of the loan evidenced hereby or the administration or collection thereof,
shall be brought only in the courts of the State of Maryland. The Borrower may
not file a counterclaim against the Lender in a suit brought by the Lender
against the Borrower in a state other than the State of Maryland unless under
the rules of procedure of the court in which the Lender brought the action the
counterclaim is mandatory, and not merely permissive, and will be considered
waived unless filed as a counterclaim in the action instituted by the Lender.
The Borrower agrees that any forum other than the State of Maryland is an
inconvenient forum and that a suit brought by the Borrower against the Lender in
a court of any state other than the State of Maryland should be forthwith
dismissed or transferred to a court located in the State of Maryland by that
Court.
25. Waiver of Jury Trial. The Borrower (by execution of this Promissory
Note) and the Lender (by acceptance of this Promissory Note) agree that any
suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by or against the Borrower or the Lender, or any successor or assign
of the Borrower or the Lender, on or with respect to this Promissory Note or any
of the other Loan Documents, or which in any way relates, directly or
indirectly, to the obligations of the Borrower to the Lender under this
Promissory Note or any of the other Loan Documents, or the dealings of the
parties with respect thereto, shall be tried only by a court and not by a jury.
THE BORROWER AND THE LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY SUCH SUIT, ACTION, OR PROCEEDING. The Borrower and the Lender acknowledge
and agree that this provision is a specific and material aspect of the agreement
between the parties and that the Lender would not enter into the transaction
with the Borrower if this provision were not part of their agreement.
26. Subordination Agreement. Notwithstanding anything contained herein to
the contrary, neither the principal nor the interest on the indebtedness crated
or evidenced by this instrument or record shall become due or be paid or payable
except to the extent permitted in the Subordination Agreement dated as of
November 1, 1996, among the Lender, the Borrower and First Union National Bank
of North Carolina, which Subordination Agreement is
6
<PAGE>
incorporated herein by specific reference thereto to the same extent as if fully
set forth herein.
IN WITNESS WHEREOF, the Borrower has duly executed this Promissory Note
under seal as of the date first above written.
ATTEST:/WITNESS BORROWER:
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
/s/ J.T. Janssen By:/s/ John C. Weiss, III (SEAL)
- ------------------------------- -----------------------
Treasurer Secretary John C. Weiss, III, President
APPROVED AS TO FORM AND LEGAL
SUFFICIENCY THIS 19 DAY OF
SEPTEMBER, 1996:
/s/ Jay M. Caplan
- -------------------------------
Jay M. Caplan, Special Solicitor
7
<PAGE>
AFTER THE ENDORSEMENT OF THIS NOTE AS HEREIN PROVIDED, THIS NOTE MAY NOT BE
ASSIGNED, PLEDGED, ENDORSED OR OTHERWISE TRANSFERRED EXCEPT TO A SUCCESSOR OF
THE TRUSTEE UNDER THE TRUST INDENTURE REFERRED TO IN THE LOAN AGREEMENT REFERRED
TO HEREIN.
PROMISSORY NOTE
$7,000,000 November 21, 1996
--
FOR VALUE RECEIVED, CHESAPEAKE BIOLOGICAL LABORATORIES, INC., a Maryland
corporation (the "Borrower"), by this promissory note promises to pay to the
order of THE MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY, a body
corporate and politic and a public instrumentality of the State of Maryland (the
"Issuer") the principal sum of SEVEN MILLION and No/100 Dollars ($7,000,000)
which principal amount shall be due and payable in 80 consecutive quarterly
installments on the first Business Day of each February, May, August and
November, commencing the first Business Day of November, 1998, as more
specifically set forth below:
<TABLE>
<CAPTION>
PAYMENT PAYMENT PAYMENT PAYMENT PAYMENT PAYMENT
DATE* AMOUNT DATE* AMOUNT DATE* AMOUNT
- ------------------------------------- ---------- ------------------ ---------- ------------------ ---------
<S> <C> <C> <C> <C> <C>
November, 1998....................... $ 155,000 August, 2005 $ 150,000 May, 2012 $ 25,000
February, 1999....................... 155,000 November, 2005 150,000 August, 2012 25,000
May, 1999............................ 155,000 February, 2006 150,000 November, 2012 25,000
August, 1999......................... 155,000 May, 2006 150,000 February, 2013 25,000
November, 1999....................... 155,000 August, 2006 150,000 May, 2013 25,000
February, 2000....................... 155,000 November, 2006 150,000 August, 2013 25,000
May, 2000............................ 155,000 February, 2007 150,000 November, 2013 20,000
August, 2000......................... 155,000 May, 2007 150,000 February, 2014 20,000
November, 2000....................... 155,000 August, 2007 150,000 May, 2014 20,000
February, 2001....................... 155,000 November, 2007 150,000 August, 2014 20,000
May, 2001............................ 155,000 February, 2008 150,000 November, 2014 20,000
August, 2001......................... 155,000 May, 2008 150,000 February, 2015 20,000
November, 2001....................... 155,000 August, 2008 150,000 May, 2015 20,000
February, 2002....................... 155,000 November, 2008 25,000 August, 2015 20,000
May, 2002............................ 155,000 February, 2009 25,000 November, 2015 20,000
August, 2002......................... 155,000 May, 2009 25,000 February, 2016 20,000
November, 2002....................... 155,000 August, 2009 25,000 May, 2016 20,000
February, 2003....................... 155,000 November, 2009 25,000 August, 2016 20,000
May, 2003............................ 155,000 February, 2010 25,000 November, 2016 20,000
August, 2003......................... 155,000 May, 2010 25,000 February, 2017 20,000
November, 2003....................... 150,000 August, 2010 25,000 May, 2017 20,000
February, 2004....................... 150,000 November, 2010 25,000 August, 2017 20,000
May, 2004............................ 150,000 February, 2011 25,000 November, 2017 20,000
August, 2004......................... 150,000 May, 2011 25,000 February, 2018 20,000
November, 2004....................... 150,000 August, 2011 25,000 May, 2018 20,000
February, 2005....................... 150,000 November, 2011 25,000 August, 2018 20,000
May, 2005............................ 150,000 February, 2012 25,000
</TABLE>
- ------------------------
* The Payment Date shall be the first Business Day of each of the months
listed.
<PAGE>
The Borrower further agrees to pay interest on the unpaid principal amount
from the date of authentication and delivery of the Bonds (as defined in the
Loan Agreement referred to below) until the principal amount and all interest
thereon is paid in full which shall be paid on the first Business Day of each
February, May, August and November (the "Interest Payment Dates"), at the rate
of interest equal to the Variable Rate (as defined in the Indenture hereinafter
mentioned) or the Fixed Rate (as defined in the Indenture).
This Promissory Note is the "Note" referred to in the Loan Agreement dated
as of November 1, 1996 (the "Loan Agreement"), between the Borrower and the
Issuer and is entitled to the benefits thereof and subject to the conditions
thereof. Terms not otherwise defined herein shall have the definitions set forth
in the Loan Agreement.
Under the Loan Agreement, the Issuer has loaned to the Borrower the proceeds
received from the sale of the Issuer's $7,000,000 Maryland Industrial
Development Financing Authority Economic Development Revenue Bonds (Chesapeake,
Biological Laboratories, Inc. Facility), 1996 Issue, dated as of the date hereof
(the "Bonds"). The Bonds have been issued, concurrently with the execution and
delivery of this Note, pursuant to, and are secured by, the Trust Indenture
among the Issuer, First Union National Bank of Virginia, as Trustee (the
"Trustee") and Branch Banking and Trust Company, as Credit Facility Trustee (the
"Credit Facility Trustee") dated as of November 1, 1996 (the "Indenture"). The
Bonds bear interest at the Variable Rate prior to the Conversion Date (as
defined in the Indenture) and at the Fixed Rate on or subsequent to the
Conversion Date. Such interest is payable on the Interest Payment Dates. This
Note shall bear interest at the Variable Rate and the Fixed Rate during the same
periods as such rates are borne by the Bonds.
Each payment of principal of and interest on this Note will be sufficient to
enable the Issuer to pay when due the total amount of principal of (whether at
maturity, upon acceleration or otherwise), premium, if any, and interest on the
Bonds. To the extent that principal of, premium, if any, or interest on the
Bonds shall be paid, there shall be credited against unpaid principal of or
interest on this Note, as the case may be, an amount equal to the principal of
or interest on the Bonds so paid. The principal of, premium, if any, and
interest on this Note are payable in immediately available funds of any coin or
currency of the United States of America which on the respective dates of
payment thereof shall be legal tender for the payment of public and private
debts.
In addition, the Borrower agrees to pay when due in immediately available
funds all other amounts at the time the Issuer may be required to pay the same
pursuant to the Bonds or the Indenture.
The obligation of the Borrower to make the payments required hereunder shall
be absolute and unconditional without any defense, recoupment or right of
set-off by reason of any default by the Issuer under the Loan Agreement or for
any other reason.
Upon the occurrence of an Event of Default specified in the Loan Agreement,
the unpaid principal hereof and accrued interest and additional interest hereon
may become forthwith due and payable as provided in the Loan Agreement, and in
the event the Borrower
2
<PAGE>
shall fail to pay any amount required to be paid under this Note when due, the
Borrower shall pay interest on such amount at a rate per annum equal to the
Overdue Rate (as defined in the Loan Agreement) or the maximum rate permitted
by law, whichever is lower.
The Borrower may at its option, and may under certain circumstances be
required to, prepay all or any part of the unpaid principal of this Note upon
the terms provided in the Loan Agreement.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, THE BORROWER AUTHORIZES THE
CLERK OR ANY ATTORNEY DESIGNATED BY THE BANK, MIDFA OR ANY CLERK OF ANY COURT
OF RECORD TO APPEAR FOR IT IN ANY COURT OF RECORD AND CONFESS JUDGMENT
AGAINST IT WITHOUT PRIOR HEARING, IN FAVOR OF THE BANK OR MIDFA FOR AND IN
THE AMOUNT EQUAL TO SUCH OF THE OBLIGATIONS OF THE BORROWER WHICH HAVE BEEN
DUE AND PAYABLE UNDER THE PROVISIONS OF THIS NOTE, PLUS INTEREST ACCRUED AND
UNPAID THEREON, ALL OTHER AMOUNTS THEN DUE AND PAYABLE HEREUNDER, COSTS OF
SUIT AND AN ATTORNEY'S FEE IN AN AMOUNT EQUAL FIFTEEN PERCENT (15%) OF SUCH
OBLIGATIONS PLUS ALL ACCRUED AND UNPAID INTEREST THEREON, PROVIDED, HOWEVER,
(A) IF THE ACTUAL ATTORNEY'S FEES INCURRED BY THE BANK OR MIDFA ARE LESS THAN
15% OF SUCH OBLIGATION (PLUS ALL ACCRUED AND UNPAID INTEREST THEREON), THE
BANK OR MIDFA WILL REFUND (TO THE EXTENT ACTUALLY COLLECTED) TO THE BORROWER
AN AMOUNT EQUAL TO THE DIFFERENCE BETWEEN 15% OF SUCH OBLIGATION (PLUS ALL
ACCRUED AND UNPAID INTEREST THEREON) AND THE AMOUNT OF SUCH ACTUAL ATTORNEY'S
FEES (AFTER ALL OF SUCH OBLIGATIONS HAVE BEEN PAID IN FULL), OR (B) IF THE
ACTUAL ATTORNEY'S FEES INCURRED BY THE BANK OR MIDFA OR OTHER HOLDER HEREOF
EXCEED 15% OF SUCH OBLIGATIONS (PLUS ALL ACCRUED AND UNPAID INTEREST THEREON,
WHETHER BY REASON OF JUDGMENT BEING CONTESTED OR OTHERWISE, THE BORROWER WILL
PAY TO THE BANK OR MIDFA ON DEMAND THE AMOUNT OF ANY SUCH EXCESS. THE
AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE BORROWER
SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISE THEREOF, OR BY ANY IMPERFECT
EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED
PURSUANT THERETO. SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR MORE
OCCASIONS, FROM TIME TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS. AS
OFTEN AS THE BANK OR MIDFA SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL OF
WHICH THIS NOTE SHALL BE A SUFFICIENT WARRANT.
The Borrower hereby promises to pay all costs of collection, including
reasonable attorneys' fees and disbursements, without regard to any statutory
presumption, in the case of a default under this Note or the Loan Agreement. The
Borrower hereby waives presentment, protest and notice of protest or dishonor.
This Note shall be construed in accordance with the laws of the State of
Maryland.
3
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this instrument to be executed
in its corporate name by its duly authorized officers and its corporate seal to
be affixed hereto all as of the date first above written.
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
ATTEST:/WITNESS
/s/ JOHN T. JANSSEN By: /s/ JOHN C. WEISS, III
- ----------------------------- ----------------------------------------
Treas/CFO John C. Weiss, III, President
- ---------
Secretary
(CORPORATE SEAL)
4
<PAGE>
ENDORSEMENT
Pay to the order of First Union National Bank of Virginia, as Trustee for
the benefit of the Bondholders under the Trust Indenture dated as of November 1,
1996, between the Issuer, the Trustee and Branch Banking and Trust Company, as
Credit Facility Trustee, without recourse. This endorsement is given and made
without any warranty as to the authority and genuineness of the signature of the
maker of the foregoing Promissory Note.
This the 21st day of November, 1996.
----
MARYLAND INDUSTRIAL DEVELOPMENT
FINANCING AUTHORITY
By: /s/ Thomas H. Mullaney
---------------------------
Title: Chairman
---------------------------
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
FOURTH INCENTIVE STOCK OPTION PLAN
1. Definitions.--As used herein, the following terms shall have the
indicated meanings:
a. "Board"--The Board of Directors of the Company.
b. "Code"--The Internal Revenue Code of 1986, as amended.
c. "Committee"--The Chesapeake Biological Laboratories, Inc. Fourth
Incentive Stock Option Committee, constituted from time to time as provided
in Section 3 hereinbelow.
d. "Common Stock"--The Class A Common Stock of the Company with a par
value of One Cent ($0.01) per share.
e. "Company"--Chesapeake Biological Laboratories, Inc.
f. "Optionee"--Employees of the Company or of any Subsidiary who hold
outstanding Options granted under the Plan.
g. "Options"--Fourth Incentive Stock Options granted under the Plan.
h. "Plan"--The Chesapeake Biological Laboratories, Inc., Fourth
Incentive Stock Option Plan as set forth herein and as hereafter amended.
i. "Subsidiary"--Any "subsidiary corporation" (as that term is defined
in Section 425(f) of the Code) of the Company.
2. Purpose.--The purpose of the Plan is to provide incentives to, and to
encourage stock ownership by, all employees of the Company and the Subsidiaries
in order that the employees may acquire or increase their proprietary interests
in the success of the Company and the Subsidiaries, and to provide additional
means of attracting and retaining competent personnel. It is intended that the
options issued pursuant to the Plan shall constitute "incentive stock options"
within the meaning of Section 422(a) of the Code.
3. Administration.--The Plan shall be administered by the Committee. The
Committee shall consist of the full Board or such lesser number of the Board
(but not less than two (2) persons)
<PAGE>
as is designated by the Board. The Board may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee, however
created, shall be filled by the Board. The Committee may be the same, and/or
a committee acting, as the Compensation Committee of the Board as established
from time to time. The Committee may select one (1) of its members as
Chairman, and the Committee shall hold meetings at such times and places as
it, or if a Chairman is appointed, when its Chairman, may determine. The
presence at a meeting of a majority of the Committee shall constitute a
quorum, and acts of a majority of the Committee present at a meeting at which
a quorum is present, or acts reduced to or approved in writing by a majority
of the members of the Committee, shall be the valid acts of the Committee.
Members of the Committee who otherwise are eligible to receive Options shall
not be disqualified from being granted such Options by reason of their
membership on the Committee or their participation in the approval by the
Committee of the grant of the Options to themselves. Subject to the
provisions of the Plan and applicable law, the Committee is authorized to
interpret the Plan and to prescribe, amend or rescind rules and regulations
relating to the Plan and to any Options granted thereunder, and to make any
determinations necessary or advisable for the administration of the Plan. The
interpretation and construction by the Committee of any provisions of the
Plan shall be final unless otherwise determined by the Board. No member of
the Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under it.
4. Eligibility.--All employees (including officers, whether or not
directors) of the Company or any Subsidiary shall be eligible to be granted
Options. An employee of the Company or any Subsidiary may
hold more than one Option at any time, but only on the terms and subject to the
restrictions herein set forth.
5. Grant of Options.--The Committee shall from time to time determine and
designate those employees of the Company and the Subsidiaries to whom Options
are to be granted. The Committee shall grant the Options for such amounts of
shares subject to the terms of the Plan and such further terms and restrictions
as the Committee shall from time to time determine; provided, however, that the
aggregate fair market value (determined on the date on which the Option is
granted) of Common Stock with respect to which an option can be exercised for
the first time in any calendar year shall not exceed $100,000.00.
6. Stock Subject to the Plan.--The stock subject to Options shall be
authorized but unissued shares of Common Stock. The aggregate number of shares
which may be issued under Options shall not exceed eight hundred thousand
(800,000) shares. If an Option shall terminate or expire unexercised, in whole
or in part, the shares so released from the Option may be made subject to
additional Options. The Company shall reserve and keep available for issuance
upon the exercise of Options that number of shares of Common Stock as will
satisfy the requirements of all Options which
2
<PAGE>
are outstanding from time to time.
In the event there is any change in the Company's shares of Common Stock, by
stock splits, reverse stock splits, stock dividends, recapitalizations, or
otherwise, the number of shares available for Options and the number of shares
subject to any Option shall be appropriately adjusted by the Committee.
7. Option Price.--Each Option shall state the option price, which shall not
be less than one hundred percent (100%) of the fair market value of the shares
of Common Stock on the date of the granting of the Option, except that if the
Option is granted to an Optionee who, at the time the Option is granted, owns
stock possessing more then ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any of the Subsidiaries, the option
price shall be at least one hundred ten percent (110%) of the fair market value
of the shares of Common Stock at the time the Option is granted. In the event
there is any change in the shares of Common Stock by stock splits, reverse stock
splits, stock dividends, recapitalizations or otherwise, the option price of the
shares subject to Option shall be appropriately adjusted by the Committee. The
fair market value of the Common Stock for purposes of the Plan shall be (i) the
closing price of the shares of Common Stock on the principal exchange on which
such shares are then trading, on the date on which the Option is granted or, if
such shares are not traded on such date, then on the next preceding trading date
on which a sale occurred; or (ii) if such stock is not traded on an exchange but
is quoted on NASDAQ or a successor quotation system, the last sales price (or if
the last sales price is not readily determinable, the mean between the closing
representative bid and asked prices) on the date on which the Option is granted
or, if such price or prices are not available for that date, the trading day
immediately previous to such date; or (iii) if such stock is not publicly-traded
on an exchange and is not quoted on NASDAQ or a successor quotation system, the
mean between the closing bid and asked prices for the stock, on the date on
which the Option is granted or, if such prices are not available for that date,
the trading day immediately previous to such date; or (iv) if the Company's
Common Stock is not publicly-traded, the fair market value thereof on the date
on which the Option is granted, as established by the Committee acting in good
faith.
8. Term of Options.--Options shall be exercisable for a period as determined
by the Committee at the time of grant, but in any event for a period of no more
than ten (10) years from the date of grant; provided, however, that any Option
granted to an Optionee who at the time of the grant owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any of the Subsidiaries, the Option shall be exercisable
for no more than five (5) years from the date of grant. Except as otherwise
determined by the Committee in connection with the grant of any Option and
provided for in the Option Agreement evidencing such Option, during the first
(1st) and second (2nd) years an Option is outstanding, it may not be exercised
with respect to any shares covered thereby; on the second
3
<PAGE>
(2nd) anniversary of the grant of an Option and during the following year,
the Option may be exercised with respect to twenty-five percent (25%) of the
shares covered thereby; on the third (3rd) anniversary and during the
following year, it may be exercised with respect to fifty percent (50%) of
the shares covered thereby; on the fourth (4th) anniversary and during the
following eleven (11) months, it may be exercised with respect to
seventy-five percent (75%) of the shares covered thereby; and during the
twelfth (12th) month following the fourth (4th) anniversary thereof and prior
to the expiration of the Option, an Option may be exercised with respect to
one hundred percent (100%) of the shares covered thereby, the foregoing
percentage figures in all cases being cumulative as to percentages of shares
purchased upon the exercise of the Option in the current period and all prior
periods. Notwithstanding the foregoing, the Committee may, in its discretion,
provide for and include in any Option such terms and conditions as the
Committee shall determine from time to time, not inconsistent with Section
422(a) of the Code, including but not limited to provisions which provide for
different time periods during which an Option is to be exercisable, and/or
for different numbers or percentages of covered shares which any Option may
be exercised during the different time periods; and without limiting the
generality of the foregoing, the Committee may include provisions in any
Option which provide for that Option becoming exercisable in full upon the
occurrence of certain events, including a change in control or substantial
ownership of the Company.
9. Exercise of Options.--To exercise an Option, the Optionee or his
successor shall give written notice of exercise to the Committee at the
principal office of the Company accompanied by payment of the option price in
full and a written statement that the shares are being purchased for investment
only and not with a view to distribution. However, the statement will not be
required in the event the offering of securities under the Plan is registered
with the Securities and Exchange Commission and applicable State Securities
commissions or regulatory agencies. Payment of the option price shall be in cash
or by check or by tender of certificates evidencing shares of Common Stock, duly
endorsed in blank, or any combination of the foregoing modes of payment. Shares
of Common Stock tendered as payment shall be valued at their fair market value
on the exercise date as determined by the Committee, which determination shall
be final and binding. To the extent the fair market value of the tendered shares
exceeds the option price, the excess shares shall be reissued to the Optionee.
If the Option is exercised by the successor of the Optionee, following the death
of the Optionee, proof of the right of the successor to exercise the Option in
form satisfactory to the Committee shall be submitted. Options may be exercised,
in accordance with their terms, as to less than all of the shares optioned
thereunder from time to time, but not less than one hundred (100) shares may be
purchased upon the exercise of the Option at any one time unless the number
purchased is the total number of shares remaining subject to the Option at the
time of
4
<PAGE>
exercise. For as long as the offering of securities pursuant to the Plan has
not been registered with the Securities Exchange Commission and applicable
State securities commissions and regulatory agencies, certificates
representing shares of Common Stock issued upon the exercise of Options shall
bear the following legend and transfers of such shares shall be subject to
the restrictions set forth in the legend:
The offering of the shares represented by this certificate
was not registered under the Securities Act of 1933, as
amended, and applicable State securities laws, and the
shares may be transferred by the holder only if the transfer
is registered under the provisions of such act and laws or if,
in the opinion of legal counsel to the Company, the transfer
may be made without violating such act and laws.
10. Termination of Employment Except by Reason of Death.
(a) All unexercised Options will terminate, be forfeit and lapse
immediately if (i) the Optionee's employment with the Company or any
Subsidiary is terminated because the Optionee is discharged for dishonesty or
commission of a felony, or upon the intentional commission of an act which
constitutes a breach of any obligation of the Optionee to the Company and
which has a material adverse effect or impact upon the Company or any
Subsidiary, including, but not limited to, his disclosure to unauthorized
persons of confidential information or trade secrets of the Company or any
Subsidiary; or (ii) the Optionee at any time following the termination of
Optionee's employment with the Company, either intentionally commits an act
which constitutes a breach of any obligation of the Optionee to the Company
and which has a material adverse effect or impact on the Company, or
discloses to unauthorized persons confidential information or trade secrets
of the Company or any Subsidiary.
(b) If the Optionee's employment with the Company or any
Subsidiary is terminated for any reason other then the Optionee's death or
any reason set forth in Section 10 (a) above, such Optionee shall have the
right to exercise all Options held by him, in accordance with their terms, at
any time within fourteen (14) days after the termination of employment or
such longer period (up to three (3) months or, in the case of disability of
the Optionee within the meaning of Section 22(e)(3) of the Code, up to one
(1) year), as may be provided for in the Option, but only to the extent that
the Optionee's right to exercise such Option has accrued at the time of, or
upon or by reason of, termination of employment and had not been previously
exercised; provided that no Option may be exercised under any circumstances
after the expiration of the term of the Option. Whether authorized leave or
absence or absence for military or governmental service shall constitute
termination of employment for the purposes of the Plan
5
<PAGE>
shall be determined by the Committee, which determinations shall be final and
conclusive unless overruled by the Board.
11. Death of Optionee.--If an Optionee shall die while in the employ of the
Company or a Subsidiary or the employee shall die prior to expiration of the
Option following termination of his employment with the Company and Subsidiaries
(and such Optionee shall not have been dismissed from his employment or the
option shall not have been terminated for any of the reasons set forth in
Section 10 (a) above), an Option may be exercised at any time within six (6)
months after the Optionee's death, or such longer period (up to one (1) year) as
may be set forth in the Option, by the executors or administrators of the
Optionee's estate or by any person or persons who shall have acquired the Option
directly from the Optionee by bequest or inheritance, but only to the extent
that the Optionee's right to exercise such Option had accrued at the time of his
death and had not been previously exercised; provided that nothing in this
Section 11 shall permit an Option to be exercised after the expiration of the
term of the Option.
12. Prohibition on Transfers of Options.--No Option shall be transferable by
the Optionee other than by will or the laws of descent and distribution, and
each Option shall be exercisable during the Optionee's lifetime only by the
Optionee. No Option or interest or right therein, or part thereof, will be
liable for the debts, contracts or engagements of the Optionee or the Optionee's
successors in interest or will be subject to disposition by transfer,
alienation, pledge, encumbrance, assignment or any other means, whether
voluntary, involuntary or by operation of law.
13. Mergers and Consolidations.--If the Company should be a participant in
any merger or consolidation, each outstanding Option shall pertain to and apply
to the securities to which a holder of the number of shares of Common Stock
subject to the Option would have been entitled in such transaction, and the
option exercise price shall be appropriately adjusted. In the event of the
dissolution of the Company, all unexercised outstanding Options shall terminate
and expire, as of the effective date of the dissolution. The grant of an Option
shall not afford the Optionee any right to object to or in any way limit the
right or power of the Company to make any adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate, sell or transfer all or any part of
its business or assets.
14. Rights of Optionees.--An Optionee or permitted transferee of an Option
shall have no rights as a stockholder with respect to any shares covered by his
Option until the date of the issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (whether ordinary or
extraordinary, in cash, securities or other property) or distributions or other
rights for which the record date is prior to the date a stock certificate is
issued, except as provided in
6
<PAGE>
Section 13 hereof. Nothing in this Plan or in any Option Agreement hereunder
shall confer upon any Optionee any right to continue in the employ of or in a
business relationship with the Company or any Subsidiary, or shall interfere
with or restrict in any way the rights of the Company and its subsidiaries,
which are hereby expressly reserved, to discharge any Optionee at any time
for any reason whatsoever, with or without cause.
15. Option Agreements.--The granting of an Option shall take place upon
the approval thereof by the Committee and shall be evidenced by a written
Option Agreement, stating the number of shares of Common Stock subject to the
Option evidenced thereby, such other terms and conditions as shall be
determined by the Committee, and in such form the Committee may from time to
time determine.
16. Term of Plan.--Options may be granted at any time within a period of ten
(10) years from the date the Plan is adopted by the Board or the date the Plan
was approved by the Stockholders of the Company, whichever is earlier.
17. Registration of the Offering of Securities under the Plan.--If the
Company shall be advised by its legal counsel that the offering of Options and
of shares of the Common Stock upon the exercise of Options is required to be
registered under the Securities Act of 1933, as amended, or applicable State's
securities laws, the Company may effect registration, and delivery of shares of
the Common Stock by the Company may be deferred until such registration or
registrations are effective.
18. Indemnification of Committee.--In addition to other rights of
indemnification they may have as members of the Board, the members of the
Committee shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it is judged in such action, suit or
proceeding that such Committee member is liable for negligence or misconduct in
the performance of his duties; provided that within sixty (60) days after the
institution of any such action, suit or proceeding, the Committee member shall
in writing offer the Company the opportunity, at its own expense, to handle and
defend the same.
19. Amendment of the Plan.--From time to time, the Board may, insofar as
permitted by law, with respect to any shares at the time not subject to options,
suspend or discontinue the Plan; and the Board may, insofar as permitted by law,
revise or
7
<PAGE>
amend the Plan in any respect whatsoever, except that, without approval of
the Stockholders of the Company, no such revision or amendment shall increase
the number of shares subject to the Plan or change the designation of the
class of employees eligible to receive Options; and except for any
modification or amendment contemplated by the sentence immediately following,
no such amendment or modification shall, without the consent of the Optionee,
affect his or her rights under an Option previously granted to the Optionee.
Without limiting the generality of the foregoing, the Board may, without
further approval by the Stockholders and without securing further
consideration from the Optionee, amend this Plan or condition or modify the
grant of Options hereunder in response to securities, tax or other laws,
rules or regulations, or regulatory interpretations thereof, applicable to
the Plan. The Plan may not, without the approval of the Stockholders of the
Company, be amended in any manner that would cause Options to fail to meet
the requirements of "incentive stock options" as that term is defined in
Section 422(a) of the Code.
20. Application of Funds.--The proceeds received by the Company from the
sale of shares of Common Stock pursuant to the exercise of Options shall be used
for general corporate purposes.
21. No Obligation to Exercise Option.--The granting of an Option shall
impose no obligation upon the Optionee to exercise such option.
22. Approval of Stockholders.--The Plan shall be submitted for the approval
of the holders of the Company's Common Stock within twelve (12) months after the
initial approval of the Plan by the Board. Options may be granted prior to such
shareholder approval.
8
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
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<PP&E> 5,899
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0
0
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