Collateral Pledge Agreement

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


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


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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.


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"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


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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.


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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 ...