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09-2402
i--% HARTMAN UNDERHILL & BRUBAKER LLP By: Robert W. Pontz, Esquire Attorney I.D. No. 56554 221 East Chestnut Street Lancaster, PA 17602 (717) 299-7254/(717) 299-3160 (Fax) Attorneys for Plaintiff Scarff Bros., Inc. SCARFF BROS., INC., Plaintiff V. THOMAS H. McELWEE, JR. and BECKY S. McELWEE, Defendants IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION -LAW No. Oq - a40a aiv;tTeroj : CONFESSION OF JUDGMENT CONFESSION OF JUDGMENT Pursuant to the authority contained in the warrants of attorney included in the certain Third Amended and Restated Revolving Variable Rate Note and Third Amended and Restated Guaranty Agreement, true and correct copies of which are attached as Exhibits A and C to the Complaint filed in this action (collectively the "Instruments"), I appear for the Defendants and confess judgment in favor of the Plaintiff and against the Defendants, jointly and severally, as follows: (a) Unpaid balance of principal debt $710,467.70 (b) Accrued interest through 3/15/08 $ 6,937.04 at WSJ Prime plus 2% (c) Accrued interest from 3/16/08 to 4/9/09 at Default Interest Rate under Note $ 87,514.48 (LESS) Interest Paid ($ 36,326.39) (d) Late Charges $ 1,271.37 (e) Attorneys' Commission $ 38,493.21 (5% as authorized) TOTAL $808,357.41 00545588.1 ,/ Interest on the judgment at the variable Default Interest Rate prevailing under the terms of Note (current per diem is $202.29), and all attorneys fees, costs and charges collectable under the Note and Guaranty which accrue hereafter, are to be collectable under and included within the judgment. HARTMAN UNDERHILL & BRUBAKER LLP Attorneys for Plaintiff Dated: 1181 01 By: P2,? ( E Robert W. Pontz ,squire Judgment is entered as above directed: Prothonotary 00545588.1 2 . .'k 2009 APR 16 PH 42: 52 Cl it t_ ? , ; rrt t HARTMAN UNDERHILL & BRUBAKER LLP By: Robert W. Pontz, Esquire Attorney I.D. No. 56554 221 East Chestnut Street Lancaster, PA 17602 Attorneys for Plaintiff. (717) 299-7254/(717) 299-3160 (Fax) Scarff Bros., Inc. SCARFF BROS., INC., IN THE COURT OF COMMON PLEAS OF Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION -LAW V. THOMAS H. McELWEE, JR. : No. t 1 TerrN and BECKY S. McELWEE, Defendants CONFESSION OF JUDGMENT COMPLAINT IN CONFESSION OF JUDGMENT Plaintiff files this Complaint pursuant to Pa.R.C.P. Rule 2951(b) for judgment by confession and avers as follows: 1. The Plaintiff, Scarff Bros., Inc., is a Pennsylvania corporation with its principal offices at 1522 West Main Street, Ephrata, Lancaster County, Pennsylvania 17522. 2. The Defendants, Thomas H. McElwee, Jr. and Becky S. McElwee, are adult individuals, husband and wife, residing at 250 Jumper Road, Newburg, Cumberland County, Pennsylvania 17240. 3. On March 11, 2005 Defendant Thomas H. McElwee, Jr. ("T. McElwee") executed and delivered to Plaintiff a certain Third Amended and Restated Revolving Variable Rate Note in the original principal amount of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) (the "Note"). A true and correct copy of the Note is attached hereto, incorporated by reference and marked Exhibit A. 00545303.2 4. in conjunction with his execution and delivery of the Note, Defendant T. McElwee executed and delivered to Plaintiff an Explanation and Waiver of Rights Regarding Confession of Judgment dated March 11, 2005 (the "T. McElwee Waiver"). A true and correct copy of the T. McElwee Waiver is attached hereto, incorporated by reference and marked Exhibit B. 5. On March 11, 2005, Defendant Becky S. McElwee ("B. McElwee") executed and delivered to Plaintiff a certain Third Amended and Restated Guaranty Agreement (the "Guaranty"), under which Defendant B. McElwee unconditionally guaranteed to Plaintiff all obligations of Defendant T. McElwee under the Note, including the payment of all principal, interest, penalties, reimbursements, advancements, escrows and fees, and specifically committed to become a "co-obligor" with Defendant T. McElwee with respect to Defendant T. McElwee's obligations under the Note. A true and correct copy of the Guaranty is attached hereto, incorporated by reference and marked Exhibit C. 6. in conjunction with her execution and delivery of the Guaranty, Defendant B. McElwee executed and delivered to Plaintiff an Explanation and Waiver of Rights Regarding Confession of Judgment dated March 11, 2005 (the "B. McElwee Waiver"). A true and correct copy of the B. McElwee Waiver is attached hereto, incorporated by reference and marked Exhibit D. 7. As partial security for their obligations to Plaintiff under the Note and Guaranty, Defendants executed and delivered to Plaintiff two certain Open-End Mortgages, Security Agreements and Fixture Filings, each dated as of March 11, 2005 (together the "Mortgages"), 00545303.2 2 q granting and conveying to Plaintiff all of Defendants' right, title and interest in and to certain real property known and numbered as (a) 250 Jumper Road, Newburg, Cumberland County, Pennsylvania, (b) 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania and (c) 2807 Wayne Road, Chambersburg, Franklin County, Pennsylvania (collectively the "Mortgaged Premises"). True and correct copies of the Mortgages are attached hereto, incorporated by reference and together marked Exhibit E. 8. As partial security for his obligations to Plaintiff under the Note, Defendant T. McElwee executed and delivered to Plaintiff a certain Second Amended and Restated Security Agreement dated as of March 11, 2005, granting to Plaintiff a security interest in certain collateral as described therein (the "Security Agreement"). A true and correct copy of the Security Agreement is attached hereto, incorporated by reference and marked Exhibit F. 9. Plaintiff is the owner and holder of the Note and of the Guaranty; and neither the Note nor the Guaranty has been assigned. 10. No prior judgment has been entered on the Note or on the Guaranty in any jurisdiction. 11. The Note and the Guaranty authorize confession of judgment against the Defendants upon the occurrence of an event of default under the Note. 12. Judgment may now be entered against the Defendants because Defendant T. McElwee is in default of his obligations owed to Plaintiff under the Note. Specifically, Defendant is in default under the terms of the Note for, inter alia, (a) his failure to make monthly payments of interest due between February 1, 2008 and May 31, 2008, (b) his 00545303.2 3 failure to pay real estate taxes on the Mortgaged Premises, resulting in liens that impair Plaintiffs position, (c) allowing a federal tax lien to be entered against him and (d) his failure to pay the entire balance due under the Note upon demand by Plaintiff. A true and correct copy of Plaintiff s written demand dated March 25, 2009 for payment of Defendant T. McElwee's obligations under the Note is attached hereto, incorporated by reference and marked Exhibit G. 13. The amount now due from Defendants to Plaintiff pursuant to the terms of Note and Guaranty is as follows: (a) Unpaid balance of principal debt (b) Accrued interest through 3/15/08 at WSJ Prime plus 2% (c) Accrued interest from 3/16/08 to 4/9/09 at Default Interest Rate under Note (LESS) Interest Paid (d) Late Charges (e) Attorneys' Commission (5% as authorized) TOTAL $710,467.70 $ 6,937.04 $ 87,514.48 ($ 36,326.39) $ 1,271.37 $ 38,493.21 $808,357.41 Interest on the judgment at the variable Default Interest Rate prevailing under the terms of Note (current per diem is $202.29), and all attorneys fees, costs and charges collectable under the Note and Guaranty which accrue hereafter, are to be collectable under and included within the judgment. 14. The terms of Note, Guaranty and Mortgage render the Defendants jointly and severally liable for all obligations under the Note. 15. Judgment by confession under this Complaint is not being entered against a natural person in connection with a consumer credit transaction. 00545303.2 4 16 The obligation evidenced by the Note and Guaranty and secured by the Mortgages is in excess of the "Base Figure" provided under Pennsylvania Act No. 6 of 1974, 41 P. S. §101 et seq. ("Act 611). Accordingly, none of the Mortgages is a "residential mortgage" as defined in Act 6, and the "residential mortgage" provisions of Act 6 are inapplicable to this proceeding. 17 The provisions of Pennsylvania Act No. 91 of 1983, 35 P. S. § 1680.40 et seq. ("Act 91 "), and the regulations promulgated thereunder, are inapplicable to this proceeding because: (a) Two of the three properties constituting the Mortgaged Premises are neither the principal residence of the Defendants nor a one or two-family owner- occupied residence; and (b) the third property constituting the Mortgaged Premises, which is the principal residence of the Defendants, is encumbered by more than two mortgages. WHEREFORE, Plaintiff, as authorized by the warrants of attorney set forth in the Note and in the Guaranty attached hereto and incorporated by reference, demands judgment against Defendants, jointly and severally, and in Plaintiff s favor, in the total amount of Eight Hundred Eight Thousand Three Hundred Fifty-Seven and 41/100 Dollars ($808,357.41), calculated as set forth in paragraph 13 hereof, plus subsequently accruing attorneys' commissions, fees, charges, interest at the Default Interest Rate provided under the Note (current per diem is $202.29) and costs of this action. HARTMAN UNDERHILL & BRUBAKER LLP Attorneys for Plaintiff Dated: 1'? ? IS I o? By: P___? ? Robert W. Pontz, squire 00545303.2 VERIFICATION I hereby verify that I am President of Scarff Bros., Inc.; that as such corporate officer I am authorized to make this verification; and that the information set forth in the foregoing Complaint is true and correct to the best of my knowledge, information and belief. I understand that any false statements contained herein are subject to the penalties of 18 Pa.C.S. § 4904, relating to unsworn falsification to authorities. Dated: 00545303.1 6 Scarff Bros., Inc. , ki 6'+ THIRD AMENDED AND RESTATED REVOLVING VARIABLE RATE NOTE $750,000.00 Lancaster, Pennsylvania March 11, 2005 FOR VALUE RECEIVED, without defalcation, THOMAS H. McELWEE, JR., an adult individual having a mailing address of 250 Jumper Road, Newburg, PA 17240 (the 'Borrower"), hereby promises to pay on demand and to the order of SCARFF BROS., INC., a Maryland corporation (the "Lender"), at 2300 Fallston Road, Fallston, MD 21047, or at such other place as Lender may, from time to time, direct Borrower in writing, the sum of $750,000.00, lawful money of the United States of America, together with interest as hereinafter provided on the unpaid balance from the date or dates of disbursement thereof. DEFINITIONS The following capitalized words and terms shall have the following meanings when used in this Note. "Cattle" shall mean all cattle now owned or hereafter acquired by Borrower. "Collateral" shall mean the Security Agreement covering the Cattle, the Guaranty Agreement entered into between Lender and the Borrower's spouse guaranteeing this Note, the Mortgage covering property known as 250 Jumper Road, Newburg, PA 17240, and property known as 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania, and the mortgage covering property known as 2807 Wayne Road, Chambersburg, PA 17201. "Default Interest Rate" shall mean the rate of interest five percent (5%) above the then current interest rate. "Event of Default" shall mean the occurrence of any of the following: (1) The nonpayment by Borrower within ten (10) days after it. is due of any amount payable under this Note. (2) If Borrower does not comply with any other provision of this Note or the Collateral within ten (10) days after written or oral receipt of notice from Lender, notifying Borrower, Borrower is not complying with such terms. (3) If Borrower shall admit in writing an inability to pay his debts; or shall have made a general assignment for the benefit of creditors; or shall have been adjudicated bankrupt; or shall have filed a voluntary petition in bankruptcy or for reorganization or to effect a plan or other arrangement with creditors; or shall be the subject of an involuntary petition in bankruptcy or for reorganization; or shall have filed an answer to a creditor's petition or other petition filed against him (admitting the material allegations thereof) for an adjudication in bankruptcy or for an arrangement or reorganization; or shall have applied for or permitted the appointment of a receiver or trustee or custodian, or a receiver, trustee or custodian shall have been applied for, for any of its property or assets (otherwise than upon application or consent of the Lender); or if an order shall be entered and shall not be dismissed or stayed within the time after its entry by which it becomes final and nonappealable, approving any petition for a reorganization of Borrower. (4) If any petition or application to any court or tribunal, at law or in equity, be filed by Borrower for the appointment of any receiver, liquidator, sequestrator, trustee or other similar official for Borrower or any part of its property or assets, or if any petition or application to any court or tribunal at law or in equity be filed against Borrower for the appointment of receiver, liquidator, sequestrator, trustee or other similar official for Borrower or any part of its property or assets which is not terminated within sixty (60) days of the date of the filing. (5) If there is a commencement of foreclosure or forfeiture proceedings whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding. (6) If Borrower is declared in default under any Loan, extension of credit, security agreement, purchase or sales agreement or any other agreement in favor of any creditor or person that may materially affect the Collateral or Borrower's ability to repay this Note or perform Borrower's obligations under this Note. (7) If any Guarantor of this Note disputes the validity of or liability under any guarantee of the indebtedness evidenced by this Note, is in material breach of any material indebtedness which would affect the Collateral or Borrower's ability to repay this Note. If any Guarantor dies or becomes incompetent and the Borrower is therefore unable to repay this Note. (8) If Borrower uses the proceeds from this Loan for anything other than the purchase of Cattle to be resold to Lender and any feed or other supplies necessary for the Cattle, or construction of improvements to house the Cattle. (9) If Borrower sells, transfers or encumbers the Cattle to or for the benefit of any person or entity other than Lender. 2 Y (10) If Borrower does not keep the Cattle at all times separately identifiable from any other livestock, including other livestock owned by Borrower. (11) If any of the Representations and Warranties are false at any time, or are not complied with, by Borrower. (12) An event of default under the Mortgage or Security Agreement. "Guaranty Agreement" shall mean the Guaranty Agreement given by Borrower and Guarantor to Lender and covering the property known as 250 Jumper Road, Newburg, PA 17240. "Loan" shall mean the line of credit loan from Lender to Borrower in the amount of $500,000.00 for the purchase of Cattle, and the construction of improvements. "Mortgages" shall mean the Open End Mortgage given by Borrower and Guarantor to Lender and covering the property known as 250 Jumper Road, Newburg, PA 17240, and 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania and the Open-End :Mortgage given by Borrower and Guarantor to Lender and covering the property known as 2807 Wayne Road, Chambersburg, PA 17201. "Prime Rate" shall mean the prime rate of interest as published in the money rates tables of the Wall Street Journal. When a range of rates is published, the higher rate will apply. The Prime Rate for this Note shall change on a monthly basis, as such rate changes. "Security Agreement" shall mean the Second Amended and Restated Security Agreement dated even date herewith. "Term of the Loan" shall mean the period of time commencing on the date of this Note and ending September 1, 2004. REPRESENTATIONS AND WARRANTIES The Borrower makes the following representations and warranties which shall be true while any sum is outstanding under this Note. 1. No consent of any other party and no consent, permission, license, approval, order, authorization of, or declaration with any governmental authority, bureau or agency is required in connection with execution, delivery, performance, validity or enforceability of this Note. 2. There are no actions, suits, proceedings or tax claims now pending or threatened, which would have a material adverse effect on the financial condition of Borrower, or upon the ability of Borrower to perform its obligations under this Note. 3 3. There exist no facts or circumstances which might materially, adversely affect the Borrower's operations, properties, assets, prospects or condition, financial or otherwise which have not been disclosed in writing to Lender prior to execution of this Note. 4. The Borrower is not in default under any indenture, mortgage, deed of trust, promissory note, debenture, agreement or other instrument of whatever nature to which Borrower is a party. 5. All federal, state, local or other tax returns and reports of the Borrower required by law to be filed have been duly filed and all Federal, state, local, or other governmental taxes, assessments, or other charges or levies which are due and payable have been paid, and adequate provision has been made for the payment of all such liabilities which have heretofore accrued but are not yet due and payable. 6. The Borrower has good and marketable title in fee to, or valid enforceable leases of, all property owned, leased, or otherwise used by the Borrower. 7. Borrower is not in default under any material existing agreement, and no default or event of default has accrued and is continuing. 8. Borrower shall maintain insurance on the Cattle in an amount equal to the full replacement value of the Cattle, and shall name Lender as additional insured. 9. Borrower shall comply with all statutes, rules and regulations, the noncompliance of which would materially and adversely affect his business, assets or condition, financial or otherwise. 10. Borrower shall deliver upon request of Lender proof of payment or deposit of all federal, state or local withholding taxes required to be paid. 11. Borrower shall deliver to Lender on or before the fifth day of each month, an inventory list of all cattle held by Borrower at the end of the previous month, listing the number of head of all cattle held by Borrower at the end of the previous month, listing the number of head, whether owned or held pursuant to a grower contract and the location. TERMS 1. During the Term of the Loan, Borrower shall pay on the first day of each month interest only on the average outstanding amount of the Loan for the preceding month at the interest rate of two (2) percentage points above Prime Rate, per annum. 2. The principal shall be repaid on demand of Lender but shall be repaid in full without demand on February 1, 2006, unless Lender at its option and in its sole discretion 4 chooses to continue the Loan for one (1) additional year and may thereafter be renewed each year on February 1 S` in Lender's sole discretion. 3. In the event that any installment of interest or payment of principal provided for herein shall remain unpaid for a period of ten (10) days after the same shall become due, a late charge of five percent (5%) of the installment of interest or the payment of principal so overdue shall become immediately due to the Lender. 4. At any time during the term of the Loan, the Borrower shall have the privilege without payment of a repayment fee of paying all or any portion of the principal balance of this Note prior to its originally scheduled maturity dates; provided, however that any prepayment shall not affect the obligation to continue to pay monthly installments required hereunder until the entire indebtedness has been paid. 5. Borrower will be selling the Cattle to Lender; upon sale, all proceeds, at the discretion of Lender, may first be applied to any and all principal outstanding, the remainder of the proceeds shall be used for the payment of any and all earned and outstanding interest, whether or not currently due and payable and any other sums due to Lender whether or not arising out of this Loan, any remaining proceeds may then be distributed to Borrower. The Loan evidenced by this Note shall be disbursed by Lender upon request of Borrower, not to exceed in the aggregate $750,000.00. Lender shall not be obligated to advance proceeds unless no Event of Default has occurred and no conditions exist which would cause an Event of Default after giving proper notice or after a lapse of time. All such disbursements, whether the aggregate be more or less than the face amount of this Note, shall be considered as the principal due under this Note and shall be payable in accordance with the terms hereof. The Borrower shall be entitled to borrow, repay, and reborrow principal hereunder pursuant to these terms and conditions. This Note is secured by Collateral and it is hereby declared and agreed that said debt or principal sum herein mentioned is the same which is secured by the said Collateral and that the Collateral has been executed and delivered as security for the payment of this Note and all the terms, conditions and obligations in the Collateral are incorporated in and made a part of this Note by reference thereto. Upon the occurrence of an Event of Default, interest shall accrue thereafter at the Default Interest Rate, the whole of the principal sum and interest thereon shall become due and payable at the option of the Lender, and one or more executions for collection of said principal sum with interest, and other sums due by the undersigned according to the terms hereof, or according to the terms of the Collateral, together with costs of suit and a reasonable attorney's fee for collection may issue forthwith on any judgment or judgments obtained by the Lender hereof against the undersigned; and Lender (in addition to all other rights and remedies it may have) may exercise any and all rights and remedies which it may have under any document, statute, law or rule and 5 all such rights and remedies, along with those set forth specifically herein and in the Collateral shall be cumulative and enforceable alternatively, successively or concurrently. THE FOLLOWING PARAGRAPH SETS FORTH A WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER, THE BORROWER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, AND, AFTER THE OPPORTUNITY TO SEEK ADVICE OF SEPARATE COUNSEL OF THE BORROWER, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR A HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, BORROWER HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR ATTORNEYS OF ANY COURT OF COMMON PLEAS OF PENNSYLVANIA, OR ANY ATTORNEY OR ATTORNEYS OF ANY OTHER COURT OF RECORD ELSEWHERE, OR THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN PENNSYLVANIA OR ELSEWHERE, TO APPEAR FOR BORROWER IN SUCH COURT IN AN APPROPRIATE ACTION THERE OR ELSEWHERE BROUGHT OR TO BE BROUGHT AGAINST BORROWER AT THE SUIT OF LENDER ON THIS NOTE, WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM OR TIME THERE OR ELSEWHERE TO BE HELD, AND THEREIN CONFESS OR ENTER JUDGMENT AGAINST BORROWER FOR THE EXACT SUM WHICH SHALL BE THE AMOUNT OF THE AFORESAID PRINCIPAL SUM OF THIS NOTE, WITH INTEREST AND WITH ANY OTHER PAYMENTS AND CHARGES WHICH ARE PAYABLE BY THE BORROWER UNDER THE TERMS OF THE COLLATERAL, AND WITH COSTS OF SUIT AND ANY OTHER SUMS SECURED BY THE COLLATERAL AND AN ATTORNEY'S COMMISSION OF FIVE PERCENT (5%) FOR COLLECTION, BUT NOT LESS THAN FIVE THOUSAND DOLLARS ($5,000.00); AND FOR SO DOING, THIS NOTE OR A COPY THEREOF VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT, WITHOUT FURTHER STAY, AND WITH FULL RELEASE OF ERRORS, ANY LAW, USAGE OR CUSTOM TO THE CONTRARY NOTWITHSTANDING. SUCH AUTHORITY AND POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME AS THERE IS OCCASION THEREFOR. Any failure of the Lender to exercise any right hereunder or under the Collateral shall not be construed as a waiver of the right to exercise the same or any other right at any other time, all of which rights and remedies shall be cumulative and concurrent and may be pursued singly, successively or together against Borrower and/or any other obligor under the Collateral. Such rights and remedies shall not be exhausted by any exercise thereof but may be exercised as often as occasion therefor shall occur. No waiver of any rights or remedies shall be effective against the Lender until the same shall be in writing and signed by the Lender. 6 Borrower hereby waives and releases all errors, defects and imperfections in any proceedings instituted by Lender under the terms of this Note, or the Collateral, as well as all benefit that might accrue to Borrower by virtue of any present or future laws exempting any of the property covered by the Collateral or any other property, real or personal, or any part of the proceeds arising from any sale of such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil process or extension of time for payment, as well as the right of inquisition on any real estate that may be levied upon under a judgment obtained by virtue hereof, and Borrower hereby voluntarily condemns the same and authorizes the entry of such voluntary condemnation on any writ of execution issued thereon, and agrees that such real estate may be sold upon any such writ in whole or in part in any order desired by Lender. Borrower hereby waives presentment for payment, demand, notice of nonpayment, notice of protest and protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note, and agree that the liability of Borrower shall be unconditional and shall not be in any manner affected by any indulgence, extension of time, renewal, waiver or modification granted or consented to by Lender; and Borrower hereby consents to any and all extensions of time, renewals, waivers or modifications that may be granted by Lender with respect to the payment or other provisions of this Note, and to the release of the Collateral, or any part thereof, with or without notice to Borrower or affecting Borrower's liability hereunder. In addition to and not in limitation of any right which the Lender may have under applicable law or otherwise, the Borrower hereby grants and confirms to Lender a right to set off and a lien upon and security interest in all property of the Borrower now or at any time in the Lender's possession in any capacity whatsoever as security for all liabilities of the Borrower, whether created hereunder or under any prior or subsequent agreement or document. Borrower shall pay the cost of any revenue, tax or other stamps now or hereafter required by law at any time to be affixed to this Note or the Collateral; and if any taxes are imposed with respect to debts secured by mortgages, or with respect to notices evidencing debts so secured (including without limitation any personal property taxes by whatever name called imposed by any taxing authority upon persons holding this Note and the Collateral), Borrower agrees to pay to the Lender upon demand the amount of such taxes, and hereby waives any contrary provisions of any laws or rules of court now or hereafter in effect. Should this 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 of the Lender's reasonable costs, fees (including, but not limited to, reasonable attorneys' fees) and expenses resulting from such referral. Any notice or demand required or permitted by or in connection with this Note shall be given to the parties at the addresses listed above. Notwithstanding anything to the contrary, all 7 notices and demands for payment from the Lender 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. This 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 may grant an interest in the Borrower's obligations to the Lender, and shall be binding and enforceable against the Borrower and the Borrower's personal representatives, successors and assigns. If any provision or part of any provision of this 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 Note and this Note shall be construed as if such invalid, illegal or unenforceable provision or part thereof had never been contained herein, but only to the extent of its invalidity, illegality or unenforceability. The Borrower intends this to be a sealed instrument and to be legally bound hereby. All issues arising hereunder shall be governed by the laws of the Commonwealth of Pennsylvania. This Note amends and supersedes a Note given by Thomas H. McElwee, Jr. to Scarff Bros., Inc. dated July 31, 2003 in the amount of $200,000.00, an Amended and Restated Revolving Variable Rate Note given by Thomas H. McElwee, Jr. to Scarff Bros., Inc. dated November 24, 2003 in the amount of $300,000.00, and a Second Amended and Restated Revolving Variable Rate Note given by Thomas H. McElwee, Jr. and Scarff Bros., Inc. dated June 11, 2004. IN WITNESS WHEREOF, the Borrower has caused this instrument to be executed the day and year first above written. Thomas H. McElwee, Jr. ADH:slb #364011.1 (13106.014) 8 ?X ti, 6,? ?3 EXPLANATION AND WAIVER OF RIGHTS REGARDING CONFESSION OF JUDGMENT 1. On the date hereof, THOMAS H. McELWEE, JR., with an address of 250 Jumper Road, Newburg, PA 17240 (the "Obligor") is signing and delivering to SCARFF BROS., INC., a Maryland corporation (the "Lender"), with an address of 2300 Fallston Road, Fallston, MD 21047, a Third Amended and Restated Revolving Variable Rate Note in the amount of $750,000.00 (as the same may be renewed, modified, amended, extended, restated or replaced, whether one or more, the "Obligation"). The Obligor has been advised by the Lender and by the Obligor's legal counsel, if applicable that the Obligation contains a clause that provides that the Lender may confess judgment against the Obligor. The Obligor has read the Obligation and clearly and specifically understands that by signing the Obligation which contains such confession of judgment clause: A. THE OBLIGOR IS AUTHORIZING THE LENDER TO ENTER A JUDGMENT AGAINST THE OBLIGOR AND IN FAVOR OF THE LENDER, WHICH WILL GIVE THE LENDER A LIEN UPON ANY REAL ESTATE WHICH THE OBLIGOR MAY OWN IN ANY COUNTY WHERE THE JUDGMENT IS ENTERED. B. THE OBLIGOR IS GIVING UP AN IMPORTANT RIGHT TO ANY NOTICE OR OPPORTUNITY FOR A HEARING BEFORE THE ENTRY OF THIS JUDGMENT ON THE RECORDS OF THE COURT. C. THE OBLIGOR IS AGREEING THAT THE LENDER MAY ENTER THIS JUDGMENT AND UNDERSTANDS THAT THE OBLIGOR WILL BE UNABLE TO CONTEST THE VALIDITY OF THE JUDGMENT, SHOULD THE LENDER ENTER IT, UNLESS THE OBLIGOR SUCCESSFULLY CHALLENGES ENTRY OF THE JUDGMENT ON PROCEDURAL GROUNDS THROUGH A PETITION TO OPEN OR STRIKE THE JUDGMENT, WHICH WILL REQUIRE THE OBLIGOR TO RETAIN COUNSEL AT THE OBLIGOR'S EXPENSE. D. THE OBLIGOR IS GIVING UP AN IMPORTANT RIGHT TO ANY NOTICE OR OPPORTUNITY FOR A HEARING BEFORE THE LENDER MAY REQUEST AND USE THE POWER OF THE STATE GOVERNMENT TO DEPRIVE THE OBLIGOR OF ITS PROPERTY PURSUANT TO THE JUDGMENT BY SEIZING OR HAVING THE SHERIFF OR OTHER OFFICIAL SEIZE THE OBLIGOR'S LENDER ACCOUNTS, INVENTORY, EQUIPMENT, FURNISHINGS, OR ANY OTHER PERSONAL PROPERTY THAT THE OBLIGOR MAY OWN, TO SATISFY THE OBLIGATION; AND E. THE OBLIGOR MAY BE IMMEDIATELY DEPRIVED OF THE USE OF ANY PROPERTY THAT IS SEIZED BY THE LENDER PURSUANT TO THE JUDGMENT WITHOUT NOTICE OR HEARING, AND THE PROCEDURAL RULES OF THE COURT SYSTEM OF THE COMMONWEALTH OF PENNSYLVANIA DO NOT GUARANTEE THAT THE OBLIGOR WILL RECEIVE A PROMPT HEARING AFTER THE OBLIGOR'S PROPERTY IS SEIZED. 2. The Obligor knows and understands that it is the confession of judgment clause in the Obligation which gives the Lender the rights described in subsection A. through E. of Section 1 above. 3. Fully and completely understanding the rights which are being given up if the Obligor signs the Obligation containing the confession of judgment, the Obligor nevertheless freely, knowingly and voluntarily waives said rights and chooses to sign the Obligation. 4. The Obligor acknowledges that the proceeds of the Obligation are to be used for business purposes. Dated as of this 11th day of March, 2005. PRIOR TO SIGNING THE OBLIGATION, THE OBLIGOR READ THIS EXPLANATION AND WAIVER, AND FULLY UNDERSTANDS ITS CONTENTS. WITNESS: ADH:slb #364042.1 (13106.014) Thomas H. McElwee, Jr. 2 COMMONWEALTH OF PENNSYLVANIA SS: COUNTY OF LANCASTER On this 11`l' day of March, 2005, before me, the undersigned officer, personally appeared THOMAS H. McELWEE, JR., known to me to be the person whose name is subscribed to the within instrument, and that said person acknowledged that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. Notary COMMONWEALTH OF PENNSYLVANIA PgitJudyAnn oh, Noary Public City of Lancaster, Lancaster County My Commission Expires Oct. 14, 2008 Member, Pennsylvania Association of Notaries ?xtiJb?-r ? THIRD AMENDED AND RESTATED GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (the "Guaranty") is given by BECKY S. McELWEE (the "Guarantor") for the benefit of SCARFF BROS., INC., with a mailing address of 2300 Fallston Road, Fallston, MD 21047 (the "Lender") with respect to the obligations of Thomas H. McElwee, Jr. (the "Borrower") to Lender. Borrower obtained a loan from Lender evidenced by a revolving variable rate note in the face amount of $200,000.00 dated July 31, 2003, as amended by the Amended and Restated Revolving Variable Rate Note dated November 24, 2004 in the face amount of $300,000.00, as amended by Second Amended and Restated Revolving Variable Rate Note dated June 11, 2004 in the face amount of $500,000.00 and as amended by the Third Amended and Restated Revolving Variable Rate Note dated the date hereof in the face amount of $750,000.00 (the "Note"). The Guarantor is the spouse of Borrower and has requested Lender to make the Loan available to Borrower, and in consideration for the providing of the Loan, Guarantor gives the following guaranty and indemnification to and for the benefit of Lender. This Guaranty is secured by a Mortgage covering property located at 250 Jumper Road, Newburg, PA 17240, and 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania, and a Mortgage covering property located at 2807 Wayne Road, Chambersburg, PA 17201. Section 1. THE GUARANTY. Guarantor guarantees, as surety: (a) payment of any and all sums now or hereafter due and owing to Lender by Borrower as a result of or in connection with the Loan and all renewals, refinancings, extensions, substitutions, amendments, and modifications thereof, including, but not limited to, all amounts of principal, interest, penalties, reimbursements, advancements, escrows, and fees; (b) that all sums now or hereafter due and owing by Borrower to Lender as a result of or in connection with the Loan shall be paid when and as due, whether by reason of installment, maturity, acceleration or otherwise, time being of the essence; and (c) the timely, complete, continuous, and strict performance and observance by Borrower of any and all of the terms, covenants, agreements and conditions contained in any and all existing or future documents, instruments, agreements, and writings of every kind, nature, type, and variety which evidence, reflect, embody, give rise to or secure any and all existing and future indebtedness, liabilities, and obligations of any kind of Borrower to Lender as a result of or in connection with the Loan. As used in this Guaranty, the term "Obligations" shall refer to the obligations of payment, performance, and indemnification which Guarantor has undertaken and assumed pursuant to this Guaranty, both as described in this Section and in other Sections of this Guaranty. Section 2. NATURE OF THE GUARANTY. This Guaranty: (a) is (i) irrevocable, (ii) absolute and unconditional, (iii) direct, immediate, and primary, and (iv) one of payment and not just collection; and (b) makes Guarantor surety to Lender with respect to the Obligations and the equivalent of a co-obligor with Borrower. Section 3. CONFESSION OF JUDGMENT. Upon the occurrence of any of the events authorizing acceleration of the Obligations provided in Section 15 of this Guaranty, Guarantor irrevocably and unconditionally authorizes and empowers any attorney admitted to practice before any court of record in the United States to appear on behalf of Guarantor in any court in one or more proceedings or before any clerk thereof or prothonotary or other court official and to appear for, confess and enter judgment against Guarantor at any time, with or without averment of default, with or without complaint filed, and without prior notice or opportunity of Guarantor for prior hearing, in favor of Lender in the full amount of the obligations which are due or which may become due under this Guaranty, plus court costs, plus attorneys' fees equal to five percent (5%) of the amount which is due or which may become due (but in no event less than $5,000.00), with release of all errors and without right of appeal. Guarantor waives the benefit of any and every statute, ordinance, or rule of court, whether now in force or hereafter enacted, which may be lawfully waived conferring upon Guarantor any right or privilege of exemption, homestead rights, appraisement, 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 which Guarantor has given for any attorney admitted to practice before any court of record in the United States, or the clerk of such court, to appear for and confess judgment against Guarantor shall be a continuous authority which shall not be exhausted or extinguished by any one or more exercises or imperfect exercises thereof or by any one or more judgments entered pursuant thereto and may be exercised on one or more occasions and at such times and from time to time and in the same or different courts or jurisdictions as Lender may consider necessary or advisable. GUARANTOR HEREBY ACKNOWLEDGES THAT THE CONFESSION OF JUDGMENT PROVISIONS HEREIN CONTAINED WHICH AFFECT AND WAIVE CERTAIN LEGAL RIGHTS OF GUARANTOR HAS BEEN READ, UNDERSTOOD AND VOLUNTARILY AGREED TO BY GUARANTOR. Section 4. ACCURACY OF REPRESENTATIONS. Guarantor guarantees that each and every representation and warranty made by Borrower or by Guarantor to Lender both before and after the date of this Guaranty are and shall continue to be true, correct, accurate, complete, and not knowingly misleading, and Guarantor shall indemnify and hold Lender harmless from any loss, cost, or expense which Lender may suffer, sustain or incur as a result of any representation or statement of Borrower or of Guarantor being materially false, incorrect, inaccurate, incomplete, or knowingly misleading. Section 5. FORECLOSURE INDEMNIFICATION. In the event that any real or personal property secures the obligations of Borrower to Lender, and Lender or any affiliate of Lender acquires the same after a default by borrower or Guarantor in full or partial satisfaction of the obligations of Borrower to Lender, Guarantor shall indemnify and hold Lender harmless from any loss, cost, or expense which Lender may sustain as a result of. (a) selling the real or personal property so acquired for less than the total sums owed with respect to the obligations of Borrower to Lender, provided, however, that any such sale by Lender is done in a commercially reasonable 2 manner; or (b) any action brought against Lender under §458 or §544(b) of the United States Bankruptcy Code, as amended, on the ground that the consideration paid by Lender for the real or personal property was not "reasonably equivalent value," within the contemplation of §548 or §544(b) of the United States Bankruptcy Code, as amended, or "fair consideration," within the contemplation of any applicable state fraudulent conveyance or transfer law or was otherwise inadequate. Section 6. LENDER NEED NOT PURSUE OTHER RIGHTS BEFORE ENFORCING GUARANTY. Lender shall be under no obligation to pursue Lender's rights against Borrower or against any other guarantor or other person that is now or hereafter liable upon or in connection with any of the obligations of any Guarantor or Borrower to Lender or that has granted any lien or security interest to or for the benefit of Lender to secure any of the obligations of any Guarantor or Borrower to Lender ("Other Obligor") or any collateral of any Other Obligor before pursuing Lender's rights against Guarantor. Section 7. RIGHT OF LENDER TO ACT WITH RESPECT TO BORROWER, OTHER OBLIGORS, AND COLLATERAL. Guarantor hereby assents to any and all terms and agreements between Lender and Borrower or between Lender and any Other Obligor, and all amendments and modifications thereof, whether presently existing or hereafter made and whether oral or in writing. Lender may, without compromising, impairing, diminishing, or in any way releasing Guarantor from the obligations and without notifying or obtaining the prior approval of Guarantor, at any time or from time to time: (a) waive or excuse any default by Borrower or any Other Obligor, or delay in the exercise by Lender of any or all of Lender's rights or remedies with respect to such default; (b) grant extensions of time for payment or performance by Borrower or any Other Obligor; (c) release, substitute, exchange, surrender, or add collateral of Borrower or any Other Obligor, or waive, release, or subordinate, in whole or in part, any lien or security interest held by Lender on any real or personal property securing payment or performance, in whole or in part, of the obligations of Borrower or any Other Obligor to Lender; (d) release Borrower or any Other Obligor; (e) apply payments made by Borrower, or by any Other Obligor, to any sums owed by Borrower or any Other Obligor to Lender, in any order or manner, or to any specific account or accounts, as Lender may elect; and (f) modify, change, renew, extend, or amend, in any respect Lender's agreement with Borrower or any Other Obligor, or any document, instrument, or writing embodying or reflecting the same. Section 8. WAIVERS BY GUARANTOR. Guarantor waives: (a) any and all notices whatsoever with respect to this Guaranty or with respect to any of the obligations of Borrower to Lender, including, but not limited to, notice of: (i) Lender's acceptance hereof or Lender's intention to act, or Lender's action, in reliance hereon; (ii) the present existence or future incurring of any of the obligations of Borrower to Lender or any terms or amounts thereof or any change therein; (iii) any default by Borrower or any Other Obligor; and (iv) the obtaining or release of any guaranty or surety agreement, pledge, assignment, or other security for any of the obligations of Borrower to Lender; (b) presentment and demand for payment of any sum due 3 from Borrower or any Other Obligor and protest of nonpayment; and (c) demand for performance by Borrower or any Other Obligor. Section 9. UNENFORCEABILITY OF OBLIGATIONS OF BORROWER. This Guaranty shall be valid, binding, and enforceable even if the obligations of Borrower to Lender which are guarantied hereby are now or hereafter become invalid or unenforceable for any reason. Section 10. NO CONDITIONS PRECEDENT. This Guaranty shall be effective and enforceable immediately upon its execution. Guarantor acknowledges that no unsatisfied conditions precedent to the effectiveness and enforceability of this Guaranty exist as of the date of its execution and that the effectiveness and enforceability of this Guaranty is not in any way conditioned or contingent upon any event, occurrence, or happening, or upon any condition existing or coming into existence either before or after the execution of this Guaranty. Section 11. INFORMATION CONCERNING BORROWER, COLLATERAL, OR OTHER OBLIGORS. Lender shall have no present or future duty or obligation to discover or to disclose to Guarantor any information, financial or otherwise, concerning Borrower, any Other Obligor. Guarantor waives any right to claim or assert any such duty or obligation on the part of the Lender. Guarantor agrees to obtain all information which Guarantor considers either appropriate or relevant to this Guaranty from sources other than Lender and to become and remain at all times current and continuously apprised of all information concerning Borrower, Other Obligors. Section 12. CUMULATIVE LIABILITY. The liability of Guarantor under this Guaranty shall be cumulative to, and not in lieu of, Guarantor's liability under any other document or in any capacity other than as Guarantor hereunder. Section 13. OBLIGATIONS UNCONDITIONAL. The payment and performance of the Obligations shall be the absolute and unconditional duty and obligation of Guarantor, and shall be independent of any defense or any rights of set-off, recoupment or counterclaim which Guarantor might otherwise have against Lender, and Guarantor shall pay and perform the Obligations, free of any deductions and without abatement, diminution or set-off; and until such time as the Obligations have been fully paid and performed, Guarantor: (a) shall not suspend or discontinue any payments provided for herein; (b) shall perform and observe all of the covenants and agreements contained in this Guaranty; and (c) shall not terminate or attempt to terminate this Guaranty for any reason. No delay by Lender in making demand on Guarantor for satisfaction of the Obligations shall prejudice or in any way impair Lender's ability to enforce this Guaranty. Section 14. DEFENSES AGAINST DEBTOR. Guarantor waives any right to assert against Lender any defense (whether legal or equitable), claim, counterclaim, or right of set-off 4 or recoupment which Guarantor may now or hereafter have against Borrower or any Other Obligor. Section 15. EVENTS AUTHORIZING ACCELERATION OF THE OBLIGATIONS. If any of the following shall happen or occur, Lender, without notice or demand, may accelerate and call due the Obligations, even if Lender has not accelerated and called due the sums owed to Lender by Borrower: (a) the occurrence of an Event of Default under the Note or Security Agreement between Borrower and Lender dated even date herewith; (b) a failure of Guarantor to perform any covenant or agreement contained in this Guaranty that is not cured within ten (10) days after written notice thereof is provided to Guarantor. Section 16. EXPENSES OF COLLECTION AND ATTORNEYS' FEES. Guarantor shall pay all costs and expenses incurred by Lender in collecting sums due under this Guaranty, including, but not limited to, the costs of any lien, judgment or other record searches, appraisals, travel expenses and the like. In addition, if this Guaranty is referred to an attorney for collection, whether or not judgment has been confessed or suit has been filed, Guarantor shall pay all of Lender's costs, fees (including, but not limited to, Lender's attorneys' fees, charges and expenses) and all other expenses resulting from such referral (to the extent not prohibited by law). Section 17. INTEREST RATE AFTER JUDGMENT. If judgment is entered against Guarantor on this Guaranty, the amount of the judgment entered (which may include principal, interest, charges, fees, and costs) shall bear interest at the higher of the default interest rate set forth in the documents governing the obligations of Borrower to Lender under the Loan, as determined on the date of the entry of the judgment, or the legal rate of interest then applicable to judgments in the jurisdiction in which judgment was entered. Section 18. ENFORCEMENT DURING BANKRUPTCY. Enforcement of this Guaranty shall not be stayed or in any way delayed as a result of the filing of a petition under the United States Bankruptcy, as amended, by or against Borrower. Should Lender be required to obtain an order of the United States Bankruptcy Court to begin enforcement of this Guaranty after the filing of a petition under the United States Bankruptcy Code, as amended, by or against Borrower, Guarantor hereby consents to this relief and agrees to file or cause to be filed all appropriate pleadings to evidence and effectuate such consent and to enable Lender to obtain the relief requested. Section 19. REMEDIES CUMULATIVE. All of Lender's rights and remedies shall be cumulative and any failure of Lender to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time, and from time to time, thereafter. Section 20. DISCHARGE OF GUARANTY. This Guaranty shall not be discharged and Guarantor shall not be released from liability until all Obligations have been satisfied in full and the satisfaction of the Obligations is not subject to challenge or contest. If all or any portion of the Obligations are satisfied and Lender is required for any reason to pay to any person the sums used to satisfy the Obligations, the Obligations shall remain in effect and enforceable to the extent thereof. Section 21. TERMINATION. This Guaranty may not at any time be terminated by Guarantor. This Guaranty may be terminated only in writing by Lender and upon such terms and conditions as Lender may impose. Section 22. RIGHTS OF SUBROGATION, ETC. In the event Guarantor pays any sum to or for the benefit of Lender pursuant to this Guaranty, Guarantor shall have no right of contribution, indemnification, exoneration, reimbursement, subrogation or other right or remedy against or with respect to Borrower, any Other Obligor, and hereby waives and releases all and any such rights which they may now or hereafter have. Section 23. SUBORDINATION OF CERTAIN INDEBTEDNESS. If Guarantor advances any sums to Borrower or its successors or assigns or if Borrower or its successors or assigns are now or shall hereafter become indebted to Guarantor, such sums and indebtedness shall be subordinate in all respects to the amounts now or hereafter due and owing to Lender by Borrower. Section 24. CHOICE OF LAW. The laws of the Commonwealth of Pennsylvania (excluding, however, conflict of law principles) shall govern and be applied to determine all issues relating to this Guaranty and the rights and obligations of the parties hereto, including the validity, construction, interpretation, and enforceability of this Guaranty and its various provisions and the consequences and legal effect of all transactions and events which resulted in the issuance of this Guaranty or which occurred or were to occur as a direct or indirect result of this Guaranty having been executed. Section 25. CONSENT TO JURISDICTION, AGREEMENT AS TO VENUE. Guarantor irrevocably consents to the non-exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania and of the United States District Court for the Eastern District of Pennsylvania. Guarantor agrees that venue shall be proper in any court of the Commonwealth of Pennsylvania selected by Lender or in the United States District Court for the Eastern District of Pennsylvania and waives any right to object to the maintenance of a suit in any of the state or federal courts of the Commonwealth of Pennsylvania on the basis of improper venue or of inconvenience of forum. Section 26. ACTIONS AGAINST LENDER. Any action brought by Guarantor against Lender which is based, directly or indirectly, on this Guaranty or any matter in or related to this Guaranty, including, but not limited to, the obligations of Borrower to Lender, or the administration, collection, or enforcement thereof, shall be brought only in the courts of the Commonwealth of Pennsylvania. Guarantor shall not file a counterclaim against Lender in a suit 6 brought by Lender against Guarantor in a state other than the Commonwealth of Pennsylvania unless under the rules of procedure of the court in which 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 Lender. Guarantor agrees that any forum other than the Commonwealth of Pennsylvania is an inconvenient forum and that a suit brought by Guarantor against Lender in a court of any state other than the Commonwealth of Pennsylvania should be forthwith dismissed or transferred to a court located in the Commonwealth of Pennsylvania by that court. Section 27. INVALIDITY OF ANY PART. If any provision or part of any provision of this Guaranty shall for any reason be held invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions or the remaining part of any effective provisions of this Guaranty, and this Guaranty shall be construed as if such invalid, illegal, or unenforceable provision or part thereof had never been contained herein, but only to the extent of its invalidity, illegality, or unenforceability. Section 28. AMENDMENT OR WAIVER. This Guaranty may be amended only by a writing duly executed by Guarantor and Lender. No waiver by Lender of any of the provisions of this Guaranty or any of the rights or remedies of Lender with respect hereto shall be effective or enforceable unless in writing. Section 29. BINDING NATURE. This Guaranty shall inure to the benefit of and be enforceable by Lender and Lender's successors and assigns and any other person to whom Lender may grant an interest in the obligations of Borrower to Lender, and shall be binding upon and enforceable against Guarantor and Guarantor's personal representatives, successors and assigns. Section 30. ASSIGNABILITY. This Guaranty or an interest therein may be assigned by Lender, or by any other holder, at any time or from time to time. Section 31. NOTICES. Any notice or demand required or permitted by or in connection with this Guaranty, without implying the obligation to provide any notice or demand, shall be in writing at the address set forth above or to such other address as may be hereafter specified by written notice to Lender by Guarantor. Any such notice or demand shall be deemed to be effective as of the date of hand delivery or facsimile transmission, one (1) day after dispatch if sent by telegram, mailgram, overnight delivery, express mail or federal express, or three (3) days after mailing if sent by first class mail with postage prepaid. Section 32. FINAL AGREEMENT. This Guaranty contains the final and entire agreement between Lender and Guarantor with respect to the guaranty by Guarantor of Borrower's obligations to Lender. There are no separate oral or written understandings between Lender and Guarantor with respect thereto. 7 Section 33. TENSE GENDER DEFINED TERMS CAPTIONS. As used herein, the plural shall refer to and include the singular, the singular shall refer to and include the plural, and the use of any gender shall include and refer to any other gender. If more than one person has executed this Guaranty, the term "Guarantor" shall mean all such persons collectively or any one or more of such persons individually or collectively, as the case may be and as the context may require. All captions are for the purpose of convenience only. Section 34. SEAL AND EFFECTIVE DATE. This Guaranty is an instrument executed under seal and is effective and enforceable as of the date set forth below, independent of the date of actual execution. IN WITNESS WHEREOF, and intending to be legally bound hereby, Guarantor has executed this Guaranty under seal this 11th day of March, 2005. WITNESS: t ADH:slb #364045.1 (13106.014) Becky S. McElwee 8 EXPLANATION AND WAIVER OF RIGHTS REGARDING CONFESSION OF JUDGMENT 1. On the date hereof, BECKY S. McELWEE, with an address of 250 Jumper Road, Newburg, PA 17240 (the "Obligor") is signing and delivering to SCARFF BROS., INC., a Maryland corporation (the "Lender"), with an address of 2300 Fallston Road, Fallston, MD 21047, a Third Amended and Restated Guaranty Agreement for the obligations of Thomas H. McElwee, Jr. under a Third Amended and Restated Revolving Variable Rate Note in the amount of $750,000.00 (as the same may be renewed, modified, amended, extended, restated or replaced, whether one or more, the "Obligation"). The Obligor has been advised by the Lender and by the Obligor's legal counsel, if applicable that the Obligation contains a clause that provides that the Lender may confess judgment against the Obligor. The Obligor has read the Obligation and clearly and specifically understands that by signing the Obligation which contains such confession of judgment clause: A. THE OBLIGOR IS AUTHORIZING THE LENDER TO ENTER A JUDGMENT AGAINST THE OBLIGOR AND IN FAVOR OF THE LENDER, WHICH WILL GIVE THE LENDER A LIEN UPON ANY REAL ESTATE WHICH THE OBLIGOR MAY OWN IN ANY COUNTY WHERE THE JUDGMENT IS ENTERED. B. THE OBLIGOR IS GIVING UP AN IMPORTANT RIGHT TO ANY NOTICE OR OPPORTUNITY FOR A HEARING BEFORE THE ENTRY OF THIS JUDGMENT ON THE RECORDS OF THE COURT. C. THE OBLIGOR IS AGREEING THAT THE LENDER MAY ENTER THIS JUDGMENT AND UNDERSTANDS THAT THE OBLIGOR WILL BE UNABLE TO CONTEST THE VALIDITY OF THE JUDGMENT, SHOULD THE LENDER ENTER IT, UNLESS THE OBLIGOR SUCCESSFULLY CHALLENGES ENTRY OF THE JUDGMENT ON PROCEDURAL GROUNDS THROUGH A PETITION TO OPEN OR STRIKE THE JUDGMENT, WHICH WILL REQUIRE THE OBLIGOR TO RETAIN COUNSEL AT THE OBLIGOR'S EXPENSE. D. THE OBLIGOR IS GIVING UP AN IMPORTANT RIGHT TO ANY NOTICE OR OPPORTUNITY FOR A HEARING BEFORE THE LENDER MAY REQUEST AND USE THE POWER OF THE STATE GOVERNMENT TO DEPRIVE THE OBLIGOR OF ITS PROPERTY PURSUANT TO THE JUDGMENT BY SEIZING OR HAVING THE SHERIFF OR OTHER OFFICIAL SEIZE THE OBLIGOR'S LENDER ACCOUNTS, INVENTORY, EQUIPMENT, FURNISHINGS, OR ANY OTHER PERSONAL PROPERTY THAT THE OBLIGOR MAY OWN, TO SATISFY THE OBLIGATION; AND E. THE OBLIGOR MAY BE IMMEDIATELY DEPRIVED OF THE USE OF ANY PROPERTY THAT IS SEIZED BY THE LENDER PURSUANT TO THE JUDGMENT WITHOUT NOTICE OR HEARING, AND THE PROCEDURAL RULES OF THE COURT SYSTEM OF THE COMMONWEALTH OF PENNSYLVANIA DO NOT GUARANTEE THAT THE OBLIGOR WILL RECEIVE A PROMPT HEARING AFTER THE OBLIGOR'S PROPERTY IS SEIZED. 2. The Obligor knows and understands that it is the confession of judgment clause in the Obligation which gives the Lender the rights described in subsection A. through E. of Section 1 above. 3. Fully and completely understanding the rights which are being given up if the Obligor signs the Obligation containing the confession of judgment, the Obligor nevertheless freely, knowingly and voluntarily waives said rights and chooses to sign the Obligation. 4. The Obligor acknowledges that the proceeds of the Obligation are to be used for business purposes. Dated as of this 11th day of March, 2005. PRIOR TO SIGNING THE OBLIGATION, THE OBLIGOR READ THIS EXPLANATION AND WAIVER, AND FULLY UNDERSTANDS ITS CONTENTS. WITNESS: -? Becky S. McElwee ADH:slb #364028.1 (13106.014) 2 COMMONWEALTH OF PENNSYLVANIA SS: COUNTY OF LANCASTER On this I lth day of March, 2005, before me, the undersigned officer, personally appeared BECKY S. McELWEE, known to me to be the person whose name is subscribed to the within instrument, and that said person acknowledged that she executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. COMMONWEALTH OF PENNSYLVANIA Judy Ann Poglitnsch Notary Public City of Lancaster, Lancaster County My Commission Expires Oct. 14, 2008 Member, Pennsylvania Association of Notaries x Prepared By & Return To: Aaron D. Hollis, Esquire Blakinger, Byler & Thomas, P.C. 28 Penn Square Lancaster, PA 17603 (717) 299-1100 F4 n T? 7 s r+ t r r) t ? ?; mt3R 1 y ??? 10 ??i Lvv I ? OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (Cumberland County) THIS OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (the "Mortgage") made this 11th day of March, 2005, between THOMAS H. McELWEE, JR. and BECKY S. McELWEE, adult individuals, with an address of 250 Jumper Road, Newburg, PA 17240 (the "Mortgagor"), AND SCARFF BROS., INC., a Maryland corporation, with an address of 2300 Fallston Road, Fallston, MD 21047 (the "Mortgagee"). WITNESSETH THAT: Mortgagor has executed and delivered to Mortgagee a Third Amended and Restated Revolving Variable Rate Note in the face amount of $750,000.00 dated the date hereof (the "Note") wherein Mortgagor promises to pay to Mortgagee the aggregate principal sum of $750,000.00, with interest thereon at the rates and payable at the times, in the manner and according to the terms and conditions specified in the Note, all of which are incorporated herein by reference. THIS MORTGAGE IS AN OPEN-END MORTGAGE WITHIN THE MEANING OF PENNSYLVANIA LAW, 42 Pa. C.S.A. § 8143 AND 8144, THE OPEN-END MORTGAGE STATUTE. IT SECURES FUTURE ADVANCES MADE BY MORTGAGEE TO OR ON ACCOUNT OF MORTGAGOR AS PROVIDED IN THE NOTE. ANYTHING HEREIN CONTAINED TO THE CONTRARY NOTWITHSTANDING, $750,000.00 IS THE MAXIMUM AMOUNT OF INDEBTEDNESS (EXCLUSIVE OF INTEREST AND ADVANCES FOR THE PAYMENT OF TAXES, INSURANCE AND OTHER COSTS OR CHARGES HEREIN AUTHORIZED) WHICH MAY BE SECURED BY THIS MORTGAGE AT ANY TIME. r 0 `?r;j E DEFINED TERMS The following capitalized words and terms shall have the following meanings when used in this Mortgage. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Mortgage shall have the meanings attributed to such terms in the Uniform Commercial Code. "Collateral" shall mean that portion of the Mortgaged Property that may be collateral subject to the Uniform Commercial Code. "Debtor" shall mean Mortgagor. "Environmental Laws and Regulations" shall mean all laws, regulations, policies, and/or orders pertaining to the protection of health and welfare of persons and property and all state or federal common law or other causes of action relating to liability from use or misuses of Hazardous Substances (hereinafter defined). These include, but are not limited to, laws and regulations governing the manufacture, generation, storage, accumulation, control, treatment, processing, spilling, leaking, emitting, discharging, disposal, dispersal, transporting, escape or other handling of waste, hazardous waste, oil and petroleum products, toxic substances, liquids, Hazardous Substances, pollutants, contaminants, solid wastes, effluent, or sludges, as defined and regulated under: the Federal Resource Conservation and Recovery Act; Safe Drinking Water Act; Clean Air Act; Refuse Act of 1899; Clean Water Act; Federal Insecticide, Fungicide and Rodenticide Act; Toxic Substances Control Act; Hazardous Materials Transportation Act; Surface Mining Control and Reclamation Act; Atomic Energy Act; Uranium Mill Tailings Control Act of 1978, as amended; Low-Level Radioactive Waste Policy Act; Nuclear Waste Policy Act of 1982; National Environmental Policy Act; Federal Hazard Communication Standard (29 C.F.R. §1910.1200); Food, Drug & Cosmetic Act; Comprehensive Environmental Response, Compensation, and Liability Act, as amended; Emergency Planning and Community Right-To-Know Act; Solid Waste Disposal Act; Pennsylvania Hazardous Sites Cleanup Act; Pennsylvania Solid Waste Management Act; Pennsylvania Clean Streams Law; Pennsylvania Sewage Facilities Act (including all subtitles); Storage Tank and Spill Prevention Act; or other federal, state, or local laws, rules, policies or orders of general application, ordinances or the like having similar purposes. "Event of Default" shall mean: A. The failure of Mortgagor to pay any installment of interest or principal and interest, or any other sum required to be paid under the Note within ten (10) days after it is due; or B. The failure of Mortgagor to observe or perform any other of the covenants or agreements or conditions herein contained, required to be kept or performed or observed 2 BK109 5 7? by Mortgagor and such failure shall continue unremedied for a period of ten (10) days after the giving of notice thereof to Mortgagor; or C. Any material representation or warranty made herein by Mortgagor shall prove to be untrue or inaccurate in any material respect; or D. The occurrence of an Event of Default as specified in the Note, the Security Agreement, the Guaranty Agreement, or other Loan Documents. "Guaranty Agreement" shall mean the Third Amended and Restated Guaranty Agreement given by Becky S. McElwee for the obligations of Thomas H. McElwee, Jr. dated the date hereof. "Hazardous Substance" shall mean (1) any chemical, solid, liquid, gas, or other substance having the characteristics identified in, listed under, or designated pursuant to all Environmental Laws and Regulations; (2) petroleum, crude oil, waste oil, solvents, gasoline, natural gas, liquefied natural gas, synthetic fuel, or other petroleum, oil, or gas based products, nuclear, radioactive, or atomic substances, mixtures, wastes, compounds, materials, elements, products, or matters; (3) any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste (including materials to be recycled, reconditioned or reclaimed); (4) any other substance identified in any present or future law as presenting an imminent and substantial danger to the public health or welfare or to the environment, or as otherwise requiring special handling, collection, storage, treatment, disposal, or transportation; (5) and any other substance, mixture, waste, raw materials, ore, pollutants, contaminants, compound, material, element, product or matter that requires or may reasonably be foreseen to require an order requiring cost of clean up. "Indebtedness" shall mean the obligations of Mortgagor to Mortgagee under the Note and Guaranty Agreement.. "Leases" shall mean all leases or subleases of the Mortgaged Property, now existing or hereafter created and all extensions and renewals thereof and substitutions therefor, independent of the term or duration thereof and whether or not evidenced by a written document. "Loan" shall mean the loan made to Mortgagor by Mortgagee in the amount of $750,000.00 evidenced by the Note. "Loan Documents" shall mean the Note, the Guaranty Agreement, the Security Agreement, this Mortgage and any other document executed by Mortgagor in favor of Mortgagee. "Mortgaged Property" shall mean all of Mortgagor's right, title and interest in: A. the Property; and 3 ' 1 _ '773 B. all buildings and other improvements erected or hereafter erected on the Property; and C. all fixtures and any appliances, machinery, furniture, furnishings and equipment of any nature whatsoever, belonging to Mortgagor and other articles of personal property belonging to Mortgagor now or at any time hereafter installed in, attached to, delivered to or situated in or upon the Property or any other buildings and improvements now or hereafter erected thereon, or used or intended to be used in connection with the Property or in the operation of any improvements, or business owned by Mortgagor, or in the operation or maintenance of any improvements or business situate on the Property, whether or not the personal property owned by Mortgagor is or shall be affixed thereto; and D. all building materials, fixtures, building machinery and building equipment delivered on site to the Property during the course of, or in connection with, construction of, or reconstruction of, or remodeling of any buildings and improvements; and E. any and all easements, rights-of-way, tenements, hereditaments and appurtenances belonging to the above-described Property or any part thereof hereby mortgaged or intended so to be, or in any way appertaining thereto, and all streets, alleys, passages, ways, water courses, and all easements and covenants now existing or hereafter created for the benefit of the Mortgagor or any subsequent tenant of the Property over ground adjoining the Property and all rights to enforce the maintenance thereof, and all other rights, liberties, and privileges of whatsoever kind or character, and the reversions and remainders, income, rents, issues and profits arising therefrom, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, at law or in equity, of the Mortgagor in and to the above-described Property or any part thereof; and F. all proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including without limitation, proceeds of insurance and condemnation awards; and G. all substitutes and replacements for, accessions, attachments, and other additions to, and tools, parts, and equipment used in connection with any of the above; and H. all rents with the right to collect such rents at any time for application to the Indebtedness and to utilize any collection or enforcement rights or remedies which may be available to the Mortgagor under the law or any of the Leases but without any duty or obligation to perform on behalf of the Mortgagor any of the Mortgagor's duties or obligations to any of the Leases; and 1. all property similar to the above hereafter acquired by Mortgagor. 4 -7 1 "Note" shall mean the Third Amended and Restated Revolving Variable Rate Note in the face amount of $750,000.00 dated the date hereof and executed by Mortgagor in favor of Mortgagee as may be amended, replaced or increased from time to time. "Property" shall mean the real property located at 250 Jumper Road, Newburg, PA 17240 and 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania, as more fully described on Exhibit A attached hereto. "Secured Party" shall mean Mortgagee. "Security Agreement" shall mean the Second Amended and Restated Security Agreement between Mortgagor and Mortgagee bearing even date herewith. NOW THEREFORE, in consideration of the Loan, and as security for payment to Mortgagee of the Indebtedness, and all other sums provided for in this Mortgage, the Note or the Guaranty Agreement according to their respective terms and conditions, and for performance of the agreements, conditions, covenants, provisions and stipulations contained herein and therein, Mortgagor has granted, conveyed, bargained, sold, aliened, released, confirmed and mortgaged, and by these presents does hereby grant, convey, bargain, sell, alien, release, confirm and mortgage unto Mortgagee, its successors and assigns, all of its right, title and interest in, of and to the Mortgaged Property and hereby grants unto Mortgagee, its successors and assigns, a security interest in and to the Mortgaged Property. TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed or mentioned and intended so to be, unto Mortgagee, its successors and assigns, to its own use forever. PROVIDED ALWAYS, and this instrument is executed upon the express condition that, if Mortgagor pays to Mortgagee the principal sum, the interest thereon and all other sums payable by Mortgagor to Mortgagee as are secured hereby, in accordance with the provisions of the Note and Guaranty Agreement, at the times and in the manner specified, without deduction, fraud or delay, and Mortgagor performs and complies with all the agreements, conditions, covenants, provisions and stipulations contained therein, then this Mortgage and the estate hereby granted shall cease and become void. In the event that any interest or portion of the Mortgaged Property or title to any other part of the Mortgaged Property or any portion thereof or any interest therein is transferred or conveyed to any person or entity other than Mortgagor in any manner whatsoever, the entire Indebtedness, at the option of the Mortgagee, shall be immediately due and payable. THIS MORTGAGE is executed and delivered subject to the following covenants, conditions and agreements and Mortgagor covenants, warrants and agrees as follows: 1. PAYMENT AND PERFORMANCE. Mortgagor shall pay to Mortgagee, in accordance with the terms of the Note, the Guaranty Agreement, and this Mortgage, and any other Loan Documents, the principal and interest, and other sums therein set forth, and 5 : v , 9K 13 5 Mortgagor shall perform and comply with all the agreements, conditions, covenants, provisions and stipulations therein set forth and shall timely perform all of its obligations and duties as landlord under any of the Leases now or hereafter in effect. 2. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall keep and maintain all buildings and improvements now or at any time hereafter erected on the Mortgaged Property and the sidewalks and curbs abutting them, in good order, condition and state of repair, and will make or cause to be made, as and when necessary, all repairs, renewals and replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen. Mortgagor shall abstain from and shall not permit the commission of waste in or about the Mortgaged Property; and shall not undertake or permit any demolition or structural alterations or improvements to the Mortgaged Property without the prior written consent of the Mortgagee. 3. TAXES AND OTHER CHARGES. Mortgagor shall pay when due and payable and before interest or penalties are due thereon, without any deduction, defalcation or abatement, all taxes, assessments, water and sewer rents and all other charges or claims which may be assessed, levied, or filed at any time against the Mortgaged Property or any part thereof or against the respective interests of Mortgagor and Mortgagee therein, or which by any present or future law may have priority over the Indebtedness either in lien or in distribution out of the proceeds of any judicial sale; and provided, that if after giving written notice to Mortgagee of its intended action and upon furnishing to Mortgagee such security or bond as Mortgagee shall require, Mortgagor shall contest in good faith and by appropriate legal action the validity of any such item, or the amount thereof, then Mortgagor shall not be required to pay the item so long as the contest operates to prevent collection, sale, forfeiture, or any other loss or damage to the Mortgaged Property or Mortgagor, is maintained and prosecuted with diligence, and shall not have been terminated or discontinued adversely to Mortgagor. All costs and expenses incidental to such contest shall be paid by Mortgagor and in the event of a ruling or adjudication adverse to Mortgagor, Mortgagor shall promptly pay such taxes, assessments, water and sewer rents, charges or claims. Mortgagor shall indemnify and save harmless the Mortgagee and the Mortgaged Property from any loss or damage arising from such contest. 4. INSURANCE. The Mortgagor shall keep or require any lessee to keep all buildings and improvements now or hereafter erected upon the Mortgaged Property continuously insured for the benefit of the Mortgagee, against all loss or damage by fire, with extended coverage and against all other hazards, under a comprehensive all-risk building insurance policy, with boiler and machinery coverage and comprehensive all-risk personal property insurance, in an amount not less than the full insurable value of the Mortgaged Property with extended coverage. The policies carried shall contain the "replacement cost endorsement." The policy shall not provide for more than a $10,000.00 deductible from the loss payable for any casualty. Insurable value shall be determined, upon request of the Mortgagee, not more than once annually and by an appraiser or rating bureau satisfactory to the Mortgagee. The Mortgagee shall be listed as a Mortgagee and as loss payee on all policies required by this Mortgage in a standard Mortgagee clause in favor of Mortgagee. 6 P- Mortgagor shall also maintain general liability coverage (in an amount satisfactory to Mortgagee but not less than $1,000,000.00 property damage and $3,000,000.00 bodily injury to any one person and $3,000,000.00 bodily injury, per occurrence). In addition, the aforesaid policy shall have attached as a rider thereto, or the Mortgagor shall provide or cause to be provided by separate policy, coverage against loss or damage by vandalism and malicious mischief. During the period of any construction, reconstruction or repair of improvements to the Mortgaged Property, the Mortgagor or the Mortgagor's contractor on behalf of the Mortgagor shall maintain builder's risk insurance in an amount satisfactory to the Mortgagee, but in no event less than 100% of the costs of construction, against all risks of physical loss. A minimum amount of $1,000,000.00 property damage and $3,000,000.00 bodily injury to any one person and $3,000,000.00 bodily injury, per occurrence, shall be maintained by or on behalf of the Mortgagor's contractors. Mortgagor shall require its contractor to maintain workers' compensation insurance. Deductibles on the builder's risk insurance shall not exceed $100,000.00. Mortgagor shall maintain business interruption insurance providing coverage in such amount as is reasonably satisfactory to Mortgagee but in any event in an amount at least equal to the sum of the annual payments due under the Note and the annual payments for real estate taxes, insurance premiums and other ongoing expenses related to the Mortgaged Property. Mortgagor shall maintain workers' compensation insurance (including employer's liability insurance, if requested by Mortgagee) for all employees of Mortgagor engaged on or with respect to the Mortgaged Property, in such amount as is reasonably satisfactory to Mortgagee, or if such limits are established by law, in such amounts. The Mortgagee shall receive originals of all of said policies upon the execution of this Mortgage and upon each renewal, expansion, substitution or modification thereof, together with a current Accord Evidence of Property Insurance Certificate. Any modification of such insurance policy must be approved by the Mortgagee in writing prior to the effective date of such modification. All policies shall provide that the Mortgagee may settle all claims under all such policies and may demand, receive and receipt for all monies becoming payable thereunder. The proceeds under any policy shall be paid by the insurer to the Mortgagee as the Mortgagee's interest may appear. All of such policies shall contain provision for notice to the Mortgagee not less than thirty (30) days in advance of any cancellation of such policy, shall not be subject to contribution, and shall be for a term of at least one year at the time of execution of this Mortgage. If the insurance, or any part thereof, shall expire, or be canceled, or become void or voidable by reason of breach of any condition thereof, or if Mortgagee determines that such coverage is unsatisfactory by reason of the failure or impairment of the capital of any company in which the insurance may then be carried, Mortgagor shall place new insurance on the Mortgaged Property, satisfactory to Mortgagee. 7 trt l V `?> 5 3; Z-77 Not less than thirty (30) days prior to the expiration of any coverage required by the Mortgage, Mortgagor shall deliver to Mortgagee a duplicate policy or certificate evidencing the renewal of such coverage and the payment of all premiums. The Mortgagor shall also secure such certificates from public officials as are available for the purpose or otherwise demonstrate to the satisfaction of the Mortgagee that the Mortgaged Property is not located within an area identified by the Federal Emergency Management Agency as having "special flood hazards," as such term is used in the National Flood Insurance Act of 1968, as amended and supplemented by The Flood Disaster Protection Act of 1973, and in regulations, interpretations and rulings thereunder or in a zoned flood plain or flood hazard area as determined by local findings, determinations, ordinances, regulations or rulings, and if located therein, the Mortgagor shall secure the amount of flood insurance required by the Mortgagee in its discretion and demonstrate payment of all premiums due therefor. All insurance policies described in this Section 4 shall be written by insurance companies licensed to do business within the Commonwealth of Pennsylvania and shall be in form satisfactory to the Mortgagee, shall be issued by companies satisfactory to Mortgagee, and shall be maintained in full force and effect. 5. CASUALTY TO MORTGAGED PROPERTY. The Mortgagor shall promptly give written notice of any casualty affecting the value of the Mortgaged Property to the Mortgagee. Mortgagee may make proof of loss if not promptly done by Mortgagor. Any adjustment of a proof of loss shall require written consent of Mortgagee. The proceeds of all insurance on the Mortgaged Property shall be applied as follows: A. The Mortgagee may, at its option, apply proceeds of such insurance to prepayment of the amounts due under the Note, the Guaranty Agreement, this Mortgage, or any additional Loan Documents (any excess proceeds to be paid to Mortgagor); or B. If the Mortgagee does not exercise the option in subparagraph A. above, then: (1) The Mortgagor may, if the Mortgaged Property is partially or totally destroyed by fire, flood, windstorm or other casualty so as to render the Mortgaged Property unsuitable for Mortgagor's continued use, have the option of not replacing, restoring or repairing the damaged Mortgaged Property, but in lieu of such replacement, restoration or repair, and provided that the insurance proceeds together with any required funds of Mortgagor will prepay any remaining amounts secured hereby in full, Mortgagor may apply the full proceeds of such insurance on the Mortgaged Property toward the prepayment of the amounts secured hereby (any excess proceeds to be paid to Mortgagor); provided that the insurance proceeds, together with any required funds of Mortgagor, will prepay any remaining amounts secured hereby in full; or 8 9 10 i::-i 7UO (2) If the Mortgagor does not elect to prepay the amounts secured hereby in full, the proceeds of all such insurance shall be held by the Mortgagee in a separate insurance loss account until such time as Mortgagor shall have delivered to Mortgagee for its approval and to its satisfaction, sufficient plans, specifications, and contracts containing a detailed breakdown of the costs to replace, restore or repair the damaged Mortgaged Property. Thereafter, the Mortgagee will, upon delivery to it of a certificate of the Mortgagor setting forth the costs theretofore incurred or paid, subject to Mortgagee inspection and acceptance of the replacement, restoration, or repair of the damaged Mortgaged Property, apply so much as may be necessary of the proceeds of such insurance toward the payment of the costs of such replacement, restoration or repair. If said proceeds are not sufficient to pay in full the costs of such replacement, restoration or repair, the Mortgagor will nonetheless complete or cause to be completed the work thereof and will pay such excess cost prior to requesting Mortgagee to apply any of the proceeds of such insurance to the cost of such replacement, restoration or repair. Any balance of said proceeds of insurance remaining after the payment of all costs of such replacement, restoration or repair shall be applied toward the prepayment of the amounts secured hereby. If said amounts shall have been paid in full, any further balance of said proceeds of insurance shall be paid to the Mortgagor; provided, however, that if the Mortgagor does not elect to prepay the amounts secured hereby in full, there shall be no diminution in or postponement of future installments payable under the Note or hereunder until payment thereof in full, and the Mortgagor shall proceed promptly to replace, restore or repair the Mortgaged Property damaged or destroyed or cause said work to be done. All policies of insurance contemplated by this Mortgage, and all renewals thereof, are hereby assigned to Mortgagee as additional security for payment of the Indebtedness and Mortgagor hereby agrees that, if an Event of Default hereunder shall have occurred and be continuing, any amounts available thereunder upon cancellation or termination of any of such policies or renewals, whether in the form of return of premiums or otherwise, shall be payable to Mortgagee as assignee thereof. If Mortgagee becomes the owner of or obtains an interest in the Mortgaged Property, or any part thereof, by foreclosure or otherwise, such policies, including all right, title and interest of Mortgagor hereunder, shall become the absolute property of Mortgagee. 6. CONDEMNATION. Mortgagor hereby assigns, transfers and sets over to Mortgagee the entire proceeds of any award or claim for damage for any of the Mortgaged Property taken or damaged under the power of eminent domain or by condemnation. The proceeds of the award shall be applied in reduction of the Indebtedness unless Mortgagee elects to require Mortgagor to restore or rebuild, in which event the proceeds shall be held by Mortgagee and used to reimburse Mortgagor for the cost of restoring and rebuilding all Improvements in accordance with plans and specifications to be submitted to and approved by Mortgagee. In the event Mortgagee holds the proceeds to reimburse Mortgagor for the costs of rebuilding and restoring the premises, then the proceeds of the award shall be paid out in the same manner, and under the same terms and conditions, as provided in Section 5.B(2) hereof for the payment of insurance proceeds in reimbursement of the costs of rebuilding and restoration. If 9 SK 13 ?7 the amount of such award is insufficient to cover the cost of rebuilding and restoration, Mortgagor shall pay such cost in excess of the award before being entitled to reimbursement out of the award. Any surplus which may remain out of said award after payment of such costs of rebuilding and restoration shall, at the option of Mortgagee, be applied on account of the Indebtedness or be paid to any other party entitled thereto. 7. USE; COMPLIANCE WITH LAWS. A. Mortgagor shall comply, and shall cause each lessee under the Leases or other user of the Mortgaged Property to comply, with all laws, ordinances, regulations and orders of all federal, state, municipal and other governmental authorities having jurisdiction of the Mortgaged Property and the use made thereof and with all orders and directions of the Board of Fire Underwriters or similar body, and with all restrictions of record pertaining to the Mortgaged Property, improvements thereon and the use thereof. B. Without the prior written consent of Mortgagee, Mortgagor shall not (1) make, permit, or suffer any change to be made in the general nature of the occupancy of the Mortgaged Property; (2) initiate or acquiesce in any reclassification of the Mortgaged Property under any applicable zoning or similar laws, ordinances and regulations; or (3) make, permit or suffer any use of the Mortgaged Property that could with the passage of time result in the creation of any right of user, or any claim of adverse possession or easement on, to or against any part of the Mortgaged Property in favor of any person or the public. 8. OTHER LIENS, TRANSFERS. Without the prior written consent of Mortgagee, Mortgagor will not: A. Create, permit or suffer to exist any lien or security interest in the Mortgaged Property or any part or element thereof, or interest therein, except other liens in favor of Mortgagee. B. Sell, contract to sell, convey, alienate or transfer in any manner whatever the Mortgaged Property or any part thereof or any interest therein, whether legal or equitable, or lease, agree to lease, option or agree to option, the Mortgaged Property or any part thereof or any interest therein, whether legal or equitable, without first obtaining the written consent of the Mortgagee, which consent Mortgagee reserves the right to refuse; or be divested of title, or any interest therein, whether legal or equitable, in any manner or way, whether voluntary or involuntary. 9. INSPECTION. Mortgagee and any person authorized by Mortgagee shall have the right at any time, upon reasonable notice to Mortgagor, to enter the Mortgaged Property at any reasonable hour to inspect and photograph its condition and state of repair. 10. DECLARATION OF NO SET-OFF. Within 10 days after requested to do so by Mortgagee by notice to Mortgagor, Mortgagor shall certify to Mortgagee or to any proposed 10 s a I u `N: ?; J t3 assignee of this Mortgage, in a writing duly acknowledged, the amount of principal, interest and other charges then owing on the Indebtedness and any other indebtedness secured by prior liens, if any, and whether there are any set-offs or defenses against them. 11. SECURITY AGREEMENT. A. This Mortgage is both a real property Mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Mortgaged Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor, by executing and delivering this Mortgage grants to Mortgagee, as security for the Indebtedness, a security interest in the Collateral. Mortgagor hereby authorizes Mortgagee to file financing statements in order to create, perfect, preserve and continue the security interest(s) herein granted. This Mortgage shall also be effective as a financing statement filed as "fixture filing" for the purposes of the Uniform Commercial Code, shall cover all items of the Mortgaged Property that are or are to become fixtures, and is to be filed for record in the Recorder's Office. This Mortgage shall also be effective as a financing statement covering any other of the Mortgaged Property and may be filed in the appropriate filing or recording office. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section 11. The addresses of the Debtor and Secured Party are as set forth at the beginning of this Mortgage. The record owner of the Property is: Thomas H. McElwee, Jr. and Becky S. McElwee. Information concerning the security interest(s) herein granted may be obtained from Mortgagee upon request. . If an Event of Default shall occur, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Mortgaged Property or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation of the Mortgaged Property. Upon request or demand of Mortgagee, Mortgagor shall at its expense assemble the Mortgaged Property and make it available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses, including legal expenses and attorneys' fees and disbursements, incurred or paid by Mortgagee in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Mortgaged Property. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Mortgaged Property sent to Mortgagor in accordance with the provisions hereof at least five business days prior to such sale, disposition or auction shall constitute reasonable notice to Mortgagor. The proceeds of any disposition of the Mortgaged Property, or any part thereof, may be applied by Mortgagee to the payment of the Indebtedness in such priority and proportions as Mortgagee in its discretion shall deem proper. 11 Mortgagor shall notify Mortgagee of any change in name or identity of Mortgagor or any change in location of the Mortgaged Property and shall promptly execute, file and record, at its sole cost and expense, such Uniform Commercial Code forms as are necessary to maintain the priority of the lien of Mortgagee upon and security interest in the Mortgaged Property. In addition, Mortgagor shall promptly execute, file and record such additional Uniform Commercial Code forms or continuation statements as Mortgagee shall deem necessary and shall pay all expenses and fees in connection with the filing and recording thereof, provided that no such additional documents shall increase the obligations of Mortgagor under the Note or this Mortgage. Mortgagor hereby grants to Mortgagee an irrevocable power of attorney, coupled with an interest, to file with the appropriate public office on its behalf any financing or other statements signed only by Mortgagee, as secured party, in connection with the Collateral. B. That portion of the Mortgaged Property consisting of personal property and equipment shall be owned by Mortgagor and shall not be the subject matter of any lease or other transaction whereby the ownership or any beneficial interest in any of such property is held by any person or entity other than Mortgagor nor shall Mortgagor create or suffer to be created any security interest covering any such property as it may from time to time be replaced, other than the security interest created herein. 12. RIGHT TO REMEDY DEFAULTS. In case of any default by Mortgagor, Mortgagee may, but need not, make any payment or perform any act herein required, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting the Mortgaged Property, or contest any tax or assessment. All moneys paid for any of the purposes herein authorized and all expenses paid or incurred in connection therewith, including attorney's fees and any other money advanced by Mortgagee to protect the Mortgaged Property and the lien hereof, shall be so much additional Indebtedness and shall become immediately due and payable without notice and with interest thereon at the applicable rate provided in the Note from the date of expenditure or advance until paid. No inaction on the part of Mortgagee shall be considered as a waiver of any right accruing to it on account of any default on the part of Mortgagor. 13. REMEDIES FOR DEFAULT. Upon the occurrence of an Event of Default and in addition to any and all other rights and remedies Mortgagee may have: A. The entire unpaid balance of the indebtedness and all other sums secured by this Mortgage shall become immediately due and payable, at the option of Mortgagee, without notice or demand. B. For the purpose of obtaining possession of the Mortgaged Property upon the occurrence of any event which would constitute an event of default hereunder, Mortgagor hereby authorizes and empowers any attorney of any court of record in the Commonwealth of Pennsylvania or elsewhere, as attorney for Mortgagor and all persons claiming under or 12 I to ?? ? Bh! : 2F F i , 2 U through Mortgagor, to sign an agreement for entering in any competent court an amicable action or actions in ejectment for possession of the Mortgaged Property and to appear for and confess judgment against Mortgagor, and against all persons claiming under or through Mortgagor, in favor of Mortgagee, for recovery by Mortgagee of possession thereof, for which this Mortgage, or a copy thereof verified by affidavit, shall be a sufficient warrant; and thereupon a writ of possession may immediately issue for possession of the Mortgaged Property, without any prior writ or proceeding whatsoever and without any stay of execution. If for any reason after such action has been commenced it shall be discontinued, or possession of the Mortgaged Property shall remain in or be restored to Mortgagor, Mortgagee shall have the right for the same default or any subsequent default to bring one or more further amicable actions as above provided to recover possession of the Mortgaged Property. Mortgagee may bring an amicable action in ejectment and confess judgment therein before or after the institution of proceedings to foreclose this Mortgage or to enforce the Note, or after entry of judgment therein or on the Note, or after a Sheriff's sale of the Mortgaged Property in which Mortgagee is the successful bidder, it being the understanding of the parties that the authorization to pursue such proceedings for obtaining possession and confession of judgment therein is an essential part of the remedies for enforcement of the Mortgage, the Note and the Guaranty Agreement, and shall survive any execution sale to Mortgagee. C. Mortgagee shall have the right, from time to time, to bring an appropriate action to recover any sums required to be paid by Mortgagor under the terms of this Mortgage, as they become due, without regard to whether or not any of the Indebtedness shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of mortgage foreclosure, or any other action, for any default by Mortgagor existing at the time the earlier action was commenced. D. Mortgagee may institute an action or actions of mortgage foreclosure against the Mortgaged Property, or take such other action at law or in equity for the enforcement of this Mortgage and realization on the mortgage security or any other security herein or elsewhere provided for, as the law may allow, and may proceed therein to final judgment and execution for the entire unpaid balance of the principal debt, with interest at the rate stipulated in the Note, together with all other sums due by Mortgagor in accordance with the provisions of the Note, the Guaranty Agreement or this Mortgage, including all sums which may have been loaned by Mortgagee to Mortgagor after the date of this Mortgage, and all sums which may have been advanced by Mortgagee for taxes, water or sewer rents, charges or claims, payments or prior liens, insurance or repairs to the Mortgaged Property, all costs of suit, together with interest at such rate on any judgment obtained by Mortgagee from and after the date of any Sheriff's sale until actual payment is made by the Sheriff of the full amount due Mortgagee, and a reasonable attorney's commission for collection, which attorney fee shall also be secured by this Mortgage. 14. ASSIGNMENT OF LEASES AND RENTS AFTER DEFAULT. As further security for payment of the indebtedness and performance of the obligations, covenants and agreements secured hereby, Mortgagor hereby assigns to Mortgagee all Leases, together with all 13 rents to become due under such Leases. This assignment, however, shall be operative only in the event of the occurrence of an Event of Default hereunder, or under the Note and in any such case Mortgagor hereby confers on Mortgagee the exclusive power, to be used or not in its sole discretion, to act as agent, or to appoint a third person to act as agent for Mortgagor, with power to take possession of, and collect all rents arising from the Mortgaged Property and apply such rents, at the option of Mortgagee, to the payment of the mortgage debt, taxes, assessments, and other expenses in such order or priority as Mortgagee may in its sole discretion determine, and to turn any balance remaining over to Mortgagor; but such collection of rents shall not operate as an affirmance of the tenant or lease in the event Mortgagor's title to the Mortgaged Property should be acquired by Mortgagee. Mortgagee shall be liable to account only for rents and profits actually received by Mortgagee. In exercising any of the powers in this paragraph contained, Mortgagee may also take possession of, and for these purposes use, any and all personal property contained in the Mortgaged Property and used by Mortgagor in the rental or leasing thereof or any part thereof. 15. RIGHTS AND REMEDIES CUMULATIVE. A. The rights and remedies of Mortgagee as provided in this Mortgage or the Note, or any other Loan Document shall be cumulative and concurrent, may be pursued separately, successively or together, at the sole discretion of Mortgagee, and may be exercised as often as occasion therefor shall arise. The failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. The remedies provided herein are in addition to all remedies of Mortgagee provided by law. B. Any failure by Mortgagee to insist upon strict performance by Mortgagor of any of the terms and provisions of this Mortgage, the Note, or any other Loan Documents shall not be deemed to be a waiver of any of the terms or provisions thereof, and Mortgagee shall have the right thereafter to insist upon strict performance by Mortgagor of any and all of them. C. Neither Mortgagor nor any other person now or hereafter obligated for payment of all or any part of the sums now or hereafter secured by this Mortgage shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated or the failure of Mortgagee to take action to foreclose on this Mortgage or otherwise enforce any provisions of the Mortgage, the Note, the Guaranty Agreement or any other Loan Document, or by reason of the release, regardless of consideration of all or any part of the security held for the Indebtedness. D. Mortgagee may release, regardless of consideration, any part of the security held for the Indebtedness without, as to the remainder of the security, in any way impairing or affecting the lien of this Mortgage or its priority over any subordinate lien. E. For payment of the Indebtedness, Mortgagee may resort to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect. 14 (?1 0 J {+i_i ES' 1 V 16. REQUIRED NOTICES. Mortgagor shall notify Mortgagee promptly of the occurrence of any of the following: A. A fire or other casualty causing damage in the amount of $100,000.00 or more to the Mortgaged Property; B. Receipt of notice of condemnation of the Mortgaged Property; C. Receipt of notice from any governmental authority relating to the structure, use or occupancy of the Mortgaged Property; D. Receipt of any notice from any tenant of all or any portion of the Mortgaged Property; E. Substantial change in the occupancy of the Mortgaged Property; F. Receipt of any notice from the holder of any lien or security interest in the Mortgaged Property; or G. Commencement of any litigation affecting the Mortgaged Property. 17. MORTGAGOR'S WAIVERS. Mortgagor hereby waives and releases: A. All errors, defects and imperfections in any proceeding instituted by Mortgagee under the Note, the Guaranty Agreement, this Mortgage, or any other Loan Document; B. All benefit that might accrue to Mortgagor by virtue of any present or future law exempting the Mortgaged Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment; and C. Unless specifically required herein, all notices of Mortgagor's default or of Mortgagee's election to exercise or Mortgagee's actual exercise, of any right, privilege, or remedy under the Note, the Guaranty Agreement, this Mortgage, or any other Loan Document. 18. COUNSEL FEES. If Mortgagee becomes a party to any suit or proceeding affecting the Mortgaged Property or title thereto, the lien created by this Mortgage or Mortgagee's interest therein, or if Mortgagee engages counsel to collect any of the Indebtedness or to enforce performance of the agreements, conditions, covenants, provisions or stipulations of this Mortgage, the Note or the Guaranty Agreement, or to represent Mortgagee in any bankruptcy or insolvency proceeding or reorganization, Mortgagee's costs, expenses and reasonable counsel fees, whether or not suit is instituted, shall be paid to Mortgagee by Mortgagor, on demand, with interest at the then effective rate set forth in the Note, and, until paid, they shall be deemed to be part of the Indebtedness. 15 19. ENVIRONMENTAL WARRANTIES AND COVENANTS. A. Mortgagor hereby warrants and covenants that: (1) The present use of the Mortgaged Property is, and any currently contemplated future use of the Mortgaged Property will be in compliance with all applicable Environmental Laws and Regulations and no environmental liability exists on or in connection with the Mortgaged Property; (2) After inquiry and investigation by Mortgagor, conducted with due diligence, there are no Hazardous Substances located on the Mortgaged Property (except as disclosed in writing to Mortgagee and acknowledged, in writing, by Mortgagee as acceptable, and any such Hazardous Substances have been properly transported, stored or disposed of at other locations); (3) Mortgagor has all permits or authorizations under Environmental Laws and Regulations necessary to carry on its business, has filed all notifications and plans and has such information and plans available as required under Environmental Laws and Regulations, and is in compliance with all applicable Environmental Laws and Regulations, including but not limited to deed acknowledgment required by the Pennsylvania Solid Waste Management Act, 35 P.S. 6018.405 and the Pennsylvania Hazardous Sites Cleanup Act, 35 P.S. §6025.512(b); (4) Mortgagor is not aware of nor has Mortgagor received any claims, demands, orders, notices of violation, notices of intent to file a claim, demand, order, lawsuit, notices of deficiencies, or requests for information relating to actual or potential actions as described in subsection 19.A, any of which are based upon or refer to Environmental Laws and Regulations; (5) To the best of the information and belief of Mortgagor after a due diligence inquiry, subsections (1) through (4) above are applicable to usage of the Mortgaged Property by predecessors in title or interest of Mortgagor and its lessees or tenants or invitees; (6) Mortgagor has received no notice and is unaware that the Mortgaged Property has been designated as a site on the National Priorities List or similar state list, or has been or is the subject of any removal or response action, private or governmental, under the Comprehensive Environmental Response, Compensation or Liability Act, as amended, or the Pennsylvania Hazardous Sites Cleanup Act or any similar state or federal law, and that no requests have been received to provide information or participate in any study, remedial design or response action under such laws; 16 (7) Mortgagor will exercise due care with respect to any substances, including but not limited to Hazardous Substances, which may be located on, disposed of, or placed on the Mortgaged Property; (8) Mortgagor will take reasonable precautions against the foreseeable acts or omissions of any third party in the location, disposal or placement of Hazardous Substances on the Mortgaged Property and the environmental consequences that could foreseeably result from such acts or omissions; (9) Mortgagor shall, and shall use its best efforts to cause each employee, agent or contractor to, use its or their best efforts to comply in all material respects with any applicable Environmental Laws and Regulations; provided, however, that this provision shall not prevent the Mortgagor from contesting, in good faith and with reasonable diligence, the validity or application of such laws by appropriate proceedings; (10) Mortgagor has not, by act or omission, caused or contributed to the release or threatened release of any Hazardous Substance on the Mortgaged Property; and (11) Mortgagor shall immediately notify Mortgagee and its successors in interest of any act or omission that could give rise to liability under any Environmental Laws and Regulations, as soon as it occurs, including, but not limited to, any of the events referred to in this subsection 19.A of this Mortgage. B. Conditioned upon notice from a governmental agency of a violation of Environmental Laws and Regulations or upon Mortgagee's reasonable suspicion of such violation or upon default and prior to the institution of foreclosure proceedings by Mortgagee, Mortgagor hereby grants to Mortgagee the right to require an environmental audit to be conducted at the expense of Mortgagor, including but not limited to such physical testing as may be reasonably concluded to be necessary to determine compliance with applicable Environmental Laws and Regulations. The exercise of this right shall be limited to a single completed audit unless one of the events in this paragraph has occurred and in which event Mortgagee's right to environmental testing shall only be limited by the reasonable necessity of Mortgagee to have a complete evaluation of the Mortgaged Property. Mortgagor warrants that it has produced or offered to produce for inspection copies or summaries of all oral or written reports or correspondence prepared by any person and relating to any of the matters described in this Section 19 heretofore prepared for Mortgagor or in its possession, including any audits, inspection reports, samples or data relating to any such report or investigations. C. Mortgagor covenants that it shall not construe this Mortgage or take any action which may cause the Mortgagee to be considered a generator of Hazardous Substances, an owner, an operator or a person in control of any facility or part of any business of the Mortgagor. 17 D. Mortgagor, its successors and assigns, hereby agrees to defend, indemnify and hold harmless Mortgagee, its directors, officers, employees, agents, contractors, subcontractors, licensees, invitees, successors and assigns from and against any and all claims, demands, judgments, damages, actions, causes of action, injuries, administrative orders, consent agreements and orders, liabilities, penalties, costs, and expenses of any kind whatsoever including but not limited to claims arising out of environmental hazards, loss of life, injury to persons, property, or business, and/or damage to natural resources in connection with the activities of Mortgagor or its predecessors or successors in interest, lessees, invitees, or third parties who have trespassed on the Mortgaged Property, or any of them, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of Mortgagor which (1) arise out of the actual, alleged or threatened manufacture, discharge, dispersal, release, storage, accumulation, control, processing, spilling, leaking, emitting, transportation, treatment, generation, disposal, handling, or escape of Hazardous Substances, or (2) actually or allegedly arise out of the use, specification or inclusion of any product, material or process containing chemicals or Hazardous Substances, the failure to detect the existence or proportion of chemicals or Hazardous Substances in the soil, air, surface water or groundwater, or the performance or failure to perform the abatement of any pollution source or the replacement or removal of any object, soil, water, surface water or groundwater containing chemicals or Hazardous Substances. The Mortgagor, its successors and assigns, shall bear, pay and discharge when and as the same become due and payable, any and all such judgments or claims for contribution, indemnification, damages, penalties and attorneys, consulting and experts fees or otherwise against Mortgagee, shall hold Mortgagee harmless for such judgments or claims, and shall assume the burden and expense of defending all suits, administrative proceedings and negotiations of any description with any and all persons, entities, political subdivisions or government agencies arising out of any of the occurrences set forth herein. 20. NOTICES. All necessary notices, demands and requests shall be deemed duly given if and when (A) delivered personally, (B) transmitted by facsimile, confirmed by telephone and transmission report, together with same-day mailing by first class mail, postage prepaid, or (C) sent by a nationally recognized express courier service, postage or delivery charges prepaid, addressed as follows: To Mortgagee: Scarff Bros., Inc. 2300 Fallston Road Fallston, MD 21047 To Mortgagor: Thomas H. McElwee, Jr. Becky S. McElwee 250 Jumper Road Newburg, PA 17240 18 9 1--b u` v 21. OPEN-END MORTGAGE PROVISIONS. A. NOTICE OF JUNIOR LIEN. If (1) this Mortgage secures a line of credit or other facility pursuant to which advances are made from time to time by Mortgagee to Mortgagor, and (2) Mortgagee receives written notice pursuant to Section 8143(b) of the Open-End Mortgage Statute from a holder of a lien or encumbrance on the Mortgaged Property which is subordinate to the lien of the Mortgage, then and notwithstanding any provision to the contrary contained in the Note, the Guaranty Agreement, this Mortgage or any other Loan Document, Mortgagor agrees that Mortgagee shall not be responsible to make any further advances to Mortgagor (and Mortgagee is released from all liability for failure to make such advances) if Mortgagee determines in its sole discretion that any such advance requested by Mortgagor could be construed to be an unobligated advance under Section 8143(b) of the Open-End Mortgage Statute. B. NOTICE OF MECHANIC'S LIEN. If (1) this Mortgage secures a loan facility the proceeds of which are used to provide funds to pay toward all or part of the cost of completing any erection, construction, alteration or repair of any part of the Mortgaged Property, and (2) Mortgagee receives written notice pursuant to Section 8143(b) of the Open-End Mortgage Statute from a holder of a mechanic's lien for labor performed or to be performed or materials furnished or to be furnished for the erection, construction, alteration or repair or any part of the Mortgaged Property, then and notwithstanding any provision to the contrary contained in the Note, the Guaranty, this Mortgage, or any other Loan Documents, Mortgagor agrees that Mortgagee shall have the right to suspend (until such time as the lien is fully released) any further advances to Mortgagor (and Mortgagee is released from all liability for failure to make such advances) except advances which Mortgagee determines in its sole discretion are for the purpose of paying toward all or part of the cost of completing any erection, construction, and alteration or repair of any part of the Mortgaged Property the financing of which, in whole or in part, this Mortgage was given to secure. C. NOTICE OF LIMITATION OF INDEBTEDNESS. If Mortgagor should at any time elect to limit the liabilities secured by this Mortgage pursuant to Section 8143(c) of the Open-End Mortgage Statute, Mortgagor agrees that notice of such election shall (1) not be effective unless and until it is served upon Mortgagee in accordance with the requirements of Section 8143(d) of the Open-End Mortgage Statute and fully complies with the requirements for the giving of notices under this Mortgage; (2) release Mortgagee from all obligation to make any further advances under the Note notwithstanding anything to the contrary contained in such notice or the Note, or any other Loan Documents; (3) constitute, at the election of Mortgagee, an Event of Default under the Note or Guaranty Agreement; and (iv) not be effective to limit Mortgagor's liability for payment and performance of all liabilities for which Mortgagor is responsible under this Mortgage or the Note, or any other Loan Documents (including, without limitation, all reimbursement and indemnification agreements) whether such liabilities arise prior or subsequent to the date of such notice. 19 4:; -i 8 22. PARAGRAPH HEADINGS. Paragraph headings are for reference only and do not constitute a part of this Mortgage. 23. APPLICABLE LAW. This Mortgage shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania. The parties have participated jointly in the negotiation and drafting of this Mortgage. In the event an ambiguity or question of intent or interpretation arises, this Mortgage shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Mortgage. IN WITNESS WHEREOF, and intending to be legally bound hereby, Mortgagor has caused this instrument to be executed and sealed the day and year first above written. "MORTGAGOR" WITNESS: #o Thomas H. McElwee, Jr. ADH:slb #364059.1 (13106.014) Becky S. McElwee f 20 H l_l F i ? COMMONWEALTH OF PENNSYLVANIA SS: COUNTY OF LANCASTER On this 1 lfh day of March, 2005, before me, the undersigned officer, personally appeared THOMAS H. McELWEE, JR. and BECKY S. McELWEE, known to me to be the persons whose names are subscribed to the within instrument, and that said persons acknowledged that they executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. Notary ublic COMMONWEALTH OF PENNSYLVANIA Notarial Seal Judy Ann Poglitsch, Notary Public City of Lancaster, Lancaster County My Commission Expires Oct. 14, 2008 Member, Pennsylvania Association of Notaries -';m 5 9 1 EXHIBIT "A" PROPERTY PROPERTY #1 'k I L the following described real estate lying and being situate in Hopewell Township, Cumberland County, Pennsylvania, bounded and limited as follows: BEGINNING at an iron pin, formerly a post on the Northerly edge of Township Route 360, a dirt road also known as Jumper Road, subject to the easement of said road, along the Northerly edge of said road and the lands now or formerly of George H. Wright and wife, in a generally Northwesterly direction as follows: North 69 degrees, 11 minutes, 41 seconds West 530.61 feet to a point; thence North 75 degrees, 42 minutes, 30 seconds West 491.90 feet; thence North 51 degrees, 11 minutes, 50 seconds West 202.66 feet to a point; thence North 57 degrees, 28 minutes, 36 seconds West 236.25 feet to a point; thence North 78 degrees, 33 minutes, 20 seconds West 368.31 feet to a point; thence North 68 degrees, 32 minutes, 19 seconds West 167.43 feet to an iron pin, being the lines describing the Northerly edge of Township Route 360; thence by the lands now or formerly of John Bert, South 27 degrees, 50 minutes, 22 seconds West 314.01 feet to a pin; thence by lands now or formerly of Americus Allen and heirs, South 34 degrees, 30 minutes East 1,070.85 feet to a post; thence by the same, South 83 degrees, 30 minutes West 1,014.75 feet to a pin; thence by lands now or formerly of David Byars, et ux, and Mary Miller, North 33 degrees, 52 minutes East 649.1 feet to a pin, the Place of BEGINNING. CONTAINING 30.08 acres, more or less. BEING THE SAME PREMISES which John D. Petersheim and Lydia F. Petersheim, by deed dated April 24, 1985 and recorded May 1, 1985 in the Recorder of Deeds Office in and for Cumberland County, Pennsylvania in Deed Book F, Volume 31, Page 777, granted and conveyed unto Thomas H. McElwee, Jr. and Becky S. McElwee. PROPERTY #2 ALL THAT CERTAIN tract of land with the improvements thereon erected situate in West Pennsboro Township, Cumberland County, Pennsylvania, bounded and described as follows: BEGINNING at a point on the East bank of the Big Spring; thence by lands now or formerly of Salter and Baker and lands now or formerly of Alvin Rife, South 30 degrees East, 94 perches to a white oak stump; thence by said lands now or formerly of Rife, South 89 degrees East, 84 perches to a post; thence by lands now or formerly of Harry E. McElwee, South 4 3/4 perches to a post; thence by the same, South 40 degrees West, 44%2 perches to a post; thence by the same, South 46 degrees East, 42 perches to a post; thence by lands now or formerly of Stanley Spencer, South 24 degrees West, 89%2 perches; thence by lands now or formerly of Oliver Myers, South 48 degrees West, 94 perches; thence by lands now or formerly of Allay Farrier, North 20 degrees West, 170 perches; thence by lands now or formerly of Harry E. McElwee, South 89 degrees West, 10%2 perches; thence by the school lot, North 1 degree East, 8 perches; thence by said school lot and lands now or formerly of Flora Satcher, South 89 degrees West, 30 perches to a post on the bank of the Big Spring; thence down the spring by its several courses, 73 perches to the place of BEGINNING. CONTAINING 156 acres and 127 perches, more or less. LESS, HOWEVER, a strip of land conveyed to P. Vaughn Ahl, et. al., by deed dated February 13, 1957, and recorded in the Office of the Recorder of Deeds for Cumberland County in Deed Book "Q", Volume 17, Page 153. LESS, HOWEVER, THE FOLLOWING CONVEYANCES: A tract of lard containing 1.235 acres corm eyed to Roy M. Franklin by deed dated Augusi 5, 1969, recorded in Cumberland County Deed Book 231, Page 223. 2. Lot No. 5 containing 1.033 acres conveyed to Robert Stauffer, U and Cheri Ridolfi by deed dated October 25, 1983, recorded in Cumberland County Deed Book 30K, Page 959. Lot No. 6 containing 8.919 acres and Lot No. 7 containing 2.925 acres conveyed to Robert Goodrich by deed dated February 13, 1984, recorded in Cumberland County Deed Book 30- 0, Page 218. 4. Lot No. 4 containing 0.825 acres conveyed to Gregory R. MaCoy and Katherine W. MaCoy by deed dated April 23, 1984, recorded in Cumberland County Deed Book 30Q, Page 926. Lot Nos. 1, 5 and 3-B containing 1.964 acres conveyed to Mary E. Blakeslee and Laszlo Bockh, her husband, by deed dated May 24, 1984, recorded in Cumberland County Deed Book 30R, Page 824. Lot Nos. 2 and 3 containing 1.594 acres conveyed to Henry A. Zajac and Mae A. Zajac, his wife, by deed dated July 12, 1984, recorded in Cumberland County Deed Book 30U, Page 115. 7. Lot No. 7-B containing 2,918.15 square feet conveyed to Gregory A. MaCoy and Katherine W. MaCoy by deed dated September 11, 1985, recorded in Cumberland County Deed Book 31N, Page 312. Lot No. 11 containing 0.911 acre, Lot No. 12 containing 0.919 acre and Lot No. 13 containing 0.934 acre conveyed to Ernest P. Femsten and Barbara A. Fernsten, his wife, by deed dated June 24, 1987, recorded in Cumberland County Deed Book 32T, Page 424. 9. Lot No. 8 containing 36,198.31 square feet and Lot No. 9 containing 37,167.44 square feet conveyed to Darrell C. Shears and Angela R. Shears, his wife, by deed dated May 25, 1988, recorded in Cumberland County Deed Book 331, Page 1078. 10. Lot No. 14 containing 0.868 acre conveyed to P. Edward Mullin, single, by deed dated August 18, 1989, recorded in Cumberland County Deed Book 34C, Page 935. 11. Lot No. 20 containing 1.158 acres conveyed to Andrew W. Sweger and Kimberly A. Sweger, his wife, by deed dated October 30, 1989, recorded in Cumberland County Deed Book 34G, Page 173. 12. Lot No. 17 containing 0.868 acre and Lot No. 18 containing 0.986 acre conveyed to William M. Bassin and Mary K. Bassin, his wife, by deed dated April 20, 1990, recorded in Cumberland County Deed Book 34N, Page 124. Ll R f t.3 i 7 ?a 13. Lot No. 15 containing 1.236 acres and Lot No. 16 containing 0.880 acre conveyed to Roger L. Amsbaugh and Karmae M. Amsbaugh, his wife, by deed dated May 10, 1990, recorded in Cumberland County Deed Book 34-0, Page 136. 14. Lot No. 19-B containing 0.493 acre conveyed to Andrew W. Sweger and Kimberly A. Sweger, his wife, by deed dated March 22, 1991, recorded in Cumberland County Deed Book 35A, Page 172. 15. Lot No. 19-A containing 0.493 acre conveyed to William M. Bassin and Mary K. Bassin, his wife, by deed dated March 22, 1991, recorded in Cumberland County Deed Book 35A, Page 174. 16. Lot No. 10 containing 2.104 acres conveyed to David M. Hutton by deed dated January 13, 1992, recorded in Cumberland County Deed Book 35M, Page 80. 17. Lot Nos. 22, 23, 24, 25, 26 and 27 conveyed to Randy S. Shuman and Jill H. Shuman, his wife, by deed dated August 21, 1992, recorded in Cumberland County Deed Book 35V, Page 617. 18. Lot No. 28 containing 5.3632 acres conveyed to Van G. Hocker and Marian B. Hocker, his wife, by deed dated July 31, 1995, recorded in Cumberland County Deed Book 125, Page 1157. 19. Lot No. 11A containing 3.0069 acres conveyed to Ernest P. Fernsten and Barbara A. Fernsten, his wife, by deed dated November 21,1996, recorded in Cumberland County Deed Book 149, Page 519. 20. Lot No. 16A containing 0.3559 acre conveyed to Roger L. Amsbaugh and Karmae M. Amsbaugh, his wife, by deed dated September 22, 1997, recorded in Cumberland County Deed Book 164, Page 934. BEING THE SAME PREMISES which Ruth W. McElwee, widow by Deed dated November 12, 1999 and recorded December 6, 1999, in the Office of the Recorder of Deeds for Cumberland County, Pennsylvania, in Deed book 212, page 699, granted and conveyed unto Thomas H. McElwee, Jr. and Becky S. McElwee. ,cordi In CuF???;u ?_ :y PA I hereby CERTIFY that this document is recorded in the Recorder's Office of Franklin County, Pennsylvania Prepared By & Return To: Aaron D. Hollis, Esquire Blakinger, Byler & Thomas, 28 Penn Square Lancaster, PA 17603 (717) 299-1100 :SUS OF j,",% '''f h+ nltl tttt ItMN? ??`?`,`` -AMA -,D` 0 '1 Z7 1'1? "'1_1 ?9("J loos MAR 15 A 9. 4 0 Linda Miller LINDA t-i l l_ L E Recorder ofDeedsRFCORDEtR OF DEEDS FRANKLIN CGUIi T Y SSIf OPEN-END MORTGAGE SECURITY AGREEMENT AND FIXTURE FILING (Franklin County) THIS OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (the "Mortgage") made this 11th day of March, 2005, between THOMAS H. McELWEE, JR. and BECKY S. McELWEE, adult individuals, with an address of 250 Jumper Road, Newburg, PA 17240 (the "Mortgagor"), AND SCARFF BROS., INC., a Maryland corporation, with an address of 2300 Fallston Road, Fallston, MD 21047 (the "Mortgagee"). WITNESSETH THAT: Mortgagor has executed and delivered to Mortgagee a Third Amended and Restated Revolving Variable Rate Note in the face amount of $750,000.00 dated the date hereof (the "Note") wherein Mortgagor promises to pay to Mortgagee the aggregate principal sum of $750,000.00, with interest thereon at the rates and payable at the times, in the manner and according to the terms and conditions specified in the Note, all of which are incorporated herein by reference. THIS MORTGAGE IS AN OPEN-END MORTGAGE WITHIN THE MEANING OF PENNSYLVANIA LAW, 42 Pa. C.S.A. § 8143 AND 8144, THE OPEN-END MORTGAGE STATUTE. IT SECURES FUTURE ADVANCES MADE BY MORTGAGEE TO OR ON ACCOUNT OF MORTGAGOR AS PROVIDED IN THE NOTE. ANYTHING HEREIN CONTAINED TO THE CONTRARY NOTWITHSTANDING, $750,000.00 IS THE MAXIMUM AMOUNT OF INDEBTEDNESS (EXCLUSIVE OF INTEREST AND ADVANCES FOR THE PAYMENT OF TAXES, INSURANCE AND OTHER COSTS OR CHARGES HEREIN AUTHORIZED) WHICH MAY BE SECURED BY THIS MORTGAGE AT ANY TIME. DEFINED TERMS The following capitalized words and terms shall have the following meanings when used in this Mortgage. Unless specifically stated to the contrary, all references to dollar amounts shall VOL27I3PGO68 f r mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Mortgage shall have the meanings attributed to such terms in the Uniform Commercial Code. "Collateral" shall mean that portion of the Mortgaged Property that may be collateral subject to the Uniform Commercial Code. "Debtor" shall mean Mortgagor. "Environmental Laws and Regulations" shall mean all laws, regulations, policies, and/or orders pertaining to the protection of health and welfare of persons and property and all state or federal common law or other causes of action relating to liability from use or misuses of Hazardous Substances (hereinafter defined). These include, but are not limited to, laws and regulations governing the manufacture, generation, storage, accumulation, control, treatment, processing, spilling, leaking, emitting, discharging, disposal, dispersal, transporting, escape or other handling of waste, hazardous waste, oil and petroleum products, toxic substances, liquids, Hazardous Substances, pollutants, contaminants, solid wastes, effluent, or sludges, as defined and regulated under: the Federal Resource Conservation and Recovery Act; Safe Drinking Water Act; Clean Air Act; Refuse Act of 1899; Clean Water Act; Federal Insecticide, Fungicide and Rodenticide Act; Toxic Substances Control Act; Hazardous Materials Transportation Act; Surface Mining Control and Reclamation Act; Atomic Energy Act; Uranium Mill Tailings Control Act of 1978, as amended; Low-Level Radioactive Waste Policy Act; Nuclear Waste Policy Act of 1982; National Environmental Policy Act; Federal Hazard Communication Standard (29 C.F.R. §1910.1200); Food, Drug & Cosmetic Act; Comprehensive Environmental Response, Compensation, and Liability Act, as amended; Emergency Planning and Community Right-To-Know Act; Solid Waste Disposal Act; Pennsylvania Hazardous Sites Cleanup Act; Pennsylvania Solid Waste Management Act; Pennsylvania Clean Streams Law; Pennsylvania Sewage Facilities Act (including all subtitles); Storage Tank and Spill Prevention Act; or other federal, state, or local laws, rules, policies or orders of general application, ordinances or the like having similar purposes. "Event of Default" shall mean: A. The failure of Mortgagor to pay any installment of interest or principal and interest, or any other sum required to be paid under the Note within ten (10) days after it is due; or B. The failure of Mortgagor to observe or perform any other of the covenants or agreements or conditions herein contained, required to be kept or performed or observed by Mortgagor and such failure shall continue unremedied for a period of ten (10) days after the giving of notice thereof to Mortgagor; or C. Any material representation or warranty made herein by Mortgagor shall prove to be untrue or inaccurate in any material respect; or VOL27I3PGO69 2 .1 ip D. The occurrence of an Event of Default as specified in the Note, the Security Agreement, the Guaranty Agreement, or other Loan Documents. "Guaranty Agreement" shall mean the Third Amended and Restated Guaranty Agreement given by Becky S. McElwee for the obligations of Thomas H. McElwee, Jr. dated the date hereof. "Hazardous Substance" shall mean (1) any chemical, solid, liquid, gas, or other substance having the characteristics identified in, listed under, or designated pursuant to all Environmental Laws and Regulations; (2) petroleum, crude oil, waste oil, solvents, gasoline, natural gas, liquefied natural gas, synthetic fuel, or other petroleum, oil, or gas based products, nuclear, radioactive, or atomic substances, mixtures, wastes, compounds, materials, elements, products, or matters; (3) any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste (including materials to be recycled, reconditioned or reclaimed); (4) any other substance identified in any present or future law as presenting an imminent and substantial danger to the public health or welfare or to the environment, or as otherwise requiring special handling, collection, storage, treatment, disposal, or transportation; (5) and any other substance, mixture, waste, raw materials, ore, pollutants, contaminants, compound, material, element, product or matter that requires or may reasonably be foreseen to require an order requiring cost of clean up. "Indebtedness" shall mean the obligations of Mortgagor to Mortgagee under the Note and Guaranty Agreement.. "Leases" shall mean all leases or subleases of the Mortgaged Property, now existing or hereafter created and all extensions and renewals thereof and substitutions therefor, independent of the term or duration thereof and whether or not evidenced by a written document. "Loan" shall mean the loan made to Mortgagor by Mortgagee in the amount of $750,000.00 evidenced by the Note. "Loan Documents" shall mean the Note, the Guaranty Agreement, the Security Agreement, this Mortgage and ainy other document executed by Mortgagor in favor of Mortgagee. "Mortgaged Property" shall mean all of Mortgagor's right, title and interest in: A. the Property; and B. all buildings and other improvements erected or hereafter erected on the Property; and C. all fixtures and any appliances, machinery, furniture, furnishings and equipment of any nature whatsoever, belonging to Mortgagor and other articles of personal property belonging to Mortgagor now or at any time hereafter installed in, VOL2713°u070 3 attached to, delivered to or situated in or upon the Property or any other buildings and improvements now or hereafter erected thereon, or used or intended to be used in connection with the Property or in the operation of any improvements, or business owned by Mortgagor, or in the operation or maintenance of any improvements or business situate on the Property, whether or not the personal property owned by Mortgagor is or shall be affixed thereto; and D. all building materials, fixtures, building machinery and building equipment delivered on site to the Property during the course of, or in connection with, construction of, or reconstruction of, or remodeling of any buildings and improvements; and E. any and all easements, rights-of-way, tenements, hereditaments and appurtenances belonging to the above-described Property or any part thereof hereby mortgaged or intended so to be, or in any way appertaining thereto, and all streets, alleys, passages, ways, water courses, and all easements and covenants now existing or hereafter created for the benefit of the Mortgagor or any subsequent tenant of the Property over ground adjoining the Property and all rights to enforce the maintenance thereof, and all other rights, liberties, and privileges of whatsoever kind or character, and the reversions and remainders, income, rents, issues and profits arising therefrom, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, at law or in equity, of the Mortgagor in and to the above-described Property or any part thereof; and F. all proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including without limitation, proceeds of insurance and condemnation awards; and G. all substitutes and replacements for, accessions, attachments, and other additions to, and tools, parts, and equipment used in connection with any of the above; and H. all rents with the right to collect such rents at any time for application to the Indebtedness and to utilize any collection or enforcement rights or remedies which may be available to the Mortgagor under the law or any of the Leases but without any duty or obligation to perform on behalf of the Mortgagor any of the Mortgagor's duties or obligations to any of the Leases; and 1. all property similar to the above hereafter acquired by Mortgagor. "Note" shall mean the Third Amended and Restated Revolving Variable Rate Note in the face amount of $750,000.00 dated the date hereof and executed by Mortgagor in favor of Mortgagee as may be amended, replaced or increased from time to time. "Property" shall mean the real property located at 2807 Wayne Road, Chambersburg, PA 17201, as more fully described on Exhibit A attached hereto. VOL27 6 3PGO71 a r "Secured Party" shall mean Mortgagee. "Security Agreement" shall mean the Second Amended and Restated Security Agreement between Mortgagor and Mortgagee bearing even date herewith. NOW THEREFORE, in consideration of the Loan, and as security for payment to Mortgagee of the Indebtedness, and all other sums provided for in this Mortgage, the Note or the Guaranty Agreement according to their respective terms and conditions, and for performance of the agreements, conditions, covenants, provisions and stipulations contained herein and therein, Mortgagor has granted, conveyed, bargained, sold, aliened, released, confirmed and mortgaged, and by these presents does hereby grant, convey, bargain, sell, alien, release, confirm and mortgage unto Mortgagee, its successors and assigns, all of its right, title and interest in, of and to the Mortgaged Property and hereby grants unto Mortgagee, its successors and assigns, a security interest in and to the Mortgaged Property. TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed or mentioned and intended so to be, unto Mortgagee, its successors and assigns, to its own use forever. PROVIDED ALWAYS, and this instrument is executed upon the express condition that, if Mortgagor pays to Mortgagee the principal sum, the interest thereon and all other sums payable by Mortgagor to Mortgagee as are secured hereby, in accordance with the provisions of the Note and Guaranty Agreement, at the times and in the manner specified, without deduction, fraud or delay, and Mortgagor performs and complies with all the agreements, conditions, covenants, provisions and stipulations contained therein, then this Mortgage and the estate hereby granted shall cease and become void. In the event that any interest or portion of the Mortgaged Property or title to any other part of the Mortgaged Property or any portion thereof or any interest therein is transferred or conveyed to any person or entity other than Mortgagor in any manner whatsoever, the entire Indebtedness, at the option of the Mortgagee, shall be immediately due and payable. THIS MORTGAGE is executed and delivered subject to the following covenants, conditions and agreements and Mortgagor covenants, warrants and agrees as follows: 1. PAYMENT AND PERFORMANCE. Mortgagor shall pay to Mortgagee, in accordance with the terms of the Note, the Guaranty Agreement, and this Mortgage, and any other Loan Documents, the principal and interest, and other sums therein set forth, and Mortgagor shall perform and comply with all the agreements, conditions, covenants, provisions and stipulations therein set forth and shall timely perform all of its obligations and duties as landlord under any of the Leases now or hereafter in effect. 2. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall keep and maintain all buildings and improvements now or at any time hereafter erected on the Mortgaged Property and the sidewalks and curbs abutting them, in good order, condition and state of repair, and will make or cause to be made, as and when necessary, all repairs, renewals and VOL2713PGO72 5 I replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen. Mortgagor shall abstain from and shall not permit the commission of waste in or about the Mortgaged Property; and shall not undertake or permit any demolition or structural alterations or improvements to the Mortgaged Property without the prior written consent of the Mortgagee. 3. TAXES AND OTHER CHARGES. Mortgagor shall pay when due and payable and before interest or penalties are due thereon, without any deduction, defalcation or abatement, all taxes, assessments, water and sewer rents and all other charges or claims which may be assessed, levied, or filed at any time against the Mortgaged Property or any part thereof or against the respective interests of Mortgagor and Mortgagee therein, or which by any present or future law may have priority over the Indebtedness either in lien or in distribution out of the proceeds of any judicial sale; and provided, that if after giving written notice to Mortgagee of its intended action and upon furnishing to Mortgagee such security or bond as Mortgagee shall require, Mortgagor shall contest in good faith and by appropriate legal action the validity of any such item, or the amount thereof, then Mortgagor shall not be required to pay the item so long as the contest operates to prevent collection, sale, forfeiture, or any other loss or damage to the Mortgaged Property or Mortgagor, is maintained and prosecuted with diligence, and shall not have been terminated or discontinued adversely to Mortgagor. All costs and expenses incidental to such contest shall be paid by Mortgagor and in the event of a ruling or adjudication adverse to Mortgagor, Mortgagor shall promptly pay such taxes, assessments, water and sewer rents, charges or claims. Mortgagor shall indemnify and save harmless the Mortgagee and the Mortgaged Property from any loss or damage arising from such contest. 4. INSURANCE. The Mortgagor shall keep or require any lessee to keep all buildings and improvements now or hereafter erected upon the Mortgaged Property continuously insured for the benefit of the Mortgagee, against all loss or damage by fire, with extended coverage and against all other hazards, under a comprehensive all-risk building insurance policy, with boiler and machinery coverage and comprehensive all-risk personal property insurance, in an amount not less than the full insurable value of the Mortgaged Property with extended coverage. The policies carried shall contain the "replacement cost endorsement." The policy shall not provide for more than a $10,000.00 deductible from the loss payable for any casualty. Insurable value shall be determined, upon request of the Mortgagee, not more than once annually and by an appraiser or rating bureau satisfactory to the Mortgagee. The Mortgagee shall be listed as a Mortgagee and as loss payee on all policies required by this Mortgage in a standard Mortgagee clause in favor of Mortgagee. Mortgagor shall also maintain general liability coverage (in an amount satisfactory to Mortgagee but not less than $1,000,000.00 property damage and $3,000,000.00 bodily injury to any one person and $3,000,000.00 bodily injury, per occurrence). In addition, the aforesaid policy shall have attached as a rider thereto, or the Mortgagor shall provide or cause to be provided by separate policy, coverage against loss or damage by vandalism and malicious mischief. VOL2713Pr373 6 During the period of any construction, reconstruction or repair of improvements to the Mortgaged Property, the Mortgagor or the Mortgagor's contractor on behalf of the Mortgagor shall maintain builder's risk insurance in an amount satisfactory to the Mortgagee, but in no event less than 100% of the costs of construction, against all risks of physical loss. A minimum amount of $1,000,000.00 property damage and $3,000,000.00 bodily injury to any one person and $3,000,000.00 bodily injury, per occurrence, shall be maintained by or on behalf of the Mortgagor's contractors. Mortgagor shall require its contractor to maintain workers' compensation insurance. Deductibles on the builder's risk insurance shall not exceed $100,000.00. Mortgagor shall maintain business interruption insurance providing coverage in such amount as is reasonably satisfactory to Mortgagee but in any event in an amount at least equal to the sum of the annual payments due under the Note and the annual payments for real estate taxes, insurance premiums and other ongoing expenses related to the Mortgaged Property. Mortgagor shall maintain workers' compensation insurance (including employer's liability insurance, if requested by Mortgagee) for all employees of Mortgagor engaged on or with respect to the Mortgaged Property, in such amount as is reasonably satisfactory to Mortgagee, or if such limits are established by law, in such amounts. The Mortgagee shall receive originals of all of said policies upon the execution of this Mortgage and upon each renewal, expansion, substitution or modification thereof, together with a current Accord Evidence of Property Insurance Certificate. Any modification of such insurance policy must be approved by the Mortgagee in writing prior to the effective date of such modification. All policies shall provide that the Mortgagee may settle all claims under all such policies and may demand, receive and receipt for all monies becoming payable thereunder. The proceeds under any policy shall be paid by the insurer to the Mortgagee as the Mortgagee's interest may appear. All of such policies shall contain provision for notice to the Mortgagee not less than thirty (30) days in advance of any cancellation of such policy, shall not be subject to contribution, and shall be for a term of at least one year at the time of execution of this Mortgage. If the insurance, or any part thereof, shall expire, or be canceled, or become void or voidable by reason of breach of any condition thereof, or if Mortgagee determines that such coverage is unsatisfactory by reason of the failure or impairment of the capital of any company in which the insurance may then be carried, Mortgagor shall place new insurance on the Mortgaged Property, satisfactory to Mortgagee. Not less than thirty (30) days prior to the expiration of any coverage required by the Mortgage, Mortgagor shall deliver to Mortgagee a duplicate policy or certificate evidencing the renewal of such coverage and the payment of all premiums. The Mortgagor shall also secure such certificates from public officials as are available for the purpose or otherwise demonstrate to the satisfaction of the Mortgagee that the Mortgaged Property is not located within an area identified by the Federal Emergency Management Agency as having "special flood hazards," as such term is used in the National Flood Insurance Act of VOL2710F-G074 7 I r 1968, as amended and supplemented by The Flood Disaster Protection Act of 1973, and in regulations, interpretations and rulings thereunder or in a zoned flood plain or flood hazard area as determined by local findings, determinations, ordinances, regulations or rulings, and if located therein, the Mortgagor shall secure the amount of flood insurance required by the Mortgagee in its discretion and demonstrate payment of all premiums due therefor. All insurance policies described in this Section 4 shall be written by insurance companies licensed to do business within the Commonwealth of Pennsylvania and shall be in form satisfactory to the Mortgagee, shall be issued by companies satisfactory to Mortgagee, and shall be maintained in full force and effect. 5. CASUALTY TO MORTGAGED PROPERTY. The Mortgagor shall promptly give written notice of any casualty affecting the value of the Mortgaged Property to the Mortgagee. Mortgagee may make proof of loss if not promptly done by Mortgagor. Any adjustment of a proof of loss shall require written consent of Mortgagee. The proceeds of all insurance on the Mortgaged Property shall be applied as follows: A. The Mortgagee may, at its option, apply proceeds of such insurance to prepayment of the amounts due under the Note, the Guaranty Agreement, this Mortgage, or any additional Loan Documents (any excess proceeds to be paid to Mortgagor); or B. If the Mortgagee does not exercise the option in subparagraph A. above, then: (1) The Mortgagor may, if the Mortgaged Property is partially or totally destroyed by fire, flood, windstorm or other casualty so as to render the Mortgaged Property unsuitable for Mortgagor's continued use, have the option of not replacing, restoring or repairing the damaged Mortgaged Property, but in lieu of such replacement, restoration or repair, and provided that the insurance proceeds together with any required funds of Mortgagor will prepay any remaining amounts secured hereby in full, Mortgagor may apply the full proceeds of such insurance on the Mortgaged Property toward the prepayment of the amounts secured hereby (any excess proceeds to be paid to Mortgagor); provided that the insurance proceeds, together with any required funds of Mortgagor, will prepay any remaining amounts secured hereby in full; or (2) If the Mortgagor does not elect to prepay the amounts secured hereby in full, the proceeds of all such insurance shall be held by the Mortgagee in a separate insurance loss account until such time as Mortgagor shall have delivered to Mortgagee for its approval and to its satisfaction, sufficient plans, specifications, and contracts containing a detailed breakdown of the costs to replace, restore or repair the damaged Mortgaged Property. Thereafter, the Mortgagee will, upon delivery to it of a certificate of the Mortgagor setting forth the costs theretofore incurred or paid, subject to Mortgagee inspection and acceptance of the replacement, restoration, or repair of the damaged Mortgaged Property, apply so much as may be necessary of VOL 2 i 13 P'03075 8 the proceeds of such insurance toward the payment of the costs of such replacement, restoration or repair. If said proceeds are not sufficient to pay in full the costs of such replacement, restoration or repair, the Mortgagor will nonetheless complete or cause to be completed the work thereof and will pay such excess cost prior to requesting Mortgagee to apply any of the proceeds of such insurance to the cost of such replacement, restoration or repair. Any balance of said proceeds of insurance remaining after the payment of all costs of such replacement, restoration or repair shall be applied toward the prepayment of the amounts secured hereby. If said amounts shall have been paid in full, any further balance of said proceeds of insurance shall be paid to the Mortgagor; provided, however, that if the Mortgagor does not elect to prepay the amounts secured hereby in full, there shall be no diminution in or postponement of future installments payable under the Note or hereunder until payment thereof in full, and the Mortgagor shall proceed promptly to replace, restore or repair the Mortgaged Property damaged or destroyed or cause said work to be done. All policies of insurance contemplated by this Mortgage, and all renewals thereof, are hereby assigned to Mortgagee as additional security for payment of the Indebtedness and Mortgagor hereby agrees that, if an Event of Default hereunder shall have occurred and be continuing, any amounts available thereunder upon cancellation or termination of any of such policies or renewals, whether in the form of return of premiums or otherwise, shall be payable to Mortgagee as assignee thereof. If Mortgagee becomes the owner of or obtains an interest in the Mortgaged Property, or any part thereof, by foreclosure or otherwise, such policies, including all right, title and interest of Mortgagor hereunder, shall become the absolute property of Mortgagee. 6. CONDEMNATION. Mortgagor hereby assigns, transfers and sets over to Mortgagee the entire proceeds of any award or claim for damage for any of the Mortgaged Property taken or damaged under the power of eminent domain or by condemnation. The proceeds of the award shall be applied in reduction of the Indebtedness unless Mortgagee elects to require Mortgagor to restore or rebuild, in which event the proceeds shall be held by Mortgagee and used to reimburse Mortgagor for the cost of restoring and rebuilding all Improvements in accordance with plans and specifications to be submitted to and approved by Mortgagee. In the event Mortgagee holds the proceeds to reimburse Mortgagor for the costs of rebuilding and restoring the premises, then the proceeds of the award shall be paid out in the same manner, and under the same terms and conditions, as provided in Section 5.13(2) hereof for the payment of insurance proceeds in reimbursement of the costs of rebuilding and restoration. If the amount of such award is insufficient to cover the cost of rebuilding and restoration, Mortgagor shall pay such cost in excess of the award before being entitled to reimbursement out of the award. Any surplus which may remain out of said award after payment of such costs of rebuilding and restoration shall, at the option of Mortgagee, be applied on account of the Indebtedness or be paid to any other party entitled thereto. V2L2713PG 07b 9 I 7. USE; COMPLIANCE WITH LAWS. A. Mortgagor shall comply, and shall cause each lessee under the Leases or other user of the Mortgaged Property to comply, with all laws, ordinances, regulations and orders of all federal, state, municipal and other governmental authorities having jurisdiction of the Mortgaged Property and the use made thereof and with all orders and directions of the Board of Fire Underwriters or similar body, and with all restrictions of record pertaining to the Mortgaged Property, improvements thereon and the use thereof. B. Without the prior written consent of Mortgagee, Mortgagor shall not (1) make, permit, or suffer any change to be made in the general nature of the occupancy of the Mortgaged Property; (2) initiate or acquiesce in any reclassification of the Mortgaged Property under any applicable zoning or similar laws, ordinances and regulations; or (3) make, permit or suffer any use of the Mortgaged Property that could with the passage of time result in the creation of any right of user, or any claim of adverse possession or easement on, to or against any part of the Mortgaged Property in favor of any person or the public. 8. OTHER LIENS, TRANSFERS. Without the prior written consent of Mortgagee, Mortgagor will not: A. Create, permit or suffer to exist any lien or security interest in the Mortgaged Property or any part or element thereof, or interest therein, except other liens in favor of Mortgagee. B. Sell, contract to sell, convey, alienate or transfer in any manner whatever the Mortgaged Property or any part thereof or any interest therein, whether legal or equitable, or lease, agree to lease, option or agree to option, the Mortgaged Property or any part thereof or any interest therein, whether legal or equitable, without first obtaining the written consent of the Mortgagee, which consent Mortgagee reserves the right to refuse; or be divested of title, or any interest therein, whether legal or equitable, in any manner or way, whether voluntary or involuntary. 9. INSPECTION. Mortgagee and any person authorized by Mortgagee shall have the right at any time, upon reasonable notice to Mortgagor, to enter the Mortgaged Property at any reasonable hour to inspect and photograph its condition and state of repair. 10. DECLARATION OF NO SET-OFF. Within 10 days after requested to do so by Mortgagee by notice to Mortgagor, Mortgagor shall certify to Mortgagee or to any proposed assignee of this Mortgage, in a writing duly acknowledged, the amount of principal, interest and other charges then owing on the Indebtedness and any other indebtedness secured by prior liens, if any, and whether there are any set-offs or defenses against them. VOL2713PG377 10 I 11. SECURITY AGREEMENT. A. This Mortgage is both a real property Mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Mortgaged Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor, by executing and delivering this Mortgage grants to Mortgagee, as security for the Indebtedness, a security interest in the Collateral. Mortgagor hereby authorizes Mortgagee to file financing statements in order to create, perfect, preserve and continue the security interest(s) herein granted. This Mortgage shall also be effective as a financing statement filed as "fixture filing" for the purposes of the Uniform Commercial Code, shall cover all items of the Mortgaged Property that are or are to become fixtures, and is to be filed for record in the Recorder's Office. This Mortgage shall also be effective as a financing statement covering any other of the Mortgaged Property and may be filed in the appropriate filing or recording office. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section 11. The addresses of the Debtor and Secured Party are as set forth at the beginning of this Mortgage. The record owner of the Property is: Thomas H. McElwee, Jr. and Becky S. McElwee. Information concerning the security interest(s) herein granted may be obtained from Mortgagee upon request. If an Event of Default shall occur, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Mortgaged Property or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation of the Mortgaged Property. Upon request or demand of Mortgagee, Mortgagor shall at its expense assemble the Mortgaged Property and make it available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses, including legal expenses and attorneys' fees and disbursements, incurred or paid by Mortgagee in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Mortgaged Property. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Mortgaged Property sent to Mortgagor in accordance with the provisions hereof at least five business days prior to such sale, disposition or auction shall constitute reasonable notice to Mortgagor. The proceeds of any disposition of the Mortgaged Property, or any part thereof, may be applied by Mortgagee to the payment of the Indebtedness in such priority and proportions as Mortgagee in its discretion shall deem proper. Mortgagor shall notify Mortgagee of any change in name or identity of Mortgagor or any change in location of the Mortgaged Property and shall promptly execute, file and record, at its sole cost and expense, such Uniform Commercial Code forms as are necessary to maintain the priority of the lien of Mortgagee upon and security interest in the VOL27I3PGO78 11 r r Mortgaged Property. In addition, Mortgagor shall promptly execute, file and record such additional Uniform Commercial Code forms or continuation statements as Mortgagee shall deem necessary and shall pay all expenses and fees in connection with the filing and recording thereof, provided that no such additional documents shall increase the obligations of Mortgagor under the Note or this Mortgage. Mortgagor hereby grants to Mortgagee an irrevocable power of attorney, coupled with an interest, to file with the appropriate public office on its behalf any financing or other statements signed only by Mortgagee, as secured party, in connection with the Collateral. B. That portion of the Mortgaged Property consisting of personal property and equipment shall be owned by Mortgagor and shall not be the subject matter of any lease or other transaction whereby the ownership or any beneficial interest in any of such property is held by any person or entity other than Mortgagor nor shall Mortgagor create or suffer to be created any security interest covering any such property as it may from time to time be replaced, other than the security interest created herein. 12. RIGHT TO REMEDY DEFAULTS. In case of any default by Mortgagor, Mortgagee may, but need not, make any payment or perform any act herein required, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting the Mortgaged Property, or contest any tax or assessment. All moneys paid for any of the purposes herein authorized and all expenses paid or incurred in connection therewith, including attorney's fees and any other money advanced by Mortgagee to protect the Mortgaged Property and the lien hereof, shall be so much additional Indebtedness and shall become immediately due and payable without notice and with interest thereon at the applicable rate provided in the Note from the date of expenditure or advance until paid. No inaction on the part of Mortgagee shall be considered as a waiver of any right accruing to it on account of any default on the part of Mortgagor. 13. REMEDIES FOR DEFAULT. Upon the occurrence of an Event of Default and in addition to any and all other rights and remedies Mortgagee may have: A. The entire unpaid balance of the indebtedness and all other sums secured by this Mortgage shall become immediately due and payable, at the option of Mortgagee, without notice or demand. B. For the purpose of obtaining possession of the Mortgaged Property-upon the occurrence of any event which would constitute an event of default hereunder, Mortgagor hereby authorizes and empowers any attorney of any court of record in the Commonwealth of Pennsylvania or elsewhere, as attorney for Mortgagor and all persons claiming under or through Mortgagor, to sign an agreement for entering in any competent court an amicable action or actions in ejectment for possession of the Mortgaged Property and to appear for and confess judgment against Mortgagor, and against all persons claiming under or through Mortgagor, in favor of Mortgagee, for recovery by Mortgagee of possession VOL2713PG079 12 r r thereof, for which this Mortgage, or a copy thereof verified by affidavit, shall be a sufficient warrant; and thereupon a writ of possession may immediately issue for possession of the Mortgaged Property, without any prior writ or proceeding whatsoever and without any stay of execution. If for any reason after such action has been commenced it shall be discontinued, or possession of the Mortgaged Property shall remain in or be restored to Mortgagor, Mortgagee shall have the right for the same default or any subsequent default to bring one or more further amicable actions as above provided to recover possession of the Mortgaged Property. Mortgagee may bring an amicable action in ejectment and confess judgment therein before or after the institution of proceedings to foreclose this Mortgage or to enforce the Note, or after entry of judgment therein or on the Note, or after a Sheriffs sale of the Mortgaged Property in which Mortgagee is the successful bidder, it being the understanding of the parties that the authorization to pursue such proceedings for obtaining possession and confession of judgment therein is an essential part of the remedies for enforcement of the Mortgage, the Note and the Guaranty Agreement, and shall survive any execution sale to Mortgagee. C. Mortgagee shall have the right, from time to time, to bring an appropriate action to recover any sums required to be paid by Mortgagor under the terms of this Mortgage, as they become due, without regard to whether or not any of the Indebtedness shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of mortgage foreclosure, or any other action, for any default by Mortgagor existing at the time the earlier action was commenced. D. Mortgagee may institute an action or actions of mortgage foreclosure against the Mortgaged Property, or take such other action at law or in equity for the enforcement of this Mortgage and realization on the mortgage security or any other security herein or elsewhere provided for, as the law may allow, and may proceed therein to final judgment and execution for the entire unpaid balance of the principal debt, with interest at the rate stipulated in the Note, together with all other sums due by Mortgagor in accordance with the provisions of the Note, the Guaranty Agreement or this Mortgage, including all sums which may have been loaned by Mortgagee to Mortgagor after the date of this Mortgage, and all sums which may have been advanced by Mortgagee for taxes, water or sewer rents, charges or claims, payments or prior liens, insurance or repairs to the Mortgaged Property, all costs of suit, together with interest at such rate on any judgment obtained by Mortgagee from and after the date of any Sheriff s sale until actual payment is made by the Sheriff of the full amount due Mortgagee, and a reasonable attorney's commission for collection, which attorney fee shall also be secured by this Mortgage. 14. ASSIGNMENT OF LEASES AND RENTS AFTER DEFAULT. As further security for payment of the indebtedness and performance of the obligations, covenants and agreements secured hereby, Mortgagor hereby assigns to Mortgagee all Leases, together with all rents to become due under such Leases. This assignment, however, shall be operative only in the event of the occurrence of an Event of Default hereunder, or under the Note and in any such case Mortgagor hereby confers on Mortgagee the exclusive power, to be used or not in its sole discretion, to act as agent, or to appoint a third person to act as agent for Mortgagor, with power VOL27I3PG080 13 to take possession of, and collect all rents arising from the Mortgaged Property and apply such rents, at the option of Mortgagee, to the payment of the mortgage debt, taxes, assessments, and other expenses in such order or priority as Mortgagee may in its sole discretion determine, and to turn any balance remaining over to Mortgagor; but such collection of rents shall not operate as an affirmance of the tenant or lease in the event Mortgagor's title to the Mortgaged Property should be acquired by Mortgagee. Mortgagee shall be liable to account only for rents and profits actually received by Mortgagee. In exercising any of the powers in this paragraph contained, Mortgagee may also take possession of, and for these purposes use, any and all personal property contained in the Mortgaged Property and used by Mortgagor in the rental or leasing thereof or any part thereof. 15. RIGHTS AND REMEDIES CUMULATIVE. A. The rights and remedies of Mortgagee as provided in this Mortgage or the Note, or any other Loan Document shall be cumulative and concurrent, may be pursued separately, successively or together, at the sole discretion of Mortgagee, and may be exercised as often as occasion therefor shall arise. The failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. The remedies provided herein are in addition to all remedies of Mortgagee provided by law. B. Any failure by Mortgagee to insist upon strict performance by Mortgagor of any of the terms and provisions of this Mortgage, the Note, or any other Loan Documents shall not be deemed to be a waiver of any of the terms or provisions thereof, and Mortgagee shall have the right thereafter to insist upon strict performance by Mortgagor of any and all of them. C. Neither Mortgagor nor any other person now or hereafter obligated for payment of all or any part of the sums now or hereafter secured by this Mortgage shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated or the failure of Mortgagee to take action to foreclose on this Mortgage or otherwise enforce any provisions of the Mortgage, the Note, the Guaranty Agreement or any other Loan Document, or by reason of the release, regardless of consideration of all or any part of the security held for the Indebtedness. D. Mortgagee may release, regardless of consideration, any part of the security held for the Indebtedness without, as to the remainder of the security, in any way impairing or affecting the lien of this Mortgage or its priority over any subordinate lien. E. For payment of the Indebtedness, Mortgagee may resort to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect. 16. REQUIRED NOTICES. Mortgagor shall notify Mortgagee promptly of the occurrence of any of the following: VOL2713PGO81 14 A. A fire or other casualty causing damage in the amount of $100,000.00 or more to the Mortgaged Property; B. Receipt of notice of condemnation of the Mortgaged Property; C. Receipt of notice from any governmental authority relating to the structure, use or occupancy of the Mortgaged Property; D. Receipt of any notice from any tenant of all or any portion of the Mortgaged Property; E. Substantial change in the occupancy of the Mortgaged Property; F.. Receipt of any notice from the holder of any lien or security interest in the Mortgaged Property; or G. Commencement of any litigation affecting the Mortgaged Property. 17. MORTGAGOR'S WAIVERS. Mortgagor hereby waives and releases: A. All errors, defects and imperfections in any proceeding instituted by Mortgagee under the Note, the Guaranty Agreement, this Mortgage, or any other Loan Document; B. All benefit that might accrue to Mortgagor by virtue of any present or future law exempting the Mortgaged Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment; and C. Unless specifically required herein, all notices of Mortgagor's default or of Mortgagee's election to exercise or Mortgagee's actual exercise, of any right, privilege, or remedy under the Note, the Guaranty Agreement, this Mortgage, or any other Loan Document. 18. COUNSEL FEES. If Mortgagee becomes a party to any suit or proceeding affecting the Mortgaged Property or title thereto, the lien created by this Mortgage or Mortgagee's interest therein, or if Mortgagee engages counsel to collect any of the Indebtedness or to enforce performance of the agreements, conditions, covenants, provisions or stipulations of this Mortgage, the Note or the Guaranty Agreement, or to represent Mortgagee in any bankruptcy or insolvency proceeding or reorganization, Mortgagee's costs, expenses and reasonable counsel fees, whether or not suit is instituted, shall be paid to Mortgagee by Mortgagor, on demand, with interest at the then effective rate set forth in the Note, and, until paid, they shall be deemed to be part of the Indebtedness. VOL27I3PGO82 15 1 10 19. ENVIRONMENTAL WARRANTIES AND COVENANTS. A. Mortgagor hereby warrants and covenants that: (1) The present use of the Mortgaged Property is, and any currently contemplated future use of the Mortgaged Property will be in compliance with all applicable Environmental Laws and Regulations and no environmental liability exists on or in connection with the Mortgaged Property; (2) After inquiry and investigation by Mortgagor, conducted with due diligence, there are no Hazardous Substances located on the Mortgaged Property (except as disclosed in writing to Mortgagee and acknowledged, in writing, by Mortgagee as acceptable, and any such Hazardous Substances have been properly transported, stored or disposed of at other locations); (3) Mortgagor has all permits or authorizations under Environmental Laws and Regulations necessary to carry on its business, has filed all notifications and plans and has such information and plans available as required under Environmental Laws and Regulations, and is in compliance with all applicable Environmental Laws and Regulations, including but not limited to deed acknowledgment required by the Pennsylvania Solid Waste Management Act, 35 P.S. 6018.405 and the Pennsylvania Hazardous Sites Cleanup Act, 35 P.S. §6025.512(b); (4) Mortgagor is not aware of nor has Mortgagor received any claims, demands, orders, notices of violation, notices of intent to file a claim, demand, order, lawsuit, notices of deficiencies, or requests for information relating to actual or potential actions as described in subsection 19.A, any of which are based upon or refer to Environmental Laws and Regulations; (5) To the best of the information and belief of Mortgagor after a due diligence inquiry, subsections (1) through (4) above are applicable to usage of the Mortgaged Property by predecessors in title or interest of Mortgagor and its lessees or tenants or invitees; (6) Mortgagor has received no notice and is unaware that the Mortgaged Property has been designated as a site on the National Priorities List or similar state list, or has been or is the subject of any removal or response action, private or governmental, under the Comprehensive Environmental Response, Compensation or Liability Act, as amended, or the Pennsylvania Hazardous Sites Cleanup Act or any similar state or federal law, and that no requests have been received to provide information or participate in any study, remedial design or response action under such laws; VBL27I3PGO83 16 Ip (7) Mortgagor will exercise due care with respect to any substances, including but not limited to Hazardous Substances, which may be located on, disposed of, or placed on the Mortgaged Property; (8) Mortgagor will take reasonable precautions against the foreseeable acts or omissions of any third party in the location, disposal or placement of Hazardous Substances on the Mortgaged Property and the environmental consequences that could foreseeably result from such acts or omissions; (9) Mortgagor shall, and shall use its best efforts to cause each employee, agent or contractor to, use its or their best efforts to comply in all material respects with any applicable Environmental Laws and Regulations; provided, however, that this provision shall not prevent the Mortgagor from contesting, in good faith and with reasonable diligence, the validity or application of such laws by appropriate proceedings; (10) Mortgagor has not, by act or omission, caused or contributed to the release or threatened release of any Hazardous Substance on the Mortgaged Property; and (11) Mortgagor shall immediately notify Mortgagee and its successors in interest of any act or omission that could give rise to liability under any Environmental Laws and Regulations, as soon as it occurs, including, but not limited to, any of the events referred to in this subsection 19.A of this Mortgage. B. Conditioned upon notice from a governmental agency of a violation of Environmental Laws and Regulations or upon Mortgagee's reasonable suspicion of such violation or upon default and prior to the institution of foreclosure proceedings by Mortgagee, Mortgagor hereby grants to Mortgagee the right to require an environmental audit to be conducted at the expense of Mortgagor, including but not limited to such physical testing as may be reasonably concluded to be necessary to determine compliance with applicable Environmental Laws and Regulations. The exercise of this right shall be limited to a single completed audit unless one of the events in this paragraph has occurred and in which event Mortgagee's right to environmental testing shall only be limited by the reasonable necessity of Mortgagee to have a complete evaluation of the Mortgaged Property. Mortgagor warrants that it has produced or offered to produce for inspection copies or summaries of all oral or written reports or correspondence prepared by any person and relating to any of the matters described in this Section 19 heretofore prepared for Mortgagor or in its possession, including any audits, inspection reports, samples or data relating to any such report or investigations. C. Mortgagor covenants that it shall not construe this Mortgage or take any action which may cause the Mortgagee to be considered a generator of Hazardous Substances, an owner, an operator or a person in control of any facility or part of any business of the Mortgagor. VOL2713PG©34 17 i D. Mortgagor, its successors and assigns, hereby agrees to defend, indemnify and hold harmless Mortgagee, its directors, officers, employees, agents, contractors, subcontractors, licensees, invitees, successors and assigns from and against any and all claims, demands, judgments, damages, actions, causes of action, injuries, administrative orders, consent agreements and orders, liabilities, penalties, costs, and expenses of any kind whatsoever including but not limited to claims arising out of environmental hazards, loss of life, injury to persons, property, or business, and/or damage to natural resources in connection with the activities of Mortgagor or its predecessors or successors in interest, lessees, invitees, or third parties who have trespassed on the Mortgaged Property, or any of them, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of Mortgagor which (1) arise out of the actual, alleged or threatened manufacture, discharge, dispersal, release, storage, accumulation, control, processing, spilling, leaking, emitting, transportation, treatment, generation, disposal, handling, or escape of Hazardous Substances, or (2) actually or allegedly arise out of the use, specification or inclusion of any product, material or process containing chemicals or Hazardous Substances, the failure to detect the existence or proportion of chemicals or Hazardous Substances in the soil, air, surface water or groundwater, or the performance or failure to perform the abatement of any pollution source or the replacement or removal of any object, soil, water, surface water or groundwater containing chemicals or Hazardous Substances. The Mortgagor, its successors and assigns, shall bear, pay and discharge when and as the same become due and payable, any and all such judgments or claims for contribution, indemnification, damages, penalties and attorneys, consulting and experts fees or otherwise against Mortgagee, shall hold Mortgagee harmless for such judgments or claims, and shall assume the burden and expense of defending all suits, administrative proceedings and negotiations of any description with any and all persons, entities, political subdivisions or government agencies arising out of any of the occurrences set forth herein. 20. NOTICES. All necessary notices, demands and requests shall be deemed duly given if and when (A) delivered personally, (B) transmitted by facsimile, confirmed by telephone and transmission report, together with same-day mailing by first class mail, postage prepaid, or (C) sent by a nationally recognized express courier service, postage or delivery charges prepaid, addressed as follows: To Mortgagee: Scarff Bros., Inc. 2300 Fallston Road Fallston, MD 21047 To Mortgagor: Thomas H. McElwee, Jr. Becky S. McElwee 250 Jumper Road Newburg, PA 17240 aL27I3PGO85 18 r 21. OPEN-END MORTGAGE PROVISIONS. A. NOTICE OF JUNIOR LIEN. If (1) this Mortgage secures a line of credit or other facility pursuant to which advances are made from time to time by Mortgagee to Mortgagor, and (2) Mortgagee receives written notice pursuant to Section 8143(b) of the Open-End Mortgage Statute from a holder of a lien or encumbrance on the Mortgaged Property which is subordinate to the lien of the Mortgage, then and notwithstanding any provision to the contrary contained in the Note, the Guaranty Agreement, this Mortgage or any other Loan Document, Mortgagor agrees that Mortgagee shall not be responsible to make any further advances to Mortgagor (and Mortgagee is released from all liability for failure to make such advances) if Mortgagee determines in its sole discretion that any such advance requested by Mortgagor could be construed to be an unobligated advance under Section 8143(b) of the Open-End Mortgage Statute. B. NOTICE OF MECHANIC'S LIEN. If (1) this Mortgage secures a loan facility the proceeds of which are used to provide funds to pay toward all or part of the cost of completing any erection, construction, alteration or repair of any part of the Mortgaged Property, and (2) Mortgagee receives written notice pursuant to Section 8143(b) of the Open-End Mortgage Statute from a holder of a mechanic's lien for labor performed or to be performed or materials furnished or to be furnished for the erection, construction, alteration or repair or any part of the Mortgaged Property, then and notwithstanding any provision to the contrary contained in the Note, the Guaranty, this Mortgage, or any other Loan Documents, Mortgagor agrees that Mortgagee shall have the right to suspend (until such time as the lien is fully released) any further advances to Mortgagor (and Mortgagee is released from all liability for failure to make such advances) except advances which Mortgagee determines in its sole discretion are for the purpose of paying toward all or part of the cost of completing any erection, construction, and alteration or repair of any part of the Mortgaged Property the financing of which, in whole or in part, this Mortgage was given to secure. C. NOTICE OF LIMITATION OF INDEBTEDNESS. If Mortgagor should at any time elect to limit the liabilities secured by this Mortgage pursuant to Section 8143(c) of the Open-End Mortgage Statute, Mortgagor agrees that notice of such election shall (1) not be effective unless and until it is served upon Mortgagee in accordance with the requirements of Section 8143(d) of the Open-End Mortgage Statute and fully complies with the requirements for the giving of notices under this Mortgage; (2) release Mortgagee from all obligation to make any further advances under the Note notwithstanding anything to the contrary contained in such notice or the Note, or any other Loan Documents; (3) constitute, at the election of Mortgagee, an Event of Default under the Note or Guaranty Agreement; and (iv) not be effective to limit Mortgagor's liability for payment and performance of all liabilities for which Mortgagor is responsible under this Mortgage or the Note, or any other Loan Documents (including, without limitation, all reimbursement and indemnification agreements) whether such liabilities arise prior or subsequent to the date of such notice. VaL27I3PGO86 19 22. PARAGRAPH HEADINGS. Paragraph headings are for reference only and do not constitute a part of this Mortgage. 23. APPLICABLE LAW. This Mortgage shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania. The parties have participated jointly in the negotiation and drafting of this Mortgage. In the event an ambiguity or question of intent or interpretation arises, this Mortgage shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Mortgage. IN WITNESS WHEREOF, and intending to be legally bound hereby, Mortgagor has caused this instrument to be executed and sealed the day and year first above written. "MORTGAGOR" WITNESS: t ? F Thomas H. McElwee, Jr. Becky S. McElwee' ADH:slb #364060.1 (13106.014) VGL27 i 3PGO67 20 COMMONWEALTH OF PENNSYLVANIA SS: COUNTY OF LANCASTER On this 1 lth day of March, 2005, before me, the undersigned officer, personally appeared THOMAS H. McELWEE, JR. and BECKY S. McELWEE, known to me to be the persons whose names are subscribed to the within instrument, and that said persons acknowledged that they executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. COMMONWEALTH OF PENNSYLVANIA Notarial Seal Judy Ann Poglitsch, Notary Public City of Lancaster, Lancaster County My Commission Expires Oct. 14,2008 Member, Pennsylvania Association of Notaries va 27 13 PG X18 8 EXHIBIT "A" PROPERTY ALL THE FOT ,LOWING two tracts of described real estate, together «iti the improvements thereon erected, ?yiRg and being situate in the Townnship of Guilford, Franklin County, P-nnsylva?;ia, bounded and limited as :J?lows: Tract No. 1 BEGINNING at an iron pin in the Chambersburg-Waynesboro Highway at corner of lands now or formerly of William Lowry and Mrs. Claude Wingerd; thence through said highway along lands of the latter, South 10 degrees 00 minutes West, 37.60 perches to an iron pin; thence through said highway along lands of the same, South 13 degrees 30 minutes West, 33.48 perches to a post in said highway at the east side of the Western Maryland Railroad right of way; thence with the East side of said right of way parallel to and 50.00 feet distance from the center of said Railroad, North 26 degrees 00 minutes West, 17.11 perches to a point on the East side of said Railroad; thence by the same, parallel to and 50.00 feet distance from the center line of said Railroad measured at right angles thereto, in a northwestwardly direction by a curve to right of 11,507.20 feet, radius 20.97 perches to a point on the east side of said right of way at lands now or formerly of W. H. and Harry A. Smith Estate; thence by said lands North 40.5 degrees East 27.60 perches to a stone; thence along lands now or formerly of William Lowry North 40 degrees 22 minutes East, 19.80 perches to the iron pin in said highway, the place of BEGINNING. CONTAINING 5 acres and 133.00 perches, more or less, as shown per draft of John H. Atherton, C. S. for David Elliot and James M. Heckman dated February 19, 1942. Tract No. 2 BEGINNING at a point on the West side of the Western Maryland Railroad right of way, 50.00 feet distance from the center line of said Railroad, measured at right angles thereto at corner of lands now or formerly of Freedman and Smootkins; thence by the latter North 86 degrees 00 minutes West, 21.80 perches to a point; thence by the same, North 20.5 degrees East, 24.85 perches to a white oak; thence along the West side of said right of way parallel to and 50 feet distance from the center line of said Railroad measured at right angles thereto by a curve to the right of 11,509.20 feet, radius 18.83 perches to a point; thence by the same South 26 degrees 00 minutes East, 10.70 perches to the place of BEGINNING CONTAINING 1.00 acre and 105.00 perches, more or less, neat measure, as shown by draft of John H. Atherton, C. S. for David M. Elliot and James M. Heckman dated February 19, 1942. BEING numbered and known as 2807 Wayne Road. BEING THE SAME PREMISES which Victor W. Wheelock, joined by his wife, Patricia A. Wheelock, by deed dated January 31, 2003 and recorded January 31, 2003 in the Franklin County Recorder of Deeds Office in Volume 2052, Page 279, granted and conveyed unto Thomas H. McElwee, Jr. and Becky S. McElwee, his wife. ti ?'r 2 7 4 SECOND AMENDED AND RESTATED SECURITY AGREEMENT SECURITY AGREEMENT executed and delivered this I Vh day of March, 2005, from THOMAS H. McELWEE, JR. (the "Debtor") to SCARFF BROS., INC. (the "Lender"). THE PARTIES, INTENDING TO BE LEGALLY BOUND, agree as follows: 1.1 General Provisions. Unless expressly provided in this Security Agreement, or unless the context clearly requires otherwise, the terms used in this Security Agreement without definition which are defined in the Code shall have the meanings assigned to them in the Code. 1.2 Definitions. The following terms shall have the meanings indicated: (a) "Bankruptcy Code" means the Federal Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended and as it may be further amended from time to time. (b) "Code" means the Uniform Commercial Code Modernization Act, Act No. 18 of 2001(S.B. 330, PN 817), as amended and supplemented, and as it may be amended hereafter. (c) "Collateral" means all of Debtor's cattle whether now existing or hereafter acquired, and all cash and noncash proceeds and products thereof (including proceeds of insurance), and additions hereto, and all substitutions, renewals, replacements and increases thereon. (d) "Debtor" means Thomas H. McElwee, Jr., an adult individual, having an address of 250 Jumper Road, Newburg, PA 17240, his heirs and assigns. (e) "Event of Default" means that term as defined in Section 3.1 of this Security Agreement. M "Lender" means Scarff Bros., Inc., its successors and assigns. (g) "Loan Documents" means the Note, this Security Agreement, and all other documents executed by Debtor in connection therewith. (h) "Note" means the revolving variable rate note issued by the Debtor to the Lender on the date hereof in the face amount of $750,000.00 and all amendments, modifications and increases thereof. (i) "Secured Indebtedness" means all present and future indebtedness and obligations of the Debtor to the Lender, including but not limited to obligations under the Loan Documents, whether direct, contingent, joint, several or otherwise, whether arising directly with the Lender or obtained by the Lender by assignment or otherwise and whether arising under or evidenced by a promissory note, endorsement or other agreement by the Lender or by right to reimbursement under a transaction or otherwise; and including interest on any Secured Indebtedness and fees and expenses due the Lender in connection with any Secured Indebtedness. 0) "Security Agreement" means this Security Agreement and all future written amendments to this Security Agreement that are signed by or on behalf of the Debtor. 2.1 Security Interest. As security for the prompt payment when due, at maturity or by acceleration upon default, of the Secured Indebtedness, the Debtor hereby pledges, assigns, and transfers to the Lender, and grants to the Lender a lien upon and a continuing security interest in the Collateral. The Debtor acknowledges that the grant of a lien upon and a security interest in Collateral, under this Security Agreement is, and is intended as, a contemporaneous exchange for value given to the Debtor. 2.2 Perfection. The Debtor authorizes the Lender to file financing statements describing the Collateral. In addition, at all times during the term of this Security Agreement, the Debtor shall, upon the request of the Lender: (a) execute and deliver to the Lender all assignments, assignment statements, financing statements, renewal financing statements, certificates of title, conveyances, security agreements, affidavits and other agreements, instruments and documents that the Lender reasonably considers necessary to perfect and maintain the liens, lien priority and security interests granted in this Security Agreement, and (b) take all other actions, and refrain from any action or course of conduct as the Lender reasonably considers necessary to perfect and maintain the liens, lien priority and security interests granted in this Security Agreement, and to fully consummate all of the transactions contemplated in the Loan Documents. 2.3 Priority of Security Interests. The Debtor represents and warrants to the Lender that the security interests granted to the Lender under this Security Agreement, when properly perfected by filing, shall attach to the Collateral and shall constitute at all times a valid, perfected and enforceable lien in favor of the Lender, in and upon all of the Collateral junior to no other liens. 3.1 Default. The occurrence of any one or more of the following shall constitute an Event of Default under this Security Agreement (with the expiration of any applicable notice and cure period specified in the Loan Documents): (a) the occurrence of an Event of Default under any of the Loan Documents; 2 (b) the failure of the Debtor to promptly perform in full any material aspect of the terms, conditions, requirements or obligations set forth in this Security Agreement, or the failure by the Debtor to take (or to fail to take) any action required to be taken (or prohibited from being taken) with respect to the Secured Indebtedness or the Collateral, whether or not under this Security Agreement, if the Debtor has not remedied and fully cured such non-performance, non-observance, violation or non-compliance within thirty (30) days after the Lender has given written notice thereof to the Debtor; (c) the making by the Debtor of an assignment of title to or possession of any of the Collateral (whether or not for the benefit of creditors) or a transfer, exchange, substitution or lease of any Collateral, except for transfers to Lender. 4.1 Remedies. Immediately and automatically upon any Event of Default, and after any Event of Default, whether or not an event by which the Note becomes due and payable by its terms, whether by acceleration, at maturity or otherwise, the Lender shall have with respect to the Collateral, in addition to such rights as may be granted to the Lender herein, and in the Loan Documents, all rights and remedies available to a secured party after default under the Code. In furtherance thereof, the Lender may: (a) take possession of the Collateral; (b) peaceably, by the Lender's own means or with judicial assistance, enter the Debtor's premises or any other premises used or occupied by the Debtor and take possession of the Collateral and secure, remove or dispose of it on the Debtor's premises; (c) sell or otherwise dispose of the Collateral at one of more public or private sales without advertisement or notice except as required by law (it being understood that notice of any intended public or private sale or other disposition shall be deemed to have been reasonably made if delivered or mailed, postage prepaid, to the Debtor at the address of the Debtor set forth in the Loan Documents at least five (5) days prior to the date of public sale or the date after which the private sale or other disposition is to be consummated); (d) purchase the Collateral or any portion thereof at any public sale or, as to any item of Collateral customarily sold in a recognized market or subject of widely distributed standard price quotations, at a private sale, in either event free of all rights of redemption of the Debtor; (e) setoff against the Secured Indebtedness any sum owing by the Lender to the Debtor and such setoff shall be deemed made at the time of the Event of Default; 3 N (f) transfer any item of Collateral to an assignee in conjunction with the assignment of all of a portion of the Secured Indebtedness (in which event the Lender will have no further responsibility with respect to the item of Collateral transferred); (g) subordinate or exchange any item of Collateral or surrender or release any such item, or to compromise or release the obligation of any obligor or entity jointly, severally or contingently liable with the Debtor with respect to the Secured Indebtedness; or (h) take all other lawful actions with respect to the Collateral in the Lender's name, or that of the Debtor, as may be necessary or, in the discretion of the Lender, advisable in the implementation of the remedies of the Lender. 5.1 Debtor's Representations and Warranties. Debtor warrants and represents that: (a) It has rights in or the power to transfer the Collateral and its title to the Collateral is free of all adverse claims, liens, security interests and restrictions on transfer or pledge except those created by this Security Agreement. (b) All Collateral consisting of goods is located only in the Commonwealth of Pennsylvania. (c) Debtor's principal residence is located in the Commonwealth of Pennsylvania. (d) Debtor's exact legal name is as set forth in the first paragraph of this Security Agreement. 5.2 Other Warranties and Agreements of the Debtor. In addition to and not in limitation of such rights as the Lender may have under this Security Agreement, and/or any of the Loan Documents, or by law or agreement, the Debtor makes the following warranties and agreements with the Lender: (a) The Debtor will not change the state of is principal residence without prior written notice to Lender. (b) Other than in the ordinary course of business, the Debtor will not move any of the Collateral outside of the state in which it is presently located. (c) The Debtor warrants, represents and agrees that each item of Collateral is, and will remain at all times prior to payment in full of all Secured Indebtedness, the sole property of the Debtor, free and clear of any lien, encumbrance, security interest or claim of adverse interest, other than the Lender's interests. 4 V (d) The Debtor agrees to deliver to the Lender promptly after request by the Lender, all documents and other writings evidencing the Collateral, duly endorsed or assigned and, at any time and from time to time, to execute and deliver to the Lender such certificates of interest, instruments of assignment, financing statements, confirmations, and other instruments as the Lender may, in the Lender's reasonable discretion, deem necessary or advisable to perfect the security interest of the Lender in the Collateral or to implement and continue the rights of the Lender with respect thereto. (e) With respect to each item of Collateral, the Debtor will, at the Debtor's expense: (i) take all actions necessary to protect, preserve and maintain the interest of the Debtor and the Lender therein free and clear of any liens, encumbrances, security interest or other adverse claims which are prohibited by this Security Agreement; and (ii) preserve and maintain the Collateral in good working order, and protect it from deterioration (other than normal wear), theft or other hazard. The Debtor will not sell, assign or otherwise dispose of any item of Collateral except for transfers to Lender, and will not grant any further lien, security interest or encumbrance on the Collateral, except as permitted herein. (f) The Lender shall have the right at any time and from time to time, without notice to or further consent of the Debtor and without incurring any obligation to the Debtor or impairing the Lender's security interest in any Collateral: (i) to take any action with respect to the Collateral required of the Debtor in the immediately preceding paragraph upon failure by the Debtor to do so after five (5) days' prior written notice of such failure is given to Debtor (though the Lender shall be under no obligation to take any such action) and to charge the cost thereof to the Debtor, such cost shall be payable on demand, with interest at the Default Rate, as defined in the Note, and included in the Secured Indebtedness; (ii) to transfer any item of Collateral to an assignee in conjunction with the assignment of all or any portion of the Secured Indebtedness (in which event the Lender will have no further responsibility with respect to the item of Collateral transferred); and (iii) to notify any insurer with respect to any item of Collateral or any obligor thereon of the security interest of the Lender therein and to collect all sums owing to the Debtor thereon and to compromise same if, in the discretion of the Lender, such compromise shall be deemed advisable and endorse or execute for such purpose in the name of the Debtor any instrument of payment of release of compromise received with respect thereto, such endorsement and execution to be effective as that of the Debtor for all purposes. (g) The Lender shall not be liable to the Debtor for and shall not at any time be deemed to have failed to exercise reasonable ordinary care with respect to the Collateral regarding information, knowledge, industry standards or conditions or any other facts possessed by the Debtor or any officer, employee, agent, custodian or other individual acting for or on behalf of the Debtor, and not communicated to the Lender. Such information, knowledge, industry standards or conditions or any other facts 5 J possessed by the Debtor or any officer, employee, agent, custodian, or other individual acting for or on behalf of the Debtor and communicated to the Lender that the Lender deems inappropriate need not be employed or utilized by the Lender. 6.1 Payment of Taxes. The Debtor shall pay promptly, when due, all sales, use, excise, personal property, income, withholding, corporate franchise and all other taxes, assessments and governmental charges upon and in relation to its ownership or use of any of its assets, income or gross receipts for which the Debtor is or may be liable, except to the extent any such liabilities are being contested in good faith and with due diligence by the Debtor, and the Debtor shall maintain a reserve account therefor in accordance with generally accepted accounting principles. 6.2 Discharee of Tax Liens. The Debtor shall not permit, or suffer to remain, and will promptly discharge, any lien arising from any unpaid tax, assessment, levy or governmental charge unless the Debtor contests such lien or liens in good faith, provides the Lender with all facts concerning the lien and provides adequate reserves on the books of the Debtor to protect against such loss. 6.3 Authority to Pay Taxes. In the event the Debtor shall fail to pay any such tax, assessment, levy or governmental charge or to discharge any such lien or contest the same in good faith and comply with subsection 6.2 hereof, the Lender, without waiving or releasing any obligation or default of the Debtor hereunder, may at any time or times thereafter, but shall be under no obligation to do so, make such payment, settlement, compromise or release or cause to be released any such lien, and take any other action with respect thereto which the Lender deems advisable. All sums paid by the Lender in satisfaction of, or on account of any tax, levy or assessment or governmental charge, or to discharge or release any lien, and any expenses, including reasonable attorneys' fees, court costs and other charges relating thereto, shall become a part of the Secured Indebtedness secured by the Collateral, payable on demand, with interest at the Default Rate, as defined in the Loan Agreement. 6.4 Insurance. The Debtor shall keep all of the Collateral insured, at its expense, against loss or damage by fire, explosion and such other risks ordinarily insured against by other owners or users of similar property in similar businesses for the full insurable value thereof, by policies of insurance in such form and with such companies and in such amounts as may be satisfactory to the Lender. 6.5 Policies: Proceeds. The Debtor shall deliver to the Lender on demand certified copies of all such insurance policies (or, at the option of the Lender certificates evidencing coverage) covering the risks set forth in subsection 6.4, with loss payable clauses in a form satisfactory to the Lender naming the Lender as payee, as its interest may appear. All proceeds payable under any such policies shall be payable in all events to the Lender, but at the option of the Lender any such proceeds may be released to the Debtor. The Debtor hereby grants to the Lender a continuing security interest in and to all insurance policies and the proceeds thereof to secure the repayment of the Secured Indebtedness and agrees the Lender shall have the right, in 6 ., the name of the Debtor or in the name of the Lender, to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be made thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies. 6.6 Notices by Insurer. Each insurer shall agree by endorsement upon the policy or policies issued by it to the Debtor as required above, or by independent instruments furnished to the Debtor, that it will give the Lender thirty (30) days' written notice before any such policy or policies shall be altered or canceled, and that no act or default of the Debtor or any other person shall affect the right of the Lender to recover under such policy or policies in case of loss or damage. 6.7 Authority to Obtain Insurance. If the Debtor shall fail at any time or times hereafter to obtain and maintain any of the policies of insurance required in the Loan Documents and/or this Security Agreement, or fail to pay any premium in whole or in part relating to any such policies, then after notice to the Debtor the Lender may, but it shall have no obligation to do so, obtain and cause to be maintained any or all of such policies, and pay any part or all of the premiums due thereunder, without thereby waiving any default (or Event of Default) by the Debtor, and any sums so disbursed by the Lender shall become a part of the Secured Indebtedness secured by the Collateral, payable on demand, with interest at the Default Rate, as defined in the Note. 7.1 General. This Security Agreement shall apply with respect to all present and future Secured Indebtedness of the Debtor to the Lender and to all after-acquired and replacement Collateral as and when any after-acquired or replacement Collateral shall arise, and may be terminated with respect to future Collateral only by written notice of termination by the Lender, effective upon actual receipt by the Debtor. This Security Agreement shall continue to apply to all Collateral then existing and thereafter acquired pursuant to any agreement or compromise of the terms of any of the Loan Documents or any other agreement to extend credit outstanding to the Debtor (or to any third party upon the guaranty or accommodation of the Debtor). 8.1 No Waiver. The Lender's failure at any time or times hereafter to require strict performance by the Debtor of any of the provisions, warranties, terms and conditions contained in this agreement or any Loan Documents shall not waive, affect or diminish any right of the Lender at any time or times hereafter to demand strict performance therewith and with respect to any other provisions, warranties, terms and conditions contained in this Security Agreement or any Loan Documents. Any waiver of any Event of Default shall not waive or affect any other Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Security Agreement or any Loan Documents shall be deemed to have been waived by any act or knowledge of the Lender, its agents, officers or employees, except by an instrument in writing signed by an officer of the Lender and directed to the Debtor specifying such waiver. 7 I 8.2 Application of Payments. Upon the occurrence of an Event of Default, the Debtor irrevocably waives the right to direct the application of any and all payments (including proceeds of the Collateral) at any time or times thereafter which may be received by the Lender by or for the benefit of the Debtor. 8.3 Legal Effect. This Security Agreement and any Loan Documents, instruments and documents executed and delivered pursuant hereto or to consummate the transactions contemplated hereunder shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. 8.4 Construction. The domestic law of the Commonwealth of Pennsylvania shall govern and control the construction, enforceability, validity and interpretation of this Security Agreement and any Loan Documents. 8.5 Waiver. The Debtor waives demand, protest, notice of protest, notice of default, release, compromise, settlement, extension or renewal of all commercial paper, accounts, contract rights, instruments, guarantees, and otherwise, at any time held by the Lender on which the Debtor may in any way be liable, notice of nonpayment at maturity of any and all accounts, and notice of any action taken by the Lender unless expressly required by this Security Agreement except for notices expressly required under the Loan Documents. 8.6 Representations. All representations and warranties of the Debtor and all terms, provisions, conditions and agreements to be performed by the Debtor contained in this Security Agreement, in the Loan Documents, and any instrument or document executed hereto or concurrently herewith by the Debtor and delivered to the Lender, shall be true and correct at the time of the execution of this Security Agreement, and shall survive the execution and delivery of the Loan Documents. 8.7 Choice of Remedies. To the extent that the Secured Indebtedness is now or hereafter secured by property other than the Collateral, or by a guaranty, endorsement or property of any other person, the Lender shall have the right to proceed against such other property, guaranty or endorsement on an Event of Default and/or upon the Debtor's default in the payment of any of the Secured Indebtedness, or in any of the terms, covenants or conditions contained in this Security Agreement or in any of the Loan Documents, and the Lender shall have the right, in the Lender's sole discretion, to determine which rights, security, liens, security interests or remedies the Lender shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Lender's rights or the Secured Indebtedness under this Security Agreement or under any Loan Documents. 8.8 Severability. Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any 8 I such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. 8.9 Notice. All notices, statements, requests and demands given to or made upon any party hereto in accordance with the provisions of this Security Agreement shall be in writing and shall be deemed to have been given or made when deposited in the mail, postage prepaid, addressed to such party at the address written hereinafter, or in accordance with the latest unrevoked written direction from such party to any other party hereto: Debtor: Thomas H. McElwee, Jr. 250 Jumper Road Newburg, PA 17240 Lender: Scarff Bros., Inc. 2300 Fallston Road Fallston, MD 21047 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have hereunto set their hands and seals the day and year first above written. DEBTOR: WITNESS: /s 7 7,? /? O' 1 ?Z67 Thomas H. McElwee, Jr. LENDER: ATTEST: SCARFF BROS., INC. By: Lance Scarff ADH:slb #364063.1 (13106.014) 9 Ex k) b I + & HARTMAN U NDERH I LL & BRUBAKER LLP ATTORNEYS AT LAW ANDREW F. LUCARELLI WILLIAM C. McCARTY ALEXANDER HENDERSON,M ROBERT M. FRANKHOUSER, JR. THOMAS W. BERGEN MICHAEL W. BASIC MARK STANLEY MARK E. LOVETT KEVIN M. FRENCH JOSHUA D. CO HEN KIM R. SMITH STACEY L. MORGAN RORY O. CONNAUGHTON JEFFREY C. GOSS JOHN A. MATEYAK THEODORE L.BRUBAKER ROBERT W. PONTZ BRETT D. JACKSON JEFFREY P. OUELLET WILLIAM J. ZEE, III JOHN J. HERMAN DANA C. PANAGOPOULOS MICHELLE L. GROLEAU 221 EAST CHESTNUT STREET LANCASTER, PENNSYLVANIA 17602-2782 (717) 299-7254 FAX (717) 299-3160 Web Site: www.hublaw.com March 25, 2009 COUNSEL CHRISTOPHER S. UNDERHILL MARK L. JAMES JOHN 1. HARTMAN, JR. (1919-2000) THEODORE L.BRUBAKER (1911-2002) GEORGE T. BRUBAKER (1942-2006) HARRY ST. C. GARMAN (1945-2006) Sent Via Facsimile (717)263-0279 and First Class Mail J. McDowell Sharpe, Esquire Sharpe & Sharpe, LLP 257 Lincoln Way East Chambersburg, PA 17201-2294 Re: McElwee '/ Scarff Bros, Inc. Dear Jack: This letter is in response to yours of March 16, 2009. Mr. Scarff has no interest in selling the Scarff Bros. Note (the Third Amended and Restated Revolving Variable Rate Note dated as of March 11, 2005, hereinafter referred to as the "Note) at a discount to $364,000. If Mr. McElwee's investor has genuine interest in acquiring Mr. Scarff's position, Mr. Scarff is willing to consider a serious. offer-- but only a serious offer. You correctly observe that the initial interest rate on the Note is Wall Street Journal Prime plus 2%. It is possible that WSJ Prime plus 2% has been lower than the rate Scarff Bros. has been billing Mr. McElwee for some period of months. As indicated during our meeting, Scarff Bros. has been basing the rate (in recent months) on that which his lender has been charging, him. But the point overlooked in all of this is that Mr. McElwee has been in default under the terms of the Note since at least March 15, 2008. Between February 1, 2008- and May 31, 2008, Mr. McElwee failed to make his contractual monthly interest payments, constituting an "Event of Default" under the terms of the Note. Other "Events of Default by Mr. McElwee include, without limitation, Mr. J. McDowell Sharpe, Esquire March 25, 2009 Page 2 McEwlee's failure to pay real estate taxes on the various mortgaged premises on a timely basis (resulting in liens that impair Scarff Bros.' position) and allowing a federal tax lien to be entered against him. By virtue of these "Events of Default," Scarff Bros. is entitled under the terms of the Note to charge interest at the "Default Rate", which is five percent (5%) above the contract rate. Scarff Bros. has not been billing Mr. McElwee at the "Default Rate" to date, but since Mr. McElwee insists on standing on the terms of the loan documents, Scarff Bros. will make the appropriate adjustment and reflect the same on future monthly interest statements addressed to Mr. McElwee. In addition, Scarff Bros. will be billing Mr. McElwee for the five percent (5%) late charge on each missed payment provided under the terms of the Note. After receiving your March 16 letter, Mr. Scarff called AgChoice to discuss Mr. McElwee's proposals. Mr. Scarff spoke with Don Herring and Crystal Standish, who advised, in no uncertain terms, that: (a) The payoff on AgChoice's loan secured by the Wayne Avenue property is approximately $1.55,000, as coufmned by Ms. Standish during our recent meeting, not the $125,000 represented in your March 16 letter; and (b) AgChoice requires 100% of the sale proceeds of the building lots until Mr. McElwee's remaining loan balance is paid in full and will not "share" proceeds with Scarff Bros. in the interim, as Mr. McElwee suggests. In view of AgChoice's positions set forth above, an auction of the Wayne Avenue property alone, even if bidding would go as high as $450,000, will not substantially reduce Mr. McElwee's loan obligation to Scarff Bros. in the short term. Under no circumstances will Scarff Bros. accept a 20-year amortization of any part of the loan balance. Unless and until Mr. 'McElwee obtains considerable refinancing, either from AgChoice or from another lender or investor, or commits to sell one or both farms, Mr. Scarff sees little point in discussing the situation. further. Accordingly, this letter will constitute DEMAND by Scarff Bros. for payment in full of Mr. McElwee's loan balance as follows: Principal Balance $710,467.70 Accrued Interest 56,304.52 Late Charges 1,271.37 Attorneys' Fees 2,500.00 TOTAL $770,543.59 R J. McDowell Sharpe, Esquire March 25, 2009 Page 3 Interest will continue to accrue on the unpaid principal balance at the "Default Rate" under the terms of the Note. The current "Default Rate" of interest is 10.25% per annum. The interest per diem is $202.29. All costs and expenses of collection, including attorneys' fees, will be added to the loan balance until paid in full. Please advise Mr. McElwee that if Scarff Bros. does not receive the requested payment in full on or before 4:00 p.m. on April 6,. 2009, Scarff Bros. will not hesitate to exercise its legal rights with respect to the McElwee loan obligations and the collateral for such obligations, including, without limitation, its fight confess judgment, and by foreclosure or otherwise, execute against the real and personal property collateral for the loan in such order as it may determine. Mr. McElwee's immediate response is essential if such steps are to be avoided. Until payment of the entire loan balance is received, Scarff Bros. will not hesitate to exercise all of its rights with respect to the loan and its collateral for the loan by all available legal means, in accordance with the terms of the loan documents, all without further notice. Receipt and acceptance of partial payments by Scarff Bros., if any are tendered, shall not constitute a waiver of Scarff Bros.' rights under the loan documents. Nor shall the receipt and acceptance of partial payments require Scarff Bros. to forbear from exercising any right or remedy available to it. Please do not hesitate to call me if it would be helpful to discuss these matters in more detail. Until then, Mr. McElwee should govern himself as set forth above. Very truly your pk?vj ?,/. Robert W. Pontz RVWP/ald/oo539961.DOC;1 cc: C. Howard Scarff, Pres. Scarff Bros, Inc. CG FIL! )-.; -Y OF THE L0 It P IL 16 i"& 1, 14. "t- ITY QLT s0 PQ A'CT`/ CICV 53012 zrtdam l Nofiee. Ww-Ld HARTMAN UNDERHILL & BRUBAKER LLP By: Robert W. Pontz, Esquire Attorney I.D. No. 56554 221 East Chestnut Street Lancaster, PA 17602 Attorneys for Plaintiff: (717) 299-7254/(717) 299-3160 (Fax) Scarff Bros., Inc. SCARFF BROS., INC., IN THE COURT OF COMMON PLEAS OF Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION -LAW V. THOMAS H. McELWEE, JR. and BECKY S. McELWEE, Defendants No. 01414 'I Terw? : CONFESSION OF JUDGMENT CERTIFICATION OF ADDRESSES I hereby certify that the precise address of Plaintiff and last known address of the Defendants in this matter are as follows: Plaintiff: Scarff Bros., Inc. 1522 West Main Street Ephrata, PA 17522 Dated: "I I ).d 09 Defendants: Thomas H. McElwee, Jr. & Becky S. McElwee 250 Jumper Road Newburg, PA 17240 HARTMAN UNDERHILL & BRUBAKER LLP By: r?c Robert W. Pontz squire 00545793.1 AR, ?t; AF(l I f? °?:: s 4y Office of the Prothonotary of COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NOTICE OF ENTRY OF JUDGMENT SCARFF BROS, INC., Plaintiff/s V. THOMAS H. McELWEE, JR. and BECKY S. McELWEE, Defendant/s. Confessed Judgment No. - 409 1YU Terw Pursuant to the requirements of Penna. Civil Procedural Rule #236, you are notified that judgment was entered against you in this office today on confession of judgment contained in a bond, note, lease, installment purchase contract or other document allegedly signed by you in the above-captioned case as follows: X Judgment of $808,357.41, for Plaintiff/s and against Defendant/s. ? Judgment for Defendant/s and against Plaintiff/s. ? Order or Decree in favor of Dated: / PROZbI TRY To: Thomas H. McElwee, Jr. 250 Jumper Road Newburg, PA 17240 00545800.1 Office of the Prothonotary of COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NOTICE OF ENTRY OF JUDGMENT SCARFF BROS, INC., Plaintiff/s Confessed Judgment No. OR- 240a ivuT?'P% V. THOMAS H. McELWEE, JR. and BECKY S. McELWEE, Defendant/s. Pursuant to the requirements of Penna. Civil Procedural Rule #236, you are notified that judgment was entered against you in this office today on confession of judgment contained in a bond, note, lease, installment purchase contract or other document allegedly signed by you in the above-captioned case as follows: X Judgment of $808,357.41, for Plaintiff/s and against Defendant/s. ? Judgment for Defendant/s and against Plaintiff/s. ? Order or Decree in favor of Dated: # 1& D PRO O A Y To: Becky S. McElwee 250 Jumper Road Newburg, PA 17240 00545800.1 ¦ I , HARTMAN UNDERHILL & BRUBAKER LLP By: Robert W. Pontz, Esquire Attorney I.D. No. 56554 221 East Chestnut Street Lancaster, PA 17602 (717) 299-7254/(717) 299-3160 (Fax) 0*4pllaAttorneys for Plaintiff: Scarff Bros., Inc. SCARFF BROS., INC., IN THE COURT OF COMMON PLEAS OF Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION -LAW V. THOMAS H. McELWEE, JR. :No. Oq - c1402 l mi Term and BECKY S. McELWEE, Defendants Confession of Judgment Docket Docket No. 09-2402 - Civil Term NOTICE TO DEFEND You have been sued in Court. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this complaint and notice are served, by entering a written appearance personally or by attorney and filing in writing with the Court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the Court without further notice for any money claimed in the complaint or for any other claim or relief requested by the plaintiff. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW. THIS OFFICE CAN PROVIDE YOU WITH INFORMATION ABOUT HIRING A LAWYER. IF YOU CANNOT AFFORD TO HIRE A LAWYER, THIS OFFICE MAY BE ABLE TO PROVIDE YOU WITH INFORMATION ABOUT AGENCIES THAT MAY OFFER LEGAL SERVICES TO ELIGIBLE PERSONS AT A REDUCED FEE OR NO FEE. Cumberland County Bar Association 32 South Bedford Street Carlisle, PA 17013 Telephone: (717) 249-3166 (800) 990-9108 00550675.1 S HARTMAN UNDERHILL & BRUBAKER LLP By: Robert W. Pontz, Esquire Attorney I.D. No. 56554 221 East Chestnut Street Lancaster, PA 17602 (717) 299-7254/(717) 299-3160 (Fax) Attorneys for, Plaintiff: Scarff Bros., Inc. SCARFF BROS., INC., Plaintiff V. THOMAS H. McELWEE, JR. and BECKY S. McELWEE, Defendants IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION -LAW No. Confession of Judgment Docket Docket No. 09-2402 - Civil Term COMPLAINT TO CONFORM CONFESSED JUDGMENT Plaintiff files this Complaint to conform the above-captioned confessed judgment pursuant to 41 P.S. §407 and Pa.R.C.P. 2983 and avers as follows: 1. The Plaintiff, Scarff Bros., Inc., is a Pennsylvania corporation with its principal offices at 1522 West Main Street, Ephrata, Lancaster County, Pennsylvania 17522. 2. The Defendants, Thomas H. McElwee, Jr. and Becky S. McElwee, are adult individuals, husband and wife, residing at 250 Jumper Road, Newburg, Cumberland County, Pennsylvania 17240. 3. On March 11, 2005 Defendant Thomas H. McElwee, Jr. ("T. McElwee") executed and delivered to Plaintiff a certain Third Amended and Restated Revolving Variable Rate Note in the original principal amount of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) (the "Note"). A true and correct copy of the Note is attached hereto, incorporated by reference and marked Exhibit A. 00550646.1 4. In conjunction with his execution and delivery of the Note, Defendant T. McElwee executed and delivered to Plaintiff an Explanation and Waiver of Rights Regarding Confession of Judgment dated March 11, 2005 (the "T. McElwee Waiver"). A true and correct copy of the T. McElwee Waiver is attached hereto, incorporated by reference and marked Exhibit B. 5. On March 11, 2005, Defendant Becky S. McElwee ("B. McElwee") executed and delivered to Plaintiff a certain Third Amended and Restated Guaranty Agreement (the "Guaranty"), under which Defendant B. McElwee unconditionally guaranteed to Plaintiff all obligations of Defendant T. McElwee under the Note, including the payment of all principal, interest, penalties, reimbursements, advancements, escrows and fees, and specifically committed to become a "co-obligor" with Defendant T. McElwee with respect to Defendant T. McElwee's obligations under the Note. A true and correct copy of the Guaranty is attached hereto, incorporated by reference and marked Exhibit C. 6. In conjunction with her execution and delivery of the Guaranty, Defendant B. McElwee executed and delivered to Plaintiff an Explanation and Waiver of Rights Regarding Confession of Judgment dated March 11, 2005 (the "B. McElwee Waiver"). A true and correct copy of the B. McElwee Waiver is attached hereto, incorporated by reference and marked Exhibit D. 7. As partial security for their obligations to Plaintiff under the Note and Guaranty, Defendants executed and delivered to Plaintiff two certain Open-End Mortgages, Security Agreements and Fixture Filings, each dated as of March 11, 2005 (together the "Mortgages"), 00550646.1 2 granting and conveying to Plaintiff all of Defendants' right, title and interest in and to certain real property known and numbered as (a) 250 Jumper Road, Newburg, Cumberland County, Pennsylvania, (b) 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania and (c) 2807 Wayne Road, Chambersburg, Franklin County, Pennsylvania (collectively the "Mortgaged Premises"). True and correct copies of the Mortgages are attached hereto, incorporated by reference and together marked Exhibit E. 8. The Note and the Guaranty authorize entry of judgment against the Defendants upon the occurrence of an event of default under the Note. 9. On April 16, 2009, Plaintiff caused entry in this Court of the above-captioned judgment by confession in its favor and against Defendants in the total amount of Eight Hundred Eight Thousand Three Hundred Fifty-Seven and 41/100 Dollars ($808,357.41), plus subsequently accruing interest, attorneys fees, costs and charges collectable under the Note and Guaranty ("Confessed Judgment"), based upon the following defaults of Defendant T. McElwee under the terms of the Note: (a) Defendant T. McElwee failed to make monthly payments of interest due between February 1, 2008 and May 31, 2008; (b) Defendant T. McElwee failed to pay real estate taxes on the Mortgaged Premises, resulting in liens that impair Plaintiff s position; (c) Defendant T. McElwee allowed one or more federal tax liens to be entered against him; and (d) Defendant T. McElwee failed to pay the entire balance due under the Note upon demand by Plaintiff. A true and correct copy of Plaintiffs written demand dated March 25, 2009 for payment of Defendant T. McElwee's obligations under the Note is attached hereto, incorporated by reference and marked Exhibit F. 00550646.1 3 I 10. The Confessed Judgment is a lien upon "residential real property" owned by Defendants in this County, as the term "residential real property" is defined in Pennsylvania Act No. 6 of 1974, 41 P. S. § 101 et seq. ("Act 6"). The specific "residential real property" affected by the Confessed Judgment is described in paragraph 7(a) of this Complaint. 11. Notice of the Confessed Judgment was mailed to Defendants by the Prothonotary of Cumberland County, Pennsylvania, in accordance with Pa.R.C.P. 236, on or about April 16, 2009. 12. The amount now due from Defendants to Plaintiff pursuant to the terms of Note and Guaranty is as follows: (a) Unpaid balance of principal debt (b) Accrued interest through 3/15/08 at WSJ Prime plus 2% (c) Accrued interest from 3/16/08 to 6/1/09 at Default Interest Rate under Note (LESS) Interest Paid (d) Late Charges (e) Attorneys' Commission (5% as authorized) TOTAL $710,467.70 $ 6,937.04 $ 98,235.85 ($ 36,326.39) $ 1,888.35 $ 39,060.13 $820,262.68* *Interest on the judgment at the variable Default Interest Rate prevailing under the terms of Note (current per diem is $202.29), and all attorneys fees, costs and charges collectable under the Note and Guaranty which accrue hereafter, are to be collectable under and included within the judgment. 13. The obligation evidenced by the Note and Guaranty and secured by the Mortgages is in excess of the "Base Figure" provided under Pennsylvania Act 6. Accordingly, no notice pursuant to 41 P.S. §403 was required to be sent to either Defendant prior to entry of the Confessed Judgment or commencement of this statutory action. 00550646.1 4 14. The provisions of Pennsylvania Act No. 91 of 1983, 35 P. S. § 1680.40 et seq. ("Act 91 "), and the regulations promulgated thereunder, are inapplicable to this proceeding because: (a) Two of the three properties constituting the Mortgaged Premises are neither the principal residence of the Defendants, nor a one or two-family owner- occupied residence; and (b) the third property constituting the Mortgaged Premises, which is the principal residence of the Defendants, is encumbered by more than two mortgages. WHEREFORE Plaintiff demands, as authorized under 41 P. S. §407, that judgment be entered in its favor and against Defendants, jointly and severally, in the total amount of Eight Hundred Twenty Thousand Two Hundred Sixty-Two and 68/100 Dollars ($820,262.68), plus subsequently accruing attorneys' commissions, fees, charges, interest at the Default Interest Rate provided under the Note (current per diem is $202.29) and costs of this action, that this judgment be merged with the Confessed Judgment, and that the Confessed Judgment be conformed as to amount with this judgment. HARTMAN UNDERHILL & BRUBAKER LLP Attorneys for Plaintiff Dated: G I d a 9 Q,4?J 0-7?7- By:_ Robert W. Pont Esquire 00550646.1 5 THIRD AMENDED AND RESTATED REVOLVING VARIABLE RATE NOTE $750.000.00 Lancaster, Pennsylvania March 11, 2005 FOR VALUE RECEIVED, without defalcation, THOMAS H. McELWEE, JR., an adult individual having a mailing address of 250 Jumper Road, Newburg, PA 17240 (the 'Borrower"), hereby promises to pay on demand and to the order of SCARFF BROS., INC., a Maryland corporation (the "Lender"), at 2300 Fallston Road, Fallston, MD 21047, or at such other place as Lender may, from time to time, direct Borrower in writing, the sum of $750,000.00, lawful money of the United States of America, together with interest as hereinafter provided on the unpaid balance from the date or dates of disbursement thereof. DEFINITIONS The following capitalized words and terms shall have the following meanings when used in this Note. "Cattle" shall mean all cattle now owned or hereafter acquired by Borrower. "Collateral" shall mean the Security Agreement covering the Cattle, the Guaranty Agreement entered into between Lender and the Borrower's spouse guaranteeing this Note, the Mortgage covering property known as 250 Jumper Road, Newburg, PA 17240, and property known as 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania, and the mortgage covering property known as 2807 Wayne Road, Chambersburg, PA 17201. "Default Interest Rate" shall mean the rate of interest five percent (5%) above the then current interest rate. "Event of Default" shall mean the occurrence of any of the following: (1) The nonpayment by Borrower within ten (10) days after it is due of any amount payable under this Note. (2) If Borrower does not comply with any other provision of this Note or the Collateral within ten (10) days after written or oral receipt of notice from Lender, notifying Borrower, Borrower is not complying with such terms. (3) If Borrower shall admit in writing an inability to pay his debts; or shall have made a general assignment for the benefit of creditors; or shall have been adjudicated bankrupt; or shall have filed a voluntary petition in bankruptcy or for reorganization or to effect a plan or other arrangement with creditors; or shall be the subject of an involuntary petition in bankruptcy or for reorganization; or shall have filed an answer to a creditor's petition or other petition filed against him (admitting the material allegations thereof) for an adjudication in bankruptcy or for an arrangement or reorganization; or shall have applied for or permitted the appointment of a receiver or trustee or custodian, or a receiver, trustee or custodian shall have been applied for, for any of its property or assets (otherwise than upon application or consent of the Lender); or if an order shall be entered and shall not be dismissed or stayed within the time after its entry by which it becomes final and nonappealable, approving any petition for a reorganization of Borrower. (4) If any petition or application to any court or tribunal, at law or in equity, be filed by Borrower for the appointment of any receiver, liquidator, sequestrator, trustee or other similar official for Borrower or any part of its property or assets, or if any petition or application to any court or tribunal at law or in equity be filed against Borrower for the appointment of receiver, liquidator, sequestrator, trustee or other similar official for Borrower or any part of its property or assets which is not terminated within sixty (60) days of the date of the filing. (5) If there is a commencement of foreclosure or forfeiture proceedings whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding. (6) If Borrower is declared in default under any Loan, extension of credit, security agreement, purchase or sales agreement or any other agreement in favor of any creditor or person that may materially affect the Collateral or Borrower's ability to repay this Note or perform Borrower's obligations under this Note. (7) If any Guarantor of this Note disputes the validity of or liability under any guarantee of the indebtedness evidenced by this Note, is in material breach of any material indebtedness which would affect the Collateral or Borrower's ability to repay this Note. If any Guarantor dies or becomes incompetent and the Borrower is therefore unable to repay this Note. (8) If Borrower uses the proceeds from this Loan for anything other than the purchase of Cattle to be resold to Lender and any feed or other supplies necessary for the Cattle, or construction of improvements to house the Cattle. (9) If Borrower sells, transfers or encumbers the Cattle to or for the benefit of any person or entity other than Lender. 2 (10) If Borrower does not keep the Cattle at all times separately identifiable from any other livestock, including other livestock owned by Borrower. (11) If any of the Representations and Warranties are false at any time, or are not complied with, by Borrower. (12) An event of default under the Mortgage or Security Agreement. "Guaranty Agreement" shall mean the Guaranty Agreement given by Borrower and Guarantor to Lender and covering the property known as 250 Jumper Road, Newburg, PA 17240. "Loan" shall mean the line of credit loan from Lender to Borrower in the amount of $500,000.00 for the purchase of Cattle, and the construction of improvements. "Mortgages" shall mean the Open End Mortgage given by Borrower and Guarantor to Lender and covering the property known as 250 Jumper Road, Newburg, PA 17240, and 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania and the Open-End Mortgage given by Borrower and Guarantor to Lender and covering the property known as 2807 Wayne Road, Chambersburg, PA 17201. "Prime Rate" shall mean the prime rate of interest as published in the money rates tables of the Wall Street Journal. When a range of rates is published, the higher rate will apply. The Prime Rate for this Note shall change on a monthly basis, as such rate changes. "Security Agreement" shall mean the Second Amended and Restated Security Agreement dated even date herewith. "Term of the Loan" shall mean the period of time commencing on the date of this Note and ending September 1, 2004. REPRESENTATIONS AND WARRANTIES The Borrower makes the following representations and warranties which shall be true while any sum is outstanding under this Note. 1. No consent of any other party and no consent, permission, license, approval, order, authorization of, or declaration with any governmental authority, bureau or agency is required in connection with execution, delivery, performance, validity or enforceability of this Note. 2. There are no actions, suits, proceedings or tax claims now pending or threatened, which would have a material adverse effect on the financial condition of Borrower, or upon the ability of Borrower to perform its obligations under this Note. 3 There exist no facts or circumstances which might materially, adversely affect the Borrower's operations, properties, assets, prospects or condition, financial or otherwise which have not been disclosed in writing to Lender prior to execution of this Note. 4. The Borrower is not in default under any indenture, mortgage, deed of trust, promissory note, debenture, agreement or other instrument of whatever nature to which Borrower is a party. 5. All federal, state, local or other tax returns and reports of the Borrower required by law to be filed have been duly filed and all Federal, state, local, or other governmental taxes, assessments, or other charges or levies which are due and payable have been paid, and adequate provision has been made for the payment of all such liabilities which have heretofore accrued but are not yet due and payable. 6. The Borrower has good and marketable title in fee to, or valid enforceable leases of, all property owned, leased, or otherwise used by the Borrower. 7. Borrower is not in default under an), material existing agreement, and no default or event of default has accrued and is continuing. 8. Borrower shall maintain insurance on the Cattle in an amount equal to the full replacement value of the Cattle, and shall name Lender as additional insured. 9. Borrower shall comply with all statutes, rules and regulations, the noncompliance of which would materially and adversely affect his business, assets or condition, financial or otherwise. 10. Borrower shall deliver upon request of Lender proof of payment or deposit of all federal, state or local withholding taxes required to be paid. 11. Borrower shall deliver to Lender on or before the fifth day of each month, an inventory list of all cattle held by Borrower at the end of the previous month, listing the number of head of all cattle held by Borrower at the end of the previous month, listing the number of head, whether owned or held pursuant to a grower contract and the location. TERMS 1. During the Term of the Loan, Borrower shall pay on the first day of each month interest only on the average outstanding amount of the Loan for the preceding month at the interest rate of two (2) percentage points above Prime Rate, per annum. 2. The principal shall be repaid on demand of Lender but shall be repaid in full without demand on February 1, 2006, unless Lender at its option and in its sole discretion 4 I chooses to continue the Loan for one (1) additional year and may thereafter be renewed each year on February I" in Lender's sole discretion. 3. In the event that any installment of interest or payment of principal provided for herein shall remain unpaid for a period of ten (10) days after the same shall become due, a late charge of five percent (5%) of the installment of interest or the payment of principal so overdue shall become immediately due to the Lender. 4. At any time during the term of the Loan, the Borrower shall have the privilege without payment of a repayment fee of paying all or any portion of the principal balance of this Note prior to its originally scheduled maturity dates; provided, however that any prepayment shall not affect the obligation to continue to pay monthly installments required hereunder until the entire indebtedness has been paid. 5. Borrower will be selling the Cattle to Lender; upon sale, all proceeds, at the discretion of Lender, may first be applied to any and all principal outstanding, the remainder of the proceeds shall be used for the payment of any and all earned and outstanding interest, whether or not currently due and payable and any other sums due to Lender whether or not arising out of this Loan, any remaining proceeds may then be distributed to Borrower. The Loan evidenced by this Note shall be disbursed by Lender upon request of Borrower, not to exceed in the aggregate $750,000.00. Lender shall not be obligated to advance proceeds unless no Event of Default has occurred and no conditions exist which would cause an Event of Default after giving proper notice or after a lapse of time. All such disbursements, whether the aggregate be more or less than the face amount of this Note, shall be considered as the principal due under this Note and shall be payable in accordance with the terms hereof. The Borrower shall be entitled to borrow, repay, and reborrow principal hereunder pursuant to these terms and conditions. This Note is secured by Collateral and it is hereby declared and agreed that said debt or principal sum herein mentioned is the same which is secured by the said Collateral and that the Collateral has been executed and delivered as security for the payment of this Note and all the terms, conditions and obligations in the Collateral are incorporated in and made a part of this Note by reference thereto. Upon the occurrence of an Event of Default, interest shall accrue thereafter at the Default Interest Rate, the whole of the principal sum and interest thereon shall become due and payable at the option of the Lender, and one or more executions for collection of said principal sum with interest, and other sums due by the undersigned according to the terms hereof, or according to the terms of the Collateral, together with costs of suit and a reasonable attorney's fee for collection may issue forthwith on any judgment or judgments obtained by the Lender hereof against the undersigned; and Lender (in addition to all other rights and remedies it may have) may exercise any and all rights and remedies which it may have under any document, statute, law or rule and 5 all such rights and remedies, along with those set forth specifically herein and in the Collateral shall be cumulative and enforceable alternatively, successively or concurrently. THE FOLLOWING PARAGRAPH SETS FORTH A WARR=ANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER, THE BORROWER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, AND, AFTER THE OPPORTUNITY TO SEEK ADVICE OF SEPARATE COUNSEL OF THE BORROWER, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR A HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, BORROWER HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR ATTORNEYS OF ANY COURT OF COMMON PLEAS OF PENNSYLVANIA, OR ANY ATTORNEY OR ATTORNEYS OF ANY OTHER COURT OF RECORD ELSEWHERE, OR THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN PENNSYLVANIA OR ELSEWHERE, TO APPEAR FOR BORROWER IN SUCH COURT IN AN APPROPRIATE ACTION THERE OR ELSEWHERE BROUGHT OR TO BE BROUGHT AGAINST BORROWER AT THE SUIT OF LENDER ON THIS NOTE, WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM OR TIME THERE OR ELSEWHERE TO BE HELD, AND THEREIN CONFESS OR ENTER JUDGMENT AGAINST BORROWER FOR THE EXACT SUM WHICH SHALL BE THE AMOUNT OF THE AFORESAID PRINCIPAL SUM OF THIS NOTE, WITH INTEREST AND WITH ANY OTHER PAYMENTS AND CHARGES WHICH ARE PAYABLE BY THE BORROWER UNDER THE TERMS OF THE COLLATERAL, AND WITH COSTS OF SUIT AND ANY OTHER SUMS SECURED BY THE COLLATERAL AND AN ATTORNEY'S COMMISSION OF FIVE PERCENT (5%) FOR COLLECTION, BUT NOT LESS THAN FIVE THOUSAND DOLLARS ($5,000.00); AND FOR SO DOING, THIS NOTE OR A COPY THEREOF VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT, WITHOUT FURTHER STAY, AND WITH FULL RELEASE OF ERRORS, ANY LAW, USAGE OR CUSTOM TO THE CONTRARY NOTWITHSTANDING. SUCH AUTHORITY AND POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME AS THERE IS OCCASION THEREFOR. Any failure of the Lender to exercise any right hereunder or under the Collateral shall not be construed as a waiver of the right to exercise the same or any other right at any other time, all of which rights and remedies shall be cumulative and concurrent and may be pursued singly, successively or together against Borrower and/or any other obligor under the Collateral. Such rights and remedies shall not be exhausted by any exercise thereof but may be exercised as often as occasion therefor shall occur. No waiver of any rights or remedies shall be effective against the Lender until the same shall be in writing and signed by the Lender. 6 Borrower hereby waives and releases all errors, defects and imperfections in any proceedings instituted by Lender under the terms of this Note, or the Collateral, as well as all benefit that might accrue to Borrower by virtue of any present or future laws exempting any of the property covered by the Collateral or any other property, real or personal, or any part of the proceeds arising from any sale of such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil process or extension of time for payment, as well as the right of inquisition on any real estate that may be levied upon under a judgment obtained by virtue hereof, and Borrower hereby voluntarily condemns the same and authorizes the entry of such voluntary condemnation on any writ of execution issued thereon, and agrees that such real estate may be sold upon any such writ in whole or in part in any order desired by Lender. Borrower hereby waives- presentment for payment, demand, notice of nonpayment, notice of protest and protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note, and agree that the liability of Borrower shall be unconditional and shall not be in any manner affected by any indulgence, extension of time, renewal, waiver or modification granted or consented to by Lender; and Borrower hereby consents to any and all extensions of time, renewals, waivers or modifications that may be granted by Lender with respect to the payment or other provisions of this Note, and to the release of the Collateral, or any part thereof, with or without notice to Borrower or affecting Borrower's liability hereunder. In addition to and not in limitation of any right which the Lender may have under applicable law or otherwise, the Borrower hereby grants and confirms to Lender a right to set off and a lien upon and security interest in all property of the Borrower now or at any time in the Lender's possession in any capacity whatsoever as security for all liabilities of the Borrower, whether created hereunder or under any prior or subsequent agreement or document. Borrower shall pay the cost of any revenue, tax or other stamps now or hereafter required by law at any time to be affixed to this Note or the Collateral; and if any taxes are imposed with respect to debts secured by mortgages, or with respect to notices evidencing debts so secured (including without limitation any personal property taxes by whatever name called imposed by any taxing authority upon persons holding this Note and the Collateral), Borrower agrees to pay to the Lender upon demand the amount of such taxes, and hereby waives any contrary provisions of any laws or rules of court now or hereafter in effect. Should this 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 of the Lender's reasonable costs, fees (including, but not limited to, reasonable attorneys' fees) and expenses resulting from such referral. Any notice or demand required or permitted by or in connection with this Note shall be given to the parties at the addresses listed above. Notwithstanding anything to the contrary, all 7 notices and demands for payment from the Lender 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. This 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 may grant an interest in the Borrower's obligations to the Lender, and shall be binding and enforceable against the Borrower and the Borrower's personal representatives, successors and assigns. If any provision or part of any provision of this 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 Note and this Note shall be construed as if such invalid, illegal or unenforceable provision or part thereof had never been contained herein, but only to the extent of its invalidity, illegality or unenforceability. The Borrower intends this to be a sealed instrument and to be legally bound hereby. All issues arising hereunder shall be governed by the laws of the Commonwealth of Pennsylvania. This Note amends and supersedes a Note given by Thomas H. McElwee, Jr. to Scarff Bros., Inc. dated July 31, 2003 in the amount of $200,000.00, an Amended and Restated Revolving Variable Rate Note given by Thomas H. McElwee, Jr. to Scarff Bros., Inc. dated November 24, 2003 in the amount of $300,000.00, and a Second Amended and Restated Revolving Variable Rate Note given by Thomas H. McElwee, Jr. and Scarff Bros., Inc. dated June 11, 2004. IN WITNESS WHEREOF, the Borrower has caused this instrument to be executed the day and year first above written. 1 70 / 7Y ?? ?? Thomas H. McElwee, Jr. ADH.slb 4364011 1 (13106.014) 8 EXHIBIT B 00425610.1 EXPLANATION AND WAIVER OF RIGHTS REGARDING CONFESSION OF JUDGMENT 1. On the date hereof, THOMAS H. McELWEE, JR., with an address of 250 Jumper Road, Newburg, PA 17240 (the "Obligor") is signing and delivering to SCARFF BROS., INC., a Maryland corporation (the "Lender"), with an address of 2300 Fallston Road, Fallston, MD 21047, a Third Amended and Restated Revolving Variable Rate Note in the amount of $750,000.00 (as the same may be renewed, modified, amended, extended, restated or replaced, whether one or more, the "Obligation"). The Obligor has been advised by the Lender and by the Obligor's legal counsel, if applicable that the Obligation contains a clause that provides that the Lender may confess judgment against the Obligor. The Obligor has read the Obligation and clearly, and specifically understands that by signing the Obligation which contains such confession of judgment clause: A. THE OBLIGOR IS AUTHORIZING THE LENDER TO ENTER A JUDGMENT AGAINST THE OBLIGOR AND IN FAVOR OF THE LENDER, WHICH WILL GIVE THE LENDER A LIEN UPON ANY REAL ESTATE WHICH THE OBLIGOR MAY OWN IN ANY COUNTY WHERE THE JUDGMENT IS ENTERED. B. THE OBLIGOR IS GIVING UP AN IMPORTANT RIGHT TO ANY NOTICE OR OPPORTUNITY FOR A HEARING BEFORE THE ENTRY OF THIS JUDGMENT ON THE RECORDS OF THE COURT. C. THE OBLIGOR IS AGREEING THAT THE LENDER MAY ENTER THIS JUDGMENT AND UNDERSTANDS THAT THE OBLIGOR WILL BE UNABLE TO CONTEST THE VALIDITY OF THE JUDGMENT, SHOULD THE LENDER ENTER IT, UNLESS THE OBLIGOR SUCCESSFULLY CHALLENGES ENTRY OF THE JUDGMENT ON PROCEDURAL GROUNDS THROUGH A PETITION TO OPEN OR STRIKE THE JUDGMENT, WHICH WILL REQUIRE THE OBLIGOR TO RETAIN COUNSEL AT THE OBLIGOR'S EXPENSE. D. THE OBLIGOR IS GIVING UP AN IMPORTANT RIGHT TO ANY NOTICE OR OPPORTUNITY FOR A HEARING BEFORE THE LENDER MAY REQUEST AND USE THE POWER OF THE STATE GOVERNMENT TO DEPRIVE THE OBLIGOR OF ITS PROPERTY PURSUANT TO THE JUDGMENT BY SEIZING OR HAVING THE SHERIFF OR OTHER OFFICIAL SEIZE THE OBLIGOR'S LENDER ACCOUNTS, INVENTORY, EQUIPMENT, FURNISHINGS, OR ANY OTHER PERSONAL PROPERTY THAT THE OBLIGOR MAY OWN, TO SATISFY THE OBLIGATION; AND E. THE OBLIGOR MAY BE IMMEDIATELY DEPRIVED OF THE USE OF ANY PROPERTY THAT IS SEIZED BY THE LENDER PURSUANT TO THE JUDGMENT WITHOUT NOTICE OR HEARING, AND THE PROCEDURAL RULES OF THE COURT SYSTEM OF THE COMMONWEALTH OF PENNSYLVANIA DO . 1 NOT GUARANTEE THAT THE OBLIGOR WILL RECEIVE A PROMPT HEARING AFTER THE OBLIGOR'S PROPERTY IS SEIZED. 2. The Obligor knows and understands that it is the confession of judgment clause in the Obligation which gives the Lender the rights described in subsection A. through E. of Section 1 above. 3. Fully and completely understanding the rights which are being given up if the Obligor signs the Obligation containing the confession of judgment, the Obligor nevertheless freely, knowingly and voluntarily waives said rights and chooses to sign the Obligation. 4. The Obligor acknowledges that the proceeds of the Obligation are to be used for business purposes. Dated as of this 11 ch day of March, 2005. PRIOR TO SIGNING THE OBLIGATION, THE OBLIGOR READ THIS EXPLANATION AND WAIVER, AND FULLY UNDERSTANDS ITS CONTENTS. WITNESS: Thomas H. McElwee, Jr. ADH:slb #364042.1 (13106.014) 2 COMMONWEALTH OF-PENNSYLVANIA j } SS: COUNTY OF LANCASTER ) On this 11 `h day of March, 2005, before me, the undersigned officer, personally appeared THOMAS H. McELWEE, JR., known to me to be the person whose name is subscribed to the within instrument, and that said person acknowledged that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. ?U\-k ? Notary COMMONWEALi i OI: PENNSYLVANIA Seal NNotarialSeal ria' J ts ch, Notary Public r, Lancaster County JuExpires Oct. 14, 2008 Member,Pennsylvania Association of Notaries THIRD AMENDED AND RESTATED GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (the "Guaranty") is given by BECKY S. McELWEE (the "Guarantor") for the benefit of SCARFF BROS., INC., with a mailing address of 2300 Fallston Road, Fallston, MD 21047 (the "Lender") with respect to the obligations of Thomas H. McElwee, Jr. (the "Borrower") to Lender. Borrower obtained a loan from Lender evidenced by a revolving variable rate note in the face amount of $200,000.00 dated July 31, 2003, as amended by the Amended and Restated Revolving Variable Rate Note dated November 24, 2004 in the face amount of $300,000.00, as amended by Second Amended and Restated Revolving Variable Rate Note dated June 11, 2004 in the face amount of $500,000.00 and as amended by the Third Amended and Restated Revolving Variable Rate Note dated the date hereof in the face amount of $750,000.00 (the "Note"). The Guarantor is the spouse of Borrower and has requested Lender to make the Loan available to Borrower, and in consideration for the providing of the Loan, Guarantor gives the following guaranty and indemnification to and for the benefit of Lender. This Guaranty is secured by a Mortgage covering property located at 250 Jumper Road, Newburg, PA 17240, and ,653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania, and a Mortgage covering property located at 2807 Wayne Road, Chambersburg, PA 17201. Section 1. THE GUARANTY. Guarantor guarantees, as surety: (a) payment of any and all sums now or hereafter due and owing to Lender by Borrower as a result of or in connection with the Loan and all renewals, refinancings, extensions, substitutions, amendments, and modifications thereof, including, but not limited to, all amounts of principal, interest, penalties, reimbursements, advancements, escrows, and fees; (b) that all sums now or hereafter due and owing by Borrower to Lender as a result of or in connection with the Loan shall be paid when and as due, whether by reason of installment, maturity, acceleration or otherwise, time being of the essence; and (c) the timely, complete, continuous, and strict performance and observance by Borrower of any and all of the terms, covenants, agreements and conditions contained in any and all existing or future documents, instruments, agreements, and writings of every kind, nature, type, and variety which evidence, reflect, embody, give rise to or secure any and all existing and future indebtedness, liabilities, and obligations of any kind of Borrower to Lender as a result of or in connection with the Loan. As used in this Guaranty, the term "Obligations" shall refer to the obligations of payment, performance, and indemnification which Guarantor has undertaken and assumed pursuant to this Guaranty, both as described in this Section and in other Sections of this Guaranty. Section 2. NATURE OF THE GUARANTY. This Guaranty: (a) is (i) irrevocable, (ii) absolute and unconditional, (iii) direct, immediate, and primary, and (iv) one of payment and not just collection; and (b) makes Guarantor surety to Lender with respect to the Obligations and the equivalent of a co-obligor with Borrower. Section 3. CONFESSION OF JUDGMENT. Upon the occurrence of any of the events authorizing acceleration of the Obligations provided in Section 15 of this Guaranty, Guarantor irrevocably and unconditionally authorizes and empowers any attorney admitted to practice before any court of record in the United States to appear on behalf of Guarantor in any court in one or more proceedings or before any clerk thereof or prothonotary or other court official and to appear for, confess and enter judgment against Guarantor at any time, with or without averment of default, with or without complaint filed, and without prior notice or opportunity of Guarantor for prior hearing, in favor of Lender in the full amount of the obligations which are due or which may become due under this Guaranty, plus court costs, plus attorneys' fees equal to five percent (5%) of the amount which is due or which may become due (but in no event less than $5,000.00), with release of all errors and without right of appeal. Guarantor waives the benefit of any and every statute, ordinance, or rule of court, whether now in force or hereafter enacted, which may be lawfully waived conferring upon Guarantor any right or privilege of exemption, homestead rights, appraisement, 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 which Guarantor has given for any attorney admitted to practice before any court of record in the United States, or the clerk of such court, to appear for and confess judgment against Guarantor shall be a continuous authority which shall not be exhausted or extinguished by any one or more exercises or imperfect exercises thereof or by any one or more judgments entered pursuant thereto and may be exercised on one or more occasions and at such times and from time to time and in the same or different courts or jurisdictions as Lender may consider necessary or advisable. GUARANTOR HEREBY ACKNOWLEDGES THAT THE CONFESSION OF JUDGMENT PROVISIONS HEREIN CONTAINED WHICH AFFECT AND WAIVE CERTAIN LEGAL RIGHTS OF GUARANTOR HAS BEEN READ, UNDERSTOOD AND VOLUNTARILY AGREED TO BY GUARANTOR. Section 4. ACCURACY OF REPRESENTATIONS. Guarantor guarantees that each and- every representation and warranty made by Borrower or by Guarantor to Lender both before and after the date of this Guaranty are and shall continue to be true, correct, accurate, complete, and not knowingly misleading, and Guarantor shall indemnify and hold Lender harmless from any loss, cost, or expense which Lender may suffer, sustain or incur as a result of any representation or statement of Borrower or of Guarantor being materially false, incorrect, inaccurate, incomplete, or knowingly misleading. Section 5. FORECLOSURE INDEMNIFICATION. In the event that any real or personal property secures the obligations of Borrower to Lender, and Lender or any affiliate of Lender acquires the same after a default by borrower or Guarantor in full or partial satisfaction of the obligations of Borrower to Lender, Guarantor shall indemnify and hold Lender harmless from any loss, cost, or expense which Lender may sustain as a result of. (a) selling the real or personal property so acquired for less than the total sums owed with respect to the obligations of Borrower to Lender, provided, however, that any such sale by Lender is done in a commercially reasonable 2 manner; or (b) any action brought against Lender under §458 or §544(b) of the United States Bankruptcy Code, as amended, on the ground that the consideration paid by Lender for the real or personal property was not "reasonably equivalent value," within the contemplation of §548 or §544(b) of the United States Bankruptcy Code, as amended, or "fair consideration," within the contemplation of any applicable state fraudulent conveyance or transfer law or was otherwise inadequate. Section 6. LENDER NEED NOT PURSUE OTHER RIGHTS BEFORE ENFORCING GUARANTY. Lender shall be under no obligation to pursue Lender's rights against Borrower or against any other guarantor or other person that is now or hereafter liable upon or in connection with any of the obligations of any Guarantor or Borrower to Lender or that has granted any lien or security interest to or for the benefit of Lender to secure any of the obligations of any Guarantor or Borrower to Lender ("Other Obligor") or any collateral of any Other Obligor before pursuing Lender's rights against Guarantor. Section 7. RIGHT OF LENDER TO ACT WITH RESPECT TO BORROWER OTHER OBLIGORS, AND COLLATERAL. Guarantor hereby assents to any and all terms and agreements between Lender and Borrower or between Lender and any Other Obligor, and all amendments and modifications thereof, whether presently existing or hereafter made and whether oral or in writing. Lender may, without compromising, impairing, diminishing, or in any way releasing Guarantor from the obligations and without notifying or obtaining the prior approval of Guarantor, at any time or from time to time: (a) waive or excuse any default by Borrower or any Other Obligor, or delay in the exercise by Lender of any or all of Lender's rights or remedies with respect to such default; (b) grant extensions of time for payment or performance by Borrower or any Other Obligor; (c) release, substitute, exchange, surrender, or add collateral of Borrower or any Other Obligor, or waive, release, or subordinate, in whole or in part, any lien or security interest held by Lender on any real or personal property securing payment or performance, in whole or in part, of the obligations of Borrower or any Other Obligor to Lender; (d) release Borrower or any Other Obligor; (e) apply payments made by Borrower, or by any Other Obligor, to any sums owed by Borrower or any Other Obligor to Lender, in any order or manner, or to any specific account or accounts, as Lender may elect; and (f) modify, change, renew, extend, or amend, in any respect Lender's agreement with Borrower or any Other Obligor, or any document, instrument, or writing embodying or reflecting the same. Section 8. WAIVERS BY GUARANTOR. Guarantor waives: (a) any and all notices whatsoever with respect to this Guaranty or with respect to any of the obligations of Borrower to Lender, including, but not limited to, notice of: (i) Lender's acceptance hereof or Lender's intention to act, or Lender's action, in reliance hereon; (ii) the present existence or future incurring of any of the obligations of Borrower to Lender or any terms or amounts thereof or any change therein; (iii) any default by Borrower or any Other Obligor; and (iv) the obtaining or release of any guaranty or surety agreement, pledge, assignment, or other security for any of the obligations of Borrower to Lender; (b) presentment and demand for payment of any sum due 3 from Borrower or any Other Obligor and protest of nonpayment; and (c) demand for performance by Borrower or any Other Obligor. Section 9. UNENFORCEABILITY OF OBLIGATIONS OF BORROWER. This Guaranty shall be valid, binding, and enforceable even if the obligations of Borrower to Lender which are guarantied hereby are now or hereafter become invalid or unenforceable for any reason. Section 10. NO CONDITIONS PRECEDENT. This Guaranty shall be effective and enforceable immediately upon its execution. Guarantor acknowledges that no unsatisfied conditions precedent to the effectiveness and enforceability of this Guaranty exist as of the date of its execution and that the effectiveness and enforceability of this Guaranty is not in any way conditioned or contingent upon any event, occurrence, or happening, or upon any condition existing or coming into existence either before or after the execution of this Guaranty. Section 11. INFORMATION CONCERNING BORROWER COLLATERAL OR OTHER OBLIGORS. Lender shall have no present or future duty or obligation to discover or to disclose to Guarantor any information, financial or otherwise, concerning Borrower, any Other Obligor. Guarantor waives any right to claim or assert any such duty or obligation on the part of the Lender. Guarantor agrees to obtain all information which Guarantor considers either appropriate or relevant to this Guaranty from sources other than Lender and to become and remain at all times current and continuously apprised of all information concerning Borrower, Other Obligors. Section 12. CUMULATIVE LIABILITY. The liability of Guarantor under this Guaranty shall be cumulative to, and not in lieu of, Guarantor's liability under any other document or in any capacity other than as Guarantor hereunder. Section 13. OBLIGATIONS UNCONDITIONAL. The payment and performance of the Obligations shall be the absolute and unconditional duty and obligation of Guarantor, and shall be independent of any defense or any rights of set-off, recoupment or counterclaim which Guarantor might otherwise have against Lender, and Guarantor shall pay and perform the Obligations, free of any deductions and without abatement, diminution or set-off, and until such time as the Obligations have been fully paid and performed, Guarantor: (a) shall not suspend or discontinue any payments provided for herein; (b) shall perform and observe all of the covenants and agreements contained in this Guaranty; and (c) shall not terminate or attempt to terminate this Guaranty for any reason. No delay by Lender in making demand on Guarantor for satisfaction of the Obligations shall prejudice or in any way impair Lender's ability to enforce this Guaranty. Section 14. DEFENSES AGAINST DEBTOR. Guarantor waives any right to assert against Lender any defense (whether legal or equitable), claim, counterclaim, or right of set-off 4 or recoupment which Guarantor may now or hereafter have against Borrower or any Other Obligor. Section 15. EVENTS AUTHORIZING ACCELERATION OF THE OBLIGATIONS. If any of the following shall happen or occur, Lender; without notice or demand, may accelerate and call due the Obligations, even if Lender has not accelerated and called due the sums owed to Lender by Borrower: (a) the occurrence of an Event of Default under the Note or Security Agreement between Borrower and Lender dated even date herewith; (b) a failure of Guarantor to perform any covenant or agreement contained in this Guaranty that is not cured within ten (10) days after written notice thereof is provided to Guarantor. Section 16. EXPENSES OF COLLECTION AND ATTORNEYS' FEES. Guarantor shall pay all costs and expenses incurred by Lender in collecting sums due under this Guaranty, including, but not limited to, the costs of any lien, judgment or other record searches, appraisals, travel expenses and the like. In addition, if this Guaranty is referred to an attorney for collection, whether or not judgment has been confessed or suit has been filed, Guarantor shall pay all of Lender's costs, fees (including, but not limited to, Lender's attorneys' fees, charges and expenses) and all other expenses resulting from such referral (to the extent not prohibited by law). Section 17. INTEREST RATE AFTER JUDGMENT. If judgment is entered against Guarantor on this Guaranty, the amount of the judgment entered (which may include principal, interest, charges, fees, and costs) shall bear interest at the higher of the default interest rate set forth in the documents governing the obligations of Borrower to Lender under the Loan, as determined on the date of the entry of the judgment, or the legal rate of interest then applicable to judgments in the jurisdiction in which judgment was entered. Section 18. ENFORCEMENT DURING BANKRUPTCY. Enforcement of this Guaranty shall not be stayed or in any way delayed as a result of the filing of a petition under the United States Bankruptcy Code, as amended, by or against Borrower. Should Lender be required to obtain an order of the United States Bankruptcy Court to begin enforcement of this Guaranty after the filing of a petition under the United States Bankruptcy Code, as amended, by or against Borrower, Guarantor hereby consents to this relief and agrees to file or cause to be filed all appropriate pleadings to evidence and effectuate such consent and to enable Lender to obtain the relief requested. Section 19. REMEDIES CUMULATIVE. All of Lender's rights and remedies shall be cumulative and any failure of Lender to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time, and from time to time, thereafter. Section 20.. DISCHARGE OF GUARANTY. This Guaranty shall not be discharged and Guarantor shall not be released from liability until all Obligations have been satisfied in full 5 and the satisfaction of the Obligations is not subject to challenge or contest. If all or any portion of the Obligations are satisfied and Lender is required for any reason to pay to any person the sums used to satisfy the Obligations, the Obligations shall remain in effect and enforceable to the extent thereof. Section 21. TERMINATION. This Guaranty may not at any time be terminated by Guarantor. This Guaranty may be terminated only in writing by Lender and upon such terms and conditions as Lender may impose. Section 22. RIGHTS OF SUBROGATION. ETC. In the event Guarantor pays any sum to or for the benefit of Lender pursuant to this Guaranty, Guarantor shall have no right of contribution, indemnification, exoneration, reimbursement, subrogation or other right or remedy against or with respect to Borrower, any Other Obligor, and hereby waives and releases all and any such rights which they may now or hereafter have. Section 23. SUBORDINATION OF CERTAIN INDEBTEDNESS. If Guarantor advances any sums to Borrower or its successors or assigns or if Borrower or its successors or assigns are now or shall hereafter become indebted to Guarantor, such sums and indebtedness shall be subordinate in all respects to the amounts now or hereafter due and owing to Lender by Borrower. Section 24. CHOICE OF LAW. The laws of the Commonwealth of Pennsylvania (excluding, however, conflict of lave principles) shall govern and be applied to determine all issues relating to this Guaranty and the rights and obligations of the parties hereto, including the validity, construction, interpretation, and enforceability of this Guaranty and its various provisions and the consequences and legal effect of all transactions and events which resulted in the issuance of this Guaranty or which occurred or were to occur as a direct or indirect result of this Guaranty having been executed. Section 25. CONSENT TO JURISDICTION; AGREEMENT AS TO VENUE. Guarantor irrevocably consents to the non-exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania and of the United States District Court for the Eastern District of Pennsylvania. Guarantor agrees that venue shall be proper in any court of the Commonwealth of Pennsylvania selected by Lender or in the United States District Court for the Eastern District of Pennsylvania and waives any right to object to the maintenance of a suit in any of the state or federal courts of the Commonwealth of Pennsylvania on the basis of improper venue or of inconvenience of forum. Section 26. ACTIONS AGAINST LENDER. Any action brought by Guarantor against Lender which is based, directly or indirectly, on this Guaranty or any matter in or related to this Guaranty, including, but not limited to, the obligations of Borrower to Lender, or the administration, collection, or enforcement thereof, shall be brought only in the courts of the Commonwealth of Pennsylvania. Guarantor shall not file a counterclaim against Lender in a suit 6 brought by Lender against Guarantor in a state other than the Commonwealth of Pennsylvania unless under the rules of procedure of the court in which 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 Lender. Guarantor agrees that any forum other than the Commonwealth of Pennsylvania is an inconvenient forum and that a suit brought by Guarantor against Lender in a court of any state other than the Commonwealth of Pennsylvania should be forthwith dismissed or transferred to a court located in the Commonwealth of Pennsylvania by that court. Section 27. INVALIDITY OF ANY PART. If any provision or part of any provision of this Guaranty shall for any reason be held invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions or the remaining part of any effective provisions of this Guaranty, and this Guaranty shall be construed as if such invalid, illegal, or unenforceable provision or part thereof had never been contained herein, but only to the extent of its invalidity, illegality, or unenforceability. Section 28. AMENDMENT OR WAIVER. This Guaranty may be amended only by a writing duly executed by Guarantor and Lender. No waiver by Lender of any of the provisions of this Guaranty or any of the rights or remedies of Lender with respect hereto shall be effective or enforceable unless in writing. Section 29. BINDING NATURE. This Guaranty shall inure to the benefit of and be enforceable by Lender and Lender's successors and assigns and any other person to whom Lender may grant an interest in the obligations of Borrower to Lender, and shall be binding upon and enforceable against Guarantor and Guarantor's personal representatives, successors and assigns. Section 30. ASSIGNABILITY. This Guaranty or an interest therein may be assigned by Lender, or by any other holder, at any time or from time to time. Section 31. NOTICES. Any notice or demand required or permitted by or in connection with this Guaranty, without implying the obligation to provide any notice or demand, shall be in writing at the address set forth above or to such other address as may be hereafter specified by written notice to Lender by Guarantor. Any such notice or demand shall be deemed to be effective as of the date of hand delivery or facsimile transmission, one (1) day after dispatch if sent by telegram, mailgram, overnight delivery, express mail or federal express, or three (3) days after mailing if sent by first class mail with postage prepaid. Section 32. FINAL AGREEMENT. This Guaranty contains the final and entire agreement between Lender and Guarantor with respect to the guaranty by Guarantor of Borrower's obligations to Lender. There are no separate oral or written understandings between Lender and Guarantor with respect thereto. 7 Section 33. TENSE, GENDER, DEFINED TERMS CAPTIONS. As used herein, the plural shall refer to and include the singular, the singular shall refer to and include the plural, and the use of any gender shall include and refer to any other gender. If more than one person has executed this Guaranty, the term "Guarantor" shall mean all such persons collectively or any one or more of such persons individually or collectively, as the case may be and as the context may require. All captions are for the purpose of convenience only. Section 34. SEAL AND EFFECTIVE DATE. This Guaranty is an instrument executed under seal and is effective and enforceable as of the date set forth below, independent of the date of actual execution. IN WITNESS WHEREOF, and intending to be legally bound hereby, Guarantor has executed this Guaranty under seal this 1 I th day of March, 2005. WITNESS: ,ADH:slb #364045.1 (13106.014) Becky S. McElwee 8 EXHIBIT D 00425610.1 EXPLANATION AND WAIVER OF RIGHTS REGARDING CONFESSION OF JUDGMENT 1. On the date hereof, BECKY S. McELWEE, with an address of 250 Jumper Road, Newburg, PA 17240 (the "Obligor") is signing and delivering to SCARFF BROS., INC., a Maryland corporation (the "Lender"), with an address of 2300 Fallston Road, Fallston, MD 21047, a Third Amended and Restated Guaranty Agreement for the obligations of Thomas H. McElwee, Jr. under a Third Amended and Restated Revolving Variable Rate Note in the amount of $750,000.00 (as the same may be renewed, modified, amended, extended, restated or replaced, whether one or more, the "Obligation"). The Obligor has been advised by the Lender and by the Obligor's legal counsel, if applicable that the Obligation contains a clause that provides that the Lender may confess judgment against the Obligor. The Obligor has read the Obligation and clearly and specifically understands that by signing the Obligation which contains such confession of judgment clause: A. THE OBLIGOR IS AUTHORIZING THE LENDER TO ENTER A JUDGMENT AGAINST THE OBLIGOR AND IN FAVOR OF THE LENDER, WHICH WILL GIVE THE LENDER A LIEN UPON ANY REAL ESTATE WHICH THE OBLIGOR MAY OWN IN ANY COUNTY WHERE THE JUDGMENT IS ENTERED. B. THE OBLIGOR IS GIVING UP AN IMPORTANT RIGHT TO ANY NOTICE OR OPPORTUNITY FOR A HEARING BEFORE THE ENTRY OF THIS JUDGMENT ON THE RECORDS OF THE COURT. C. THE OBLIGOR IS AGREEING THAT THE LENDER MAY ENTER THIS JUDGMENT AND UNDERSTANDS THAT THE OBLIGOR WILL BE UNABLE TO CONTEST THE VALIDITY OF THE JUDGMENT, SHOULD THE LENDER ENTER IT, UNLESS THE OBLIGOR SUCCESSFULLY CHALLENGES ENTRY OF THE JUDGMENT ON PROCEDURAL GROUNDS THROUGH A PETITION TO OPEN OR STRIKE THE JUDGMENT, WHICH WILL. REQUIRE THE OBLIGOR TO RETAIN COUNSEL AT THE OBLIGOR'S EXPENSE. D. THE OBLIGOR IS GIVING UP AN IMPORTANT RIGHT TO ANY NOTICE OR OPPORTUNITY FOR A HEARING BEFORE THE LENDER MAY REQUEST AND USE THE POWER OF THE STATE GOVERNMENT TO DEPRIVE THE OBLIGOR OF ITS PROPERTY PURSUANT TO THE JUDGMENT BY SEIZING OR HAVING THE SHERIFF OR OTHER OFFICIAL SEIZE THE OBLIGOR'S LENDER ACCOUNTS, INVENTORY, EQUIPMENT, FURNISHINGS, OR ANY OTHER PERSONAL PROPERTY THAT THE OBLIGOR MAY OWN, TO SATISFY THE OBLIGATION; AND E. THE OBLIGOR MAY BE IMMEDIATELY DEPRIVED OF THE USE OF ANY PROPERTY THAT IS SEIZED BY THE LENDER PURSUANT TO THE OF THE COURT SYSTEM OF THE COMMONWEALTH OF PENNSYLVANIA DO NOT GUARANTEE THAT THE OBLIGOR WILL RECEIVE A PROMPT HEARING AFTER THE OBLIGOR'S PROPERTY IS SEIZED. 2. The Obligor knows and understands that it is the confession of judgment clause in the Obligation which gives the Lender the rights described in subsection A. through E. of Section 1 above. 3. Fully and completely understanding the rights which are being given up if the Obligor signs the Obligation containing the confession of judgment, the Obligor nevertheless freely, knowingly and voluntarily waives said rights and chooses to sign the Obligation. 4. The Obligor acknowledges that the proceeds of the Obligation are to be used for business purposes. Dated as of this 11 ch day of March, 2005. PRIOR TO SIGNING THE OBLIGATION, THE OBLIGOR READ THIS EXPLANATION AND WAIVER, AND FULLY UNDERSTANDS ITS CONTENTS. WITNESS: y.? ?f ft 1?'r ADH:slb #364028.1 (13106.014) Becky S. McElwee 2 ----- --COj4-?M6-I?W€A)?? S-?`L?`<?I?? ?- - - SS: COUNTY OF LANCASTER ) On this I `h day of March, 2005, before me, the undersigned officer, personally appeared BECKY S. McELWEE, known to me to be the person whose name is subscribed to the within instrument, and that said person acknowledged that she executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. t 1LU Notary Publ 1 COMMONWEALTH OF PENNSYLVANIA Notarial Seal Judy Ann Poglitsch, Notary Public City of Lancaster, Lancaster County lvly Commission Expires Oct. 14, 2008 Member, Pennsylvania Association of Notaries EXHIBIT E a G 1 < Aaron D. Hollis, Esquire Blakinger, Byler & Thomas. P.C. 28 Penn Square Lancaster, PA 17603 (717) 299-1100 OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (Cumberland County) THIS OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (the "Mortgage") made this 11th day of March, 2005, between THOMAS H. McELWEE, JR. and BECKY S. McELWEE, adult individuals, with an address of 250 Jumper Road, Newburg, PA 17240 (the "Mortgagor"), AND SCARFF BROS., INC., a Maryland corporation, with an address of 2300 Fallston Road, Fallston, MD 21047 (the "Mortgagee"). WITNESSETH THAT: Mortgagor has executed and delivered to Mortgagee a Third Amended and Restated Revolving Variable Rate Note in the face amount of $750,000.00 dated the date hereof (the "Note") wherein Mortgagor promises to pay to Mortgagee the aggregate principal sum of $750,000.00, with interest thereon at the rates and payable at the times, in the manner and according to the terms and conditions specified in the Note, all of which are incorporated herein by reference. THIS MORTGAGE IS AN OPEN-END MORTGAGE WITHIN THE MEANING OF PENNSYLVANIA LAW, 42 Pa. C.S.A. § 8143 AND 8144, THE OPEN-END MORTGAGE STATUTE. IT SECURES FUTURE ADVANCES MADE BY MORTGAGEE TO OR ON ACCOUNT OF MORTGAGOR AS PROVIDED IN THE NOTE. ANYTHING HEREIN CONTAINED TO THE CONTRARY NOTWITHSTANDING, $750,000.00 IS THE MAXIMUM AMOUNT OF INDEBTEDNESS (EXCLUSIVE OF INTEREST AND ADVANCES FOR THE PAYMENT OF TAXES, INSURANCE AND OTHER COSTS OR CHARGES HEREIN AUTHORIZED) WHICH MAY BE SECURED BY THIS MORTGAGE AT ANY TIME. j J fiEl 1 - The following capitalized words and terms shall have the following meanings when used in this Mortgage. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Mortgage shall have the meanings attributed to such terms in the Uniform Commercial Code. "Collateral" shall mean that portion of the Mortgaged Property that may be collateral subject to the Uniform Commercial Code. "Debtor" shall mean Mortgagor. "Environmental Laws and Regulations" shall mean all laws, regulations, policies, and/or orders pertaining to the protection of health and welfare of persons and property and all state or federal common law or other causes of action relating to liability from use or misuses of Hazardous Substances (hereinafter defined). These include, but are not limited to, laws and regulations governing the manufacture, generation, storage, accumulation, control, treatment, processing, spilling, leaking, emitting, discharging, disposal, dispersal, transporting, escape or other handling of waste, hazardous waste, oil and petroleum products, toxic substances, liquids, Hazardous Substances, pollutants, contaminants, solid wastes, effluent, or sludges, as defined and regulated under: the Federal Resource Conservation and Recovery Act; Safe Drinking Water Act; Clean Air Act; Refuse Act of 1899; Clean Water Act; Federal Insecticide, Fungicide and Rodenticide Act; Toxic Substances Control Act; Hazardous Materials Transportation Act; Surface Mining Control and Reclamation Act; Atomic Energy Act; Uranium Mill Tailings Control Act of 1978, as amended; Low-Level Radioactive Waste Policy Act; Nuclear Waste Policy Act of 1982; National Environmental Policy Act; Federal Hazard Communication Standard (29 C.F.R. § 1910.1200); Food, Drug & Cosmetic Act; Comprehensive Environmental Response, Compensation, and Liability Act, as amended; Emergency Planning and Community Right-To-Know Act; Solid Waste Disposal Act; Pennsylvania Hazardous Sites Cleanup Act; Pennsylvania Solid Waste Management Act; Pennsylvania Clean Streams Law; Pennsylvania Sewage Facilities Act (including all subtitles); Storage Tank and Spill Prevention Act; or other federal, state, or local laws, rules, policies or orders of general application, ordinances or the like having similar purposes. "Event of Default" shall mean: A. The failure of Mortgagor to pay any installment of interest or principal and interest, or any other sum required to be paid under the Note within ten (10) days after it is due; or B. The failure of Mortgagor to observe or perform any other of the covenants or agreements or conditions herein contained, required to be kept or performed or observed 2 DIV 9 r, r; :7 --i n SiiM111 iaiiuce 511 ar> e6liliiuc-uiitntCi-r@r ?t-peYl$f?8t-teF)-(1?d?YV3 after the giving of notice thereof to Mortgagor; or C. Any material representation or warranty made herein by Mortgagor shall prove to be untrue or inaccurate in any material respect; or D. The occurrence of an Event of Default as specified in the Note, the Security Agreement, the Guaranty Agreement, or other Loan Documents. "Guaranty Agreement" shall mean the Third Amended and Restated Guaranty Agreement given by Becky S. McElwee for the obligations of Thomas H. McElwee, Jr. dated the date hereof. "Hazardous Substance" shall mean (1) any chemical, solid, liquid, gas, or other substance having the characteristics identified in, listed under, or designated pursuant to all Environmental Laws and Regulations; (2) petroleum, crude oil, waste oil, solvents, gasoline, natural gas, liquefied natural gas, synthetic fuel, or other petroleum, oil, or gas based products, nuclear, radioactive, or atomic substances, mixtures, wastes, compounds, materials, elements, products, or matters; (3) any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste (including materials to be recycled, reconditioned or reclaimed); (4) any other substance identified in any present or future law as presenting an imminent and substantial danger to the public health or welfare or to the environment, or as otherwise requiring special handling, collection, storage, treatment, disposal, or transportation; (5) and any other substance, mixture, waste, raw materials, ore, pollutants, contaminants, compound, material, element, product or matter that requires or may reasonably be foreseen to require an order requiring cost of clean up. "Indebtedness" shall mean the obligations of Mortgagor to Mortgagee under the Note and Guaranty Agreement.. "Leases" shall mean all leases or subleases of the Mortgaged Property, now existing or hereafter created and all extensions and renewals thereof and substitutions therefor, independent of the term or duration thereof and whether or not evidenced by a written document. "Loan" shall mean the loan made to Mortgagor by Mortgagee in the amount of $750,000.00 evidenced by the Note. "Loan Documents" shall mean the Note, the Guaranty Agreement, the Security Agreement, this Mortgage and any other document executed by Mortgagor in favor of Mortgagee. "Mortgaged Property" shall mean all of Mortgagor's right, title and interest in: A. the Property; and 3 - -------- b fter-erecter c) it -th7c7- Property; and - C. all fixtures and any appliances, machinery, furniture, furnishings and equipment of any nature whatsoever, belonging to Mortgagor and other articles of personal property belonging to Mortgagor now or at any time hereafter installed in, attached to, delivered to or situated in or upon the Property or any other buildings and improvements now or hereafter erected thereon, or used or intended to be used in connection with the Property or in the operation of any improvements, or business owned by Mortgagor, or in the operation or maintenance of any improvements or business situate on the Property, whether or not the personal property owned by Mortgagor is or shall be affixed thereto; and D. all building materials, fixtures, building machinery and building equipment delivered on site to the Property during the course of, or in connection with, construction of, or reconstruction of, or remodeling of any buildings and improvements; and E. any and all easements, rights-of-way, tenements, hereditaments and appurtenances belonging to the above-described Property or any part thereof hereby mortgaged or intended so to be, or in any way appertaining thereto, and all streets, alleys, passages, ways, water courses, and all easements and covenants now existing or hereafter created for the benefit of the Mortgagor or any subsequent tenant of the Property over ground adjoining the Property and all rights to enforce the maintenance thereof, and all other rights, liberties, and privileges of whatsoever kind or character, and the reversions and remainders, income, rents, issues and profits arising therefrom, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, at law or in equity, of the Mortgagor in and to the above-described Property or any part thereof, and F. all proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including without limitation, proceeds of insurance and condemnation awards; and G. all substitutes and replacements for, accessions, attachments, and other additions to, and tools, parts, and equipment used in connection with any of the above; and H. all rents with the right to collect such rents at any time for application to the Indebtedness and to utilize any collection or enforcement rights or remedies which may be available to the Mortgagor under the law or any of the Leases but without any duty or obligation to perform on behalf of the Mortgagor any of the Mortgagor's duties or obligations to any of the Leases; and I. all property similar to the above hereafter acquired by Mortgagor. 4 -t - ted-l?lti'ing-?`arratr -------- face amount of $750,000.00 dated the date hereof and executed by Mortgagor in favor of Mortgagee as may be amended, replaced or increased from time to time. "Property" shall mean the real property- located at 250 Jumper Road, Newburg, PA 17240 and 653 Big Spring Road, West Pennsboro Township, Cumberland County, Pennsylvania, as more fully described on Exhibit A attached hereto. "Secured Party" shall mean Mortgagee. "Security Agreement" shall mean the Second Amended and Restated Security Agreement between Mortgagor and Mortgagee bearing even date herewith. NOW THEREFORE, in consideration of the Loan, and as security for payment to Mortgagee of the Indebtedness, and all other sums provided for in this Mortgage, the Note or the Guaranty Agreement according to their respective terms and conditions, and for performance of the agreements, conditions, covenants, provisions and stipulations contained herein and therein, Mortgagor has granted, conveyed, bargained, sold, aliened, released, confirmed and mortgaged, and by these presents does hereby grant, convey, bargain, sell, alien, release, confirm and mortgage unto Mortgagee, its successors and assigns, all of its right, title and interest in, of and to the Mortgaged Property and hereby grants unto Mortgagee, its successors and assigns, a security interest in and to the Mortgaged Property. TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed or mentioned and intended so to be, unto Mortgagee, its successors and assigns, to its own use forever. PROVIDED ALWAYS, and this instrument is executed upon the express condition that, if Mortgagor pays to Mortgagee the principal sum, the interest thereon and all other sums payable by Mortgagor to Mortgagee as are secured hereby, in accordance with the provisions of the Note and Guaranty Agreement, at the times and in the manner specified, without deduction, fraud or delay, and Mortgagor performs and complies with all the agreements, conditions, covenants, provisions and stipulations contained therein, then this Mortgage and the estate hereby granted shall cease and become void. In the event that any interest or portion of the Mortgaged Property or title to any other part of the Mortgaged Property or any portion thereof or any interest therein is transferred or conveyed to any person or entity other than Mortgagor in any manner whatsoever, the entire Indebtedness, at the option of the Mortgagee, shall be immediately due and payable. THIS MORTGAGE is executed and delivered subject to the following covenants, conditions and agreements and Mortgagor covenants, warrants and agrees as follows: 1. PAYMENT AND PERFORMANCE. Mortgagor shall pay to Mortgagee, in accordance with the terms of the Note, the Guaranty Agreement, and this Mortgage, and any other Loan Documents, the principal and interest, and other sums therein set forth, and 5 w ,. f o gagor s a per orm an comp y wi i a e agreemen s, con i ions, cov n i -- and stipulations therein set forth and shall timely perform all of its obligations and duties as landlord under any of the Leases now or hereafter in effect. 2. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall keep and maintain all buildings and improvements now or at any time hereafter erected on the Mortgaged Property and the sidewalks and curbs abutting them, in good order, condition and state of repair, and will make or cause to be made, as and when necessary, all repairs, renewals and replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen. Mortgagor shall abstain from and shall not permit the commission of waste in or about the Mortgaged Property; and shall not undertake or permit any demolition or structural alterations or improvements to the Mortgaged Property without the prior written consent of the Mortgagee. 3. TAXES AND OTHER CHARGES. Mortgagor shall pay when due and payable and before interest or penalties are due thereon, without any deduction, defalcation or abatement, all taxes, assessments, water and sewer rents and all other charges or claims which may be assessed, levied, or filed at any time against the Mortgaged Property or any part thereof or against the respective interests of Mortgagor and Mortgagee therein, or which by any present or future law may have priority over the Indebtedness either in lien or in distribution out of the proceeds of any judicial sale; and provided, that if after giving written notice to Mortgagee of its intended action and upon furnishing to Mortgagee such security or bond as Mortgagee shall require, Mortgagor shall contest in good faith and by appropriate legal action the validity of any such item, or the amount thereof, then Mortgagor shall not be required to pay the item so long as the contest operates to prevent collection, sale, forfeiture, or any other loss or damage to the Mortgaged Property or Mortgagor, is maintained and prosecuted with diligence, and shall not have been terminated or discontinued adversely to Mortgagor. All costs and expenses incidental to such contest shall be paid by Mortgagor and in the event of a ruling or adjudication adverse to Mortgagor, Mortgagor shall promptly pay such taxes, assessments, water and sewer rents, charges or claims. Mortgagor shall indemnify and save harmless the Mortgagee and the Mortgaged Property from any loss or damage arising from such contest. 4. INSURANCE. The Mortgagor shall keep or require any lessee to keep all buildings and improvements now or hereafter erected upon the Mortgaged Property continuously insured for the benefit of the Mortgagee, against all loss or damage by fire, with extended coverage and against all other hazards, under a comprehensive all-risk building insurance policy, with boiler and machinery coverage and comprehensive all-risk personal property insurance, in an amount not less than the full insurable value of the Mortgaged Property with extended coverage. The policies carried shall contain the "replacement cost endorsement." The policy shall not provide for more than a $10,000.00 deductible from the loss payable for any casualty. Insurable value shall be determined, upon request of the Mortgagee, not more than once annually and by an appraiser or rating bureau satisfactory to the Mortgagee. The Mortgagee shall be listed as a Mort gagee and as loss payee on all policies required by this Mortgage in a standard Mortgagee clause in favor of Mortgagee. 6 _ @rener-al liability oever-age; (in an amount satisfactaf?, to Mortgagee but not less than $1,000,000.00 property damage and $3,000,000.00 bodily injury to any one person and $3,000,000.00 bodily injury, per occurrence). In addition, the aforesaid policy shall have attached as a rider thereto, or the Mortgagor shall provide or cause to be provided by separate policy, coverage against loss or damage by vandalism and malicious mischief. During the period of any construction, reconstruction or repair of improvements to the Mortgaged Property, the Mortgagor or the Mortgagor's contractor on behalf of the Mortgagor shall maintain builder's risk insurance in an amount satisfactory to the Mortgagee, but in no event less than 100% of the costs of construction, against all risks of physical loss. A minimum amount of $1,000,000.00 property damage and $3,000,000.00 bodily injury to any one person and $3,000,000.00 bodily injury, per occurrence, shall be maintained by or on behalf of the Mortgagor's contractors. Mortgagor shall require its contractor to maintain workers' compensation insurance. Deductibles on the builder's risk insurance shall not exceed $100,000.00. Mortgagor shall maintain business interruption insurance providing coverage in such amount as is reasonably satisfactory to Mortgagee but in any event in an amount at least equal to the sum of the annual payments due under the Note and the annual payments for real estate taxes, insurance premiums and other ongoing expenses related to the Mortgaged Property. Mortgagor shall maintain workers' compensation insurance (including employer's liability insurance, if requested by Mortgagee) for all employees of Mortgagor engaged on or with respect to the Mortgaged Property, in such amount as is reasonably satisfactory to Mortgagee, or if such limits are established by law, in such amounts. The Mortgagee shall receive originals of all of said policies upon the execution of this Mortgage and upon each renewal, expansion, substitution or modification thereof, together with a current Accord Evidence of Property Insurance Certificate. Any modification of such insurance policy must be approved by the Mortgagee in writing prior to the effective date of such modification. All policies shall provide that the Mortgagee may settle all claims under all such policies and may demand, receive and receipt for all monies becoming payable thereunder. The proceeds under any policy shall be paid by the insurer to the Mortgagee as the Mortgagee's interest may appear. All of such policies shall contain provision for notice to the Mortgagee not less than thirty (30) days in advance of any cancellation of such policy, shall not be subject to contribution, and shall be for a term of at least one year at the time of execution of this Mortgage. If the insurance, or any part thereof, shall expire, or be canceled, or become void or voidable by reason of breach of any condition thereof, or if Mortgagee determines that such coverage is unsatisfactory by reason of the failure or impairment of the capital of any company in which the insurance may then be carried, Mortgagor shall place new insurance on the Mortgaged Property, satisfactory to Mortgagee. 7 a Mortgage, Mortgagor shall deliver to Mortgagee a duplicate policy or certificate evidencing the renewal of such coverage and the payment of all premiums. The Mortgagor shall also secure such certificates from public officials as are available for the purpose or otherwise demonstrate to the satisfaction of the Mortgagee that the Mortgaged Property is not located within an area identified by the Federal Emergency Management Agency as having "special flood hazards," as such term is used in the National Flood Insurance Act of 1968, as amended and supplemented by The Flood Disaster Protection Act of 1973, and in regulations, interpretations and rulings thereunder or in a zoned flood plain or flood hazard area as determined by local findings, determinations, ordinances, regulations or rulings, and if located therein, the Mortgagor shall secure the amount of flood insurance required by the Mortgagee in its discretion and demonstrate payment of all premiums due therefor. All insurance policies described in this Section 4 shall be written by insurance companies licensed to do business within the Commonwealth of Pennsylvania and shall be in form satisfactory to the Mortgagee, shall be issued by companies satisfactory to Mortgagee, and shall be maintained in full force and effect. 5. CASUALTY TO MORTGAGED PROPERTY. The Mortgagor shall promptly give written notice of any casualty affecting the value of the Mortgaged Property to the Mortgagee. Mortgagee may make proof of loss if not promptly done by Mortgagor. Any adjustment of a proof of loss shall require written consent of Mortgagee. The proceeds of all insurance on the Mortgaged Property shall be applied as follows: A. The Mortgagee may, at its option, apply proceeds of such insurance to prepayment of the amounts due under the Note, the Guaranty Agreement, this Mortgage, or any additional Loan Documents (any excess proceeds to be paid to Mortgagor); or B. If the Mortgagee does not exercise the option in subparagraph A. above, then: (1) The Mortgagor may, if the Mortgaged Property is partially or totally destroyed by fire, flood, windstorm or other casualty so as to render the Mortgaged Property unsuitable for Mortgagor's continued use, have the option of not replacing, restoring or repairing the damaged Mortgaged Property, but in lieu of such replacement, restoration or repair, and provided that the insurance proceeds together with any required funds of Mortgagor will prepay any remaining amounts secured hereby in full, Mortgagor may apply the full proceeds of such insurance on the Mortgaged Property toward the prepayment of the amounts secured hereby (any excess proceeds to be paid to Mortgagor); provided that the insurance proceeds, together with any required funds of Mortgagor, will prepay any remaining amounts secured hereby in full; or 8 (2) if the b --- hereby in full, the proceeds of all such insurance shall be held by the Mortgagee in a separate insurance loss account until such time as Mortgagor shall have delivered to Mortgagee for its approval and to its satisfaction, sufficient plans, specifications, and contracts containing a detailed breakdown of the costs to replace, restore or repair the damaged Mortgaged Property. Thereafter, the Mortgagee will, upon delivery to it of a certificate of the Mortgagor setting forth the costs theretofore incurred or paid, subject to Mortgagee inspection and acceptance of the replacement, restoration, or repair of the damaged Mortgaged Property, apply so much as may be necessary of the proceeds of such insurance toward the payment of the costs of such replacement, restoration or repair. If said proceeds are not sufficient to pay in full the costs of such replacement, restoration or repair, the Mortgagor will nonetheless complete or cause to be completed the work thereof and will pay such excess cost prior to requesting Mortgagee to apply any of the proceeds of such insurance to the cost of such replacement, restoration or repair. Any balance of said proceeds of insurance remaining after the payment of all costs of such replacement, restoration or repair shall be applied toward the prepayment of the amounts secured hereby. If said amounts shall have been paid in full, any further balance of said proceeds of insurance shall be paid to the Mortgagor; provided, however, that if the Mortgagor does not elect to prepay the amounts secured hereby in full, there shall be no diminution in or postponement of future installments payable under the Note or hereunder until payment thereof in full, and the Mortgagor shall proceed promptly to replace, restore or repair the Mortgaged Property damaged or destroyed or cause said work to be done. All policies of insurance contemplated by this Mortgage, and all renewals thereof, are hereby assigned to Mortgagee as additional security for payment of the Indebtedness and Mortgagor hereby agrees that, if an Event of Default hereunder shall have occurred and be continuing, any amounts available thereunder upon cancellation or termination of any of such policies or renewals, whether in the form of return of premiums or otherwise, shall be payable to Mortgagee as assignee thereof. If Mortgagee becomes the owner of or obtains an interest in the Mortgaged Property, or any part thereof, by foreclosure or otherwise, such policies, including all right, title and interest of Mortgagor hereunder, shall become the absolute property of Mortgagee. 6. CONDEMNATION. Mortgagor hereby assigns, transfers and sets over to Mortgagee the entire proceeds of any award or claim for damage for any of the Mortgaged Property taken or damaged under the power of eminent domain or by condemnation. The proceeds of the award shall be applied in reduction of the Indebtedness unless Mortgagee elects to require Mortgagor to restore or rebuild, in which event the proceeds shall be held by Mortgagee and used to reimburse Mortgagor for the cost of restoring and rebuilding all Improvements in accordance with plans and specifications to be submitted to and approved by Mortgagee. In the event Mortgagee holds the proceeds to reimburse Mortgagor for the costs of rebuilding and restoring the premises, then the proceeds of the award shall be paid out in the same manner, and under the same terms and conditions, as provided in Section 5.B(2) hereof for the payment of insurance proceeds in reimbursement of the costs of rebuilding and restoration. If 9 L 'i v the dillul 1 of such award is insufficient to cover the cost of rebuilding and Mortgagor shall pay such cost in excess of the award before being entitled to reimbursement out of the award. Any surplus which may remain out of said award after payment of such costs of rebuilding and restoration shall, at the option of Mortgagee, be applied on account of the Indebtedness or be paid to any other party entitled thereto. 7. USE; COMPLIANCE WITH LAWS. A. Mortgagor shall comply, and shall cause each lessee under the Leases or other user of the Mortgaged Property to comply, with all laws, ordinances, regulations and orders of all federal, state, municipal and other governmental authorities having jurisdiction of the Mortgaged Property and the use made thereof and with all orders and directions of the Board of Fire Underwriters or similar body, and with all restrictions of record pertaining to the Mortgaged Property, improvements thereon and the use thereof. B. Without the prior written consent of Mortgagee, Mortgagor shall not (1) make, permit, or suffer any change to be made in the general nature of the occupancy of the Mortgaged Property; (2) initiate or acquiesce in any reclassification of the Mortgaged Property under any applicable zoning or similar laws, ordinances and regulations; or (3) make, permit or suffer any use of the Mortgaged Property that could with the passage of time result in the creation of any right of user, or any claim of adverse possession or easement on, to or against any part of the Mortgaged Property in favor of any person or the public. 8. OTHER LIENS, TRANSFERS. Without the prior written consent of Mortgagee, Mortgagor will not: A. Create, permit or suffer to exist any lien or security interest in the Mortgaged Property or any part or element thereof, or interest therein, except other liens in favor of Mortgagee. B. Sell, contract to sell, convey, alienate or transfer in any manner whatever the Mortgaged Property or any part thereof or any interest therein, whether legal or equitable, or lease, agree to lease, option or agree to option, the Mortgaged Property or any part thereof or any interest therein, whether legal or equitable, without first obtaining the written consent of the Mortgagee, which consent Mortgagee reserves the right to refuse; or be divested of title, or any interest therein, whether legal or equitable, in any manner or way, whether voluntary or involuntary. 9. INSPECTION. Mortgagee and any person authorized by Mortgagee shall have the right at any time, upon reasonable notice to Mortgagor, to enter the Mortgaged Property at any reasonable hour to inspect and photograph its condition and state of repair. 10. DECLARATION OF NO SET-OFF. Within 10 days after requested to do so by Mortgagee by notice to Mortgagor, Mortgagor shall certify to Mortgagee or to any proposed 10 a? -- other charges then owing on the Indebtedness and any other indebtedness secured by prior liens, if any, and whether there are any set-offs or defenses against them. 11. SECURITY AGREEMENT. A. This Mortgage is both a real property Mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Mortgaged Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor, by executing and delivering this Mortgage grants to Mortgagee, as security for the Indebtedness, a security interest in the Collateral. Mortgagor hereby authorizes Mortgagee to file financing statements in order to create, perfect, preserve and continue the security interest(s) herein granted. This Mortgage shall also be effective as a financing statement filed as "fixture filing" for the purposes of the Uniform Commercial Code, shall cover all items of the Mortgaged Property that are or are to become fixtures, and is to be filed for record in the Recorder's Office. This Mortgage shall also be effective as a financing statement covering any other of the Mortgaged Property and may be filed in the appropriate filing or recording office. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section 11. The addresses of the Debtor and Secured Party are as set forth at the beginning of this Mortgage. The record owner of the Property is: Thomas H. McElwee, Jr. and Becky S. McElwee. Information concerning the security interest(s) herein granted may be obtained from Mortgagee upon request. If an Event of Default shall occur, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Mortgaged Property or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation of the Mortgaged Property. Upon request or demand of Mortgagee, Mortgagor shall at its expense assemble the Mortgaged Property and make it available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses, including legal expenses and attorneys' fees and disbursements, incurred or paid by Mortgagee in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Mortgaged Property. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Mortgaged Property sent to Mortgagor in accordance with the provisions hereof at least five business days prior to such sale, disposition or auction shall constitute reasonable notice to Mortgagor. The proceeds of any disposition of the Mortgaged Property, or any part thereof, may be applied by Mortgagee to the payment of the Indebtedness in such priority and proportions as Mortgagee in its discretion shall deem proper. 11 lortgagor shall notify Nlortt or identity of gar of any b b any change in location of the Mortgaged Property and shall promptly execute, file and record, at its sole cost and expense, such Uniform Commercial Code forms as are necessary to maintain the priority of the lien of Mortgagee upon and security interest in the Mortgaged Property. In addition, Mortgagor shall promptly execute, file and record such additional Uniform Commercial Code forms or continuation statements as Mortgagee shall deem necessary and shall pay all expenses and fees in connection with the filing and recording thereof, provided that no such additional documents shall increase the obligations of Mortgagor under the Note or this Mortgage. Mortgagor hereby grants to Mortgagee an irrevocable power of attorney, coupled with an interest, to file with the appropriate public office on its behalf any financing or other statements signed only by Mortgagee, as secured party, in connection with the Collateral. B. That portion of the Mortgaged Property consisting of personal property and equipment shall be owned by Mortgagor and shall not be the subject matter of any lease or other transaction whereby the ownership or any beneficial interest in any of such property is held by any person or entity other than Mortgagor nor shall Mortgagor create or suffer to be created any security interest covering any such property as it may from time to time be replaced, other than the security interest created herein. 12. RIGHT TO REMEDY DEFAULTS. In case of any default by Mortgagor, Mortgagee may, but need not, make any payment or perform any act herein required, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting the Mortgaged Property, or contest any tax or assessment. All moneys paid for any of the purposes herein authorized and all expenses paid or incurred in connection therewith, including attorney's fees and any other money advanced by Mortgagee to protect the Mortgaged Property and the lien hereof, shall be so much additional Indebtedness and shall become immediately due and payable without notice and with interest thereon at the applicable rate provided in the Note from the date of expenditure or advance until paid. No inaction on the part of Mortgagee shall be considered as a waiver of any right accruing to it on account of any default on the part of Mortgagor. 13. REMEDIES FOR DEFAULT. Upon the occurrence of an Event of Default and in addition to any and all other rights and remedies Mortgagee may have: A. The entire unpaid balance of the indebtedness and all other sums secured by this Mortgage shall become immediately due and payable, at the option of Mortgagee, without notice or demand. B. For the purpose of obtaining possession of the Mortgaged Property upon the occurrence of any event which would constitute an event of default hereunder, Mortgagor hereby authorizes and empowers any attorney of any court of record in the Commonwealth of Pennsylvania or elsewhere, as attorney for Mortgagor and all persons claiming under or 12 F - ^' i tl?irattgh Mortgagor. entering _ action or actions in ejectment for possession of the Mortgaged Property and to appear for and confess judgment against Mortgagor, and against all persons claiming under or through Mortgagor, in favor of Mortgagee, for recovery by Mortgagee of possession thereof, for which this Mortgage, or a copy thereof verified by affidavit, shall be a sufficient warrant; and thereupon a writ of possession may immediately issue for possession of the Mortgaged Property, without any prior writ or proceeding whatsoever and without any stay of execution. If for any reason after such action has been commenced it shall be discontinued, or possession of the Mortgaged Property shall remain in or be restored to Mortgagor, Mortgagee shall have the right for the same default or any subsequent default to bring one or more further amicable actions as above provided to recover possession of the Mortgaged Property. Mortgagee may bring an amicable action in ejectment and confess judgment therein before or after the institution of proceedings to foreclose this Mortgage or to enforce the Note, or after entry of judgment therein or on the Note, or after a Sheriffs sale of the Mortgaged Property in which Mortgagee is the successful bidder, it being the understanding of the parties that the authorization to pursue such proceedings for obtaining possession and confession of judgment therein is an essential part of the remedies for enforcement of the Mortgage, the Note and the Guaranty Agreement, and shall survive any execution sale to Mortgagee. C. Mortgagee shall have the right, from time to time, to bring an appropriate action to recover any sums required to be paid by Mortgagor under the terms of this Mortgage, as they become due, without regard to whether or not any of the Indebtedness shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of mortgage foreclosure, or any other action, for any default by Mortgagor existing at the time the earlier action was commenced. D. Mortgagee may institute an action or actions of mortgage foreclosure against the Mortgaged Property, or take such other action at law or in equity for the enforcement of this Mortgage and realization on the mortgage security or any other security herein or elsewhere provided for, as the law may allow, and may proceed therein to final judgment and execution for the entire unpaid balance of the principal debt, with interest at the rate stipulated in the Note, together with all other sums due by Mortgagor in accordance with the provisions of the Note, the Guaranty Agreement or this Mortgage, including all sums which may have been loaned by Mortgagee to Mortgagor after the date of this Mortgage, and all sums which may have been advanced by Mortgagee for taxes, water or sewer rents, charges or claims, payments or prior liens, insurance or repairs to the Mortgaged Property, all costs of suit, together with interest at such rate on any judgment obtained by Mortgagee from and after the date of any Sheriff's sale until actual payment is made by the Sheriff of the full amount due Mortgagee, and a reasonable attorney's commission for collection, which attorney fee shall also be secured by this Mortgage. 14. ASSIGNMENT OF LEASES AND RENTS AFTER DEFAULT. As further security for payment of the indebtedness and performance of the obligations, covenants and agreements secured hereby, Mortgagor hereby assigns to Mortgagee all Leases, together with all 13 event of the occurrence of an Event of Default hereunder, or under the Note and in any such case Mortgagor hereby confers on Mortgagee the exclusive power, to be used or not in its sole discretion, to act as agent, or to appoint a third person to act as agent for Mortgagor, with power to take possession of, and collect all rents arising from the Mortgaged Property and apply such rents, at the option of Mortgagee, to the payment of the mortgage debt, taxes, assessments, and other expenses in such order or priority as Mortgagee may in its sole discretion determine, and to turn any balance remaining over to Mortgagor; but such collection of rents shall not operate as an affirmance of the tenant or lease in the event Mortgagor's title to the Mortgaged Property should be acquired by Mortgagee. Mortgagee shall be liable to account only for rents and profits actually received by Mortgagee. In exercising any of the powers in this paragraph contained, Mortgagee may also take possession of, and for these purposes use, any and all personal property contained in the Mortgaged Property and used by Mortgagor in the rental or leasing thereof or any part thereof. 15. RIGHTS AND REMEDIES CUMULATIVE. A. The rights and remedies of Mortgagee as provided in this Mortgage or the Note, or any other Loan Document shall be cumulative and concurrent, may be pursued separately, successively or together, at the sole discretion of Mortgagee, and may be exercised as often as occasion therefor shall arise. The failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. The remedies provided herein are in addition to all remedies of Mortgagee provided by law. B. Any failure by Mortgagee to insist upon strict performance by Mortgagor of any of the terms and provisions of this Mortgage, the Note, or any other Loan Documents shall not be deemed to be a waiver of any of the terms or provisions thereof, and Mortgagee shall have the right thereafter to insist upon strict performance by Mortgagor of any and all of them. C. Neither Mortgagor nor any other person now or hereafter obligated for payment of all or any part of the sums now or hereafter secured by this Mortgage shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated or the failure of Mortgagee to take action to foreclose on this Mortgage or otherwise enforce any provisions of the Mortgage, the Note, the Guaranty Agreement or any other Loan Document, or by reason of the release, regardless of consideration of all or any part of the security held for the Indebtedness. D. Mortgagee may release, regardless of consideration, any part of the security held for the Indebtedness without, as to the remainder of the security, in any way impairing or affecting the lien of this Mortgage or its priority over any subordinate lien. E. For payment of the Indebtedness, Mortgagee may resort to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect. 14 €r B - _ . b 1 Mortgagee occurrence of any of the following: A. A fire or other casualty causing damage in the amount of $100,000.00 or more to the Mortgaged Property; B. Receipt of notice of condemnation of the Mortgaged Property; C. Receipt of notice from any governmental authority relating to the structure, use or occupancy of the Mortgaged Property; D, Receipt of any notice from any tenant of all or any portion of the Mortgaged Property; E. Substantial change in the occupancy of the Mortgaged Property; F. Receipt of any notice from the holder of any lien or security interest in the Mortgaged Property; or G. Commencement of any litigation affecting the Mortgaged Property. 17. MORTGAGOR'S WAIVERS. Mortgagor hereby waives and releases: A. All errors, defects and imperfections in any proceeding instituted by Mortgagee under the Note, the Guaranty Agreement, this Mortgage, or any other Loan Document; B. All benefit that might accrue to Mortgagor by virtue of any present or future law exempting the Mortgaged Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment; and C. Unless specifically required herein, all notices of Mortgagor's default or of Mortgagee's election to exercise or Mortgagee's actual exercise, of any right, privilege, or remedy under the Note, the Guaranty Agreement, this Mortgage, or any other Loan Document. 18. COUNSEL FEES. If Mortgagee becomes a party to any suit or proceeding affecting the Mortgaged Property or title thereto, the lien created by this Mortgage or Mortgagee's interest therein, or if Mortgagee engages counsel to collect any of the Indebtedness or to enforce performance of the agreements, conditions, covenants, provisions or stipulations of this Mortgage, the Note or the Guaranty Agreement, or to represent Mortgagee in any bankruptcy or insolvency proceeding or reorganization, Mortgagee's costs, expenses and reasonable counsel fees, whether or not suit is instituted, shall be paid to Mortgagee by Mortgagor, on demand, with interest at the then effective rate set forth in the Note, and, until paid, they shall be deemed to be part of the Indebtedness. is Et _ . _. -r ENVIRONMENTAL WARRANTIES 1 A. Mortgagor hereby warrants and covenants that: (1) The present use of the Mortgaged Property is, and any currently contemplated future use of the Mortgaged Property will be in compliance with all applicable Environmental Laws and Regulations and no environmental liability exists on or in connection with the Mortgaged Property; (2) After inquiry and investigation by Mortgagor, conducted with due diligence, there are no Hazardous Substances located on the Mortgaged Property (except as disclosed in writing to Mortgagee and acknowledged, in writing, by Mortgagee as acceptable, and any such Hazardous Substances have been properly transported, stored or disposed of at other locations); (3) Mortgagor has all permits or authorizations under Environmental Laws and Regulations necessary to carry on its business, has filed all notifications and plans and has such information and plans available as required under Environmental Laws and Regulations, and is in compliance with all applicable Environmental Laws and Regulations, including but not limited to deed acknowledgment required by the Pennsylvania Solid Waste Management Act, 35 P.S. 6018.405 and the Pennsylvania Hazardous Sites Cleanup Act, 35 P.S. §6025.512(b); (4) Mortgagor is not aware of nor has Mortgagor received any claims, demands, orders, notices of violation, notices of intent to file a claim, demand, order, lawsuit, notices of deficiencies, or requests for information relating to actual or potential actions as described in subsection 19.A, any of which are based upon or refer to Environmental Laws and Regulations; (5) To the best of the information and belief of Mortgagor after a due diligence inquiry, subsections (1) through (4) above are applicable to usage of the Mortgaged Property by predecessors in title or interest of Mortgagor and its lessees or tenants or invitees; (6) Mortgagor has received no notice and is unaware that the Mortgaged Property has been designated as a site on the National Priorities List or similar state list, or has been or is the subject of any removal or response action, private or governmental, under the Comprehensive Environmental Response, Compensation or Liability Act, as amended, or the Pennsylvania Hazardous Sites Cleanup Act or any similar state or federal law, and that no requests have been received to provide information or participate in any study, remedial design or response action under such laws; 16 but not limited to Hazardous Substances, which may be located on, disposed of, or placed on the Mortgaged Property; (8) Mortgagor will take reasonable precautions against the foreseeable acts or omissions of any third party in the location, disposal or placement of Hazardous Substances on the Mortgaged Property and the environmental consequences that could foreseeably result from such acts or omissions; (9) Mortgagor shall, and shall use its best efforts to cause each employee, agent or contractor to, use its or their best efforts to comply in all material respects with any applicable Environmental Laws and Regulations; provided, however, that this provision shall not prevent the Mortgagor from contesting, in good faith and with reasonable diligence, the validity or application of such laws by appropriate proceedings; (10) Mortgagor has not, by act or omission, caused or contributed to the release or threatened release of any Hazardous Substance on the Mortgaged Property; and (11) Mortgagor shall immediately notify Mortgagee and its successors in interest of any act or omission that could give rise to liability under any Environmental Laws and Regulations, as soon as it occurs, including, but not limited to, any of the events referred to in this subsection 19.A of this Mortgage. B. Conditioned upon notice from a governmental agency of a violation of Environmental Laws and Regulations or upon Mortgagee's reasonable suspicion of such violation or upon default and prior to the institution of foreclosure proceedings by Mortgagee, Mortgagor hereby grants to Mortgagee the right to require an environmental audit to be conducted at the expense of Mortgagor, including but not limited to such physical testing as may be reasonably concluded to be necessary to determine compliance with applicable Environmental Laws and Regulations. The exercise of this right shall be limited to a single completed audit unless one of the events in this paragraph has occurred and in which event Mortgagee's right to environmental testing shall only be limited by the reasonable necessity of Mortgagee to have a complete evaluation of the Mortgaged Property. Mortgagor warrants that it has produced or offered to produce for inspection copies or summaries of all oral or written reports or correspondence prepared by any person and relating to any of the matters described in this Section 19 heretofore prepared for Mortgagor or in its possession, including any audits, inspection reports, samples or data relating to any such report or investigations. C. Mortgagor covenants that it shall not construe this Mortgage or take any action which may cause the Mortgagee to be considered a generator of Hazardous Substances, an owner, an operator or a person in control of any facility or part of any business of the Mortgagor. 17 DOI 9 ..:.- r. L` 1 1 S zr .. '1 'Yl --- D; Mol tgagot, its successors and assigns, hereby agrees to def-__ indernnify and- hold harmless Mortgagee, its directors, officers, employees, agents, contractors, subcontractors, licensees, invitees, successors and assigns from and against any and all claims, demands, judgments, damages, actions, causes of action, injuries, administrative orders, consent agreements and orders, liabilities, penalties, costs, and expenses of any kind whatsoever including but not limited to claims arising out of environmental hazards, loss of life, injury to persons, property, or business, and/or damage to natural resources in connection with the activities of Mortgagor or its predecessors or successors in interest, lessees, invitees, or third parties who have trespassed on the Mortgaged Property, or any of them, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of Mortgagor which (1) arise out of the actual, alleged or threatened manufacture, discharge, dispersal, release, storage, accumulation, control, processing, spilling, leaking, emitting, transportation, treatment, generation, disposal, handling, or escape of Hazardous Substances, or (2) actually or allegedly arise out of the use, specification or inclusion of any product, material or process containing chemicals or Hazardous Substances, the failure to detect the existence or proportion of chemicals or Hazardous Substances in the soil, air, surface water or groundwater, or the performance or failure to perform the abatement of any pollution source or the replacement or removal of any object, soil, water, surface water or groundwater containing chemicals or Hazardous Substances. The Mortgagor, its successors and assigns, shall bear, pay and discharge when and as the same become due and payable, any and all such judgments or claims for contribution, indemnification, damages, penalties and attorneys, consulting and experts fees or otherwise against Mortgagee, shall hold Mortgagee harmless for such judgments or claims, and shall assume the burden and expense of defending all suits, administrative proceedings and negotiations of any description with any and all persons, entities, political subdivisions or government agencies arising out of any of the occurrences set forth herein. 20. NOTICES. All necessary notices, demands and requests shall be deemed duly given if and when (A) delivered personally, (B) transmitted by facsimile, confirmed by telephone and transmission report, together with same-day mailing by first class mail, postage prepaid, or (C) sent by a nationally recognized express courier service, postage or delivery charges prepaid, addressed as follows: To Mortgagee To Mortgagor: Scarff Bros., Inc. 2300 Fallston Road Fallston, MD 21047 Thomas H. McElwee, Jr. Becky S. McElwee 250 Jumper Road Newburg, PA 17240 18 u: i J S,a A. NOTICE OF JUNIOR LIEN. If (1) this Mortgage secures a line of credit or other facility pursuant to which advances are made from time to time by Mortgagee to Mortgagor, and (2) Mortgagee receives written notice pursuant to Section 8143(b) of the Open-End Mort gage Statute from a holder of a lien or encumbrance on the Mortgaged Property which is subordinate to the lien of the Mortgage, then and notwithstanding any provision to the contrary contained in the Note, the Guaranty Agreement, this Mortgage or any other Loan Document, Mortgagor agrees that Mortgagee shall not be responsible to make any further advances to Mortgagor (and Mortgagee is released from all liability for failure to make such advances) if Mortgagee determines in its sole discretion that any such advance requested by Mortgagor could be construed to be an unobligated advance under Section 8143(b) of the Open-End Mortgage Statute. B. NOTICE OF MECHANIC'S LIEN. If (1) this Mortgage secures a loan facility the proceeds of which are used to provide funds to pay toward all or part of the cost of completing any erection, construction, alteration or repair of any part of the Mortgaged Property, and (2) Mortgagee receives written notice pursuant to Section 8143(b) of the Open-End Mortgage Statute from a holder of a mechanic's lien for labor performed or to be performed or materials furnished or to be furnished for the erection, construction, alteration or repair or any part of the Mortgaged Property, then and notwithstanding any provision to the contrary contained in the Note, the Guaranty, this Mortgage, or any other Loan Documents, Mortgagor agrees that Mortgagee shall have the right to suspend (until such time as the lien is fully released) any further advances to Mortgagor (and Mortgagee is released from all liability for failure to make such advances) except advances which Mortgagee determines in its sole discretion are for the purpose of paying toward all or part of the cost of completing any erection, construction, and alteration or repair of any part of the Mortgaged Property the financing of which, in whole or in part, this Mortgage was given to secure. C. NOTICE OF LIMITATION OF INDEBTEDNESS. If Mort gagor should at any time elect to limit the liabilities secured by this Mortgage pursuant to Section 8143(c) of the Open-End Mortgage Statute, Mortgagor agrees that notice of such election shall (1) not be effective unless and until it is served upon Mortgagee in accordance with the requirements of Section 8143(d) of the Open-End Mortgage Statute and fully complies with the requirements for the giving of notices under this Mortgage; (2) release Mortgagee from all obligation to make any further advances under the Note notwithstanding anything to the contrary contained in such notice or the Note, or any other Loan Documents; (3) constitute, at the election of Mortgagee, an Event of Default under the Note or Guaranty Agreement; and (iv) not be effective to limit Mortgagor's liability for payment and performance of all liabilities for which Mortgagor is responsible under this Mortgage or the Note, or any other Loan Documents (including, without limitation, all reimbursement and indemnification agreements) whether such liabilities arise prior or subsequent to the date of such notice. 19 -. _ HEADINGS. -_."-_-- --we for referenee on! and do not constitute a part of this Mortgage. 23, APPLICABLE LAW. This Mortgage shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania. The parties have participated jointly in the negotiation and drafting of this Mortgage. In the event an ambiguity or question of intent or interpretation arises, this Mortgage shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Mortgage. IN WITNESS WHEREOF, and intending to be legally bound hereby, Mortgagor has caused this instrument to be executed and sealed the day and year first above written. "MORTGAGOR" WITNESS: ,n ADH:slb #364059.1 (13106.014) ea- Thomas H. McElwee, Jr. Becky S. McElwee 20 SS: COUNTY OF LANCASTER ) On this l I1h day of March, 2005, before me, the undersigned officer, personally appeared THOMAS H. McELWEE, JR. and BECKY S. McELWEE, known to me to be the persons whose names are subscribed to the within instrument, and that said persons acknowledged that they executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. / Notary ublic COMMONWEALTH OF PENNSYLVANIA Notarial Seal Judy Ann Poglitsch, Notary Public City of Lancaster, Lancaster County My Commission Expires Oct. 14, 2008 Member, Pennsylvania Association of Notaries EXHIBIT "All PROPERTY PROPERTY #1 ALL the following described real estate lying and being situate in Hopewell Township, Cumberland Court-y, Pennsylvania, botmded and limited as follows: BEGINNING at an iron pin, formerly a post on the Northerly edge of Township Route 360, a dirt road also known as Jumper Road, subject to the easement of said road, along the Northerly edge of said road and the lands now or formerly of George H. Wright and wife, in a generally Northwesterly direction as follows: North 69 degrees, 11 minutes, 41 seconds West 530.61 feet to a point; thence North 75 degrees, 42 minutes, 30 seconds West 491.90 feet; thence North 51 degrees, 11 minutes, 50 seconds West 202.66 feet to a point; thence North 57 degrees, 28 minutes, 36 seconds West 236.25 feet to a point; thence North 78 degrees, 33 minutes, 20 seconds West 368.31 feet to a point; thence North 68 degrees, 32 minutes, 19 seconds West 167.43 feet to an iron pin, being the lines describing the Northerly edge of Township Route 360; thence by the lands now or formerly of John Bert, South 27 degrees, 50 minutes, 22 seconds West 314.01 feet to a pin; thence by lands now or formerly of Americus Allen and heirs, South 34 degrees, 30 minutes East 1,070.85 feet to a post; thence by the same, South 83 degrees, 30 minutes West 1,014.75 feet to a pin; thence by lands now or formerly of David Byars, et ux, and Mary Miller, North 33 degrees, 52 minutes East 649.1 feet to a pin, the Place of BEGINNING. CONTAIN-ING 30.08 acres, more or less. BEING THE SAME PREMISES which John D. Petersheim and Lydia F. Petersheim, by deed dated April 24, 1985 and recorded May 1, 1985 in the Recorder of Deeds Office in and for Cumberland County, Pennsylvania in Deed Book F, Volume 31, Page 777, granted and conveyed unto Thomas H. McElwee, Jr. and Becky S. McElwee. PROPERTY #2 ALL THAT CERTAIN tract of land with the improvements thereon erected situate in West Pennsboro Township, Cumberland County, Pennsylvania, bounded and described as follows: BEGINNING at a point on the East bank of the Big Spring; thence by lands now or formerly of Salter and Baker and lands now or formerly of Alvin Rife, South 30 degrees East, 94 perches to a white oak stump; thence by said lands now or formerly of Rife, South 89 degrees East, 84 perches to a post; thence by lands now or formerly of Harry E. McElwee, South 4-3/4 perches to a post; thence by the same, South 40 degrees West, 44 /2 perches to a post; thence by the same, South 46 degrees East, 42 perches to a post; thence by lands now or formerly of Stanley Spencer, South 24 degrees West, 89%2 perches; thence by lands now or formerly of Oliver Myers, South 48 degrees West, 94 perches; thence by lands now or formerly of Atlay Farrier, North 20 degrees West, 170 perches; thence by lands now or formerly of Harry E. McElwee, South 89 degrees West, 101/2 perches; thence by the school lot, North 1 degree East, 8 perches; thence by said school lot and lands now or formerly of Flora Satcher, South 89 degrees West, 30 perches to a post on the bank of the Big Spring; thence down the spring by its several courses, 73 perches to the place of BEGINNING. CONTAINING 156 acres and 127 perches, more or less. t _ - 0 LESS, , a-s ip o an conveyed to aug - , et. a by deed ate February 13, 1957, and recorded in the Office of the Recorder of Deeds for Cumberland County in Deed Book "Q", Volume 17, Paue 153. LESS, HOWEVER, THE FOLLOWLNG CONVEYAl`vCES: 1. A tract of land containing 1.23 acres conveyed to P.oy M. Franklin by deed dated August 5, 1969, recorded in Cumberland County Deed Book 231, Page 223. 2. Lot No. 5 containing 1.033 acres conveyed to Robert Stauffer, H and Cheri Ridolfi by deed dated October 25, 1983, recorded in Cumberland County Deed Book 30K, Page 959. 3. Lot No. 6 containing 8.919 acres and Lot No. 7 containing 2.925 acres conveyed to Robert Goodrich by deed dated February 13, 1984, recorded in Cumberland County Deed Book 30- 0, Page 218. 4. Lot No. 4 containing 0.825 acres conveyed to Gregory R. MaCoy and Katherine W. MaCoy by deed dated April 23, 1984, recorded in Cumberland County Deed Book 30Q, Page 926. 5. Lot Nos. 1, 5 and 3-B containing 1.964 acres conveyed to Mary E. Blakeslee and Laszlo Bockh, her husband, by deed dated May 24, 1984, recorded in Cumberland County Deed Book 30R, Page 824. 6. Lot Nos. 2 and 3 containing 1.594 acres conveyed to Henry A. Zajac and Mae A. Zajac, his wife, by deed dated July 12, 1984, recorded in Cumberland County Deed Book 30U, Page 115. 7. Lot No. 7-B containing 2,918.15 square feet conveyed to Gregory A. MaCoy and Katherine W. MaCoy by deed dated September 11, 1985, recorded in Cumberland County Deed Book 31 IN, Page 312. 8. Lot No. 11 containing 0.911 acre, Lot No. 12 containing 0.919 acre and Lot No. 13 containing 0.934 acre conveyed to Ernest P. Fernsten and Barbara A. Fernsten, his wife, by deed dated June 24, 1987, recorded in Cumberland County Deed Book 32T, Page 424. 9. Lot No. 8 containing 3 6,198.31 square feet and Lot No. 9 containing 3 7,167.44 square feet conveyed to Darrell C. Shears and Angela R. Shears, his wife, by deed dated May 25, 1988, recorded in Cumberland County Deed Book 331, Page 1078. 10. Lot No. 14 containing 0.868 acre conveyed to P. Edward Mullin, single, by deed dated August 18, 1989, recorded in Cumberland County Deed Book 34C, Page 935. 11. Lot No. 20 containing 1.158 acres conveyed to Andrew W. Sweger and Kimberly A. Sweger, his wife, by deed dated October 30, 1989, recorded in Cumberland County Deed Book 34G, Page 173. 12. Lot No. 17 containing 0.868 acre and Lot No. 18 containing 0.986 acre conveyed to William M. Bassin and Mary K. Bassin, his wife, by deed dated April 20, 1990, recorded in Cumberland County Deed Book 34N, Page 124. -3, tot _ No. - ni .23 cr s an - No. 16 ccontainlngO.3- SO acre conveye to -Roger L. Amsbaugh and Karmae M. Amsbaugh, his wife, by deed dated May 10, 1990, recorded in Cumberland County Deed Book 34-0, Page 136. 14. Lot No. 19-B containing 0.493 acre conveyed to Andrew W. Sweger and Kimberly A. Sweger, his wife, by deed dated March 22, 1991, recorded in Cumberland County Deed Book 35A, Page 172. 15. Lot No. 19-A. containing 0.493 acre conveyed to William M. Bassin and Mary K. Bassin, his wife, by deed dated March 22, 1991, recorded in Cumberland County Deed Book 35A, Page 174. 16. Lot No. 10 containing 2.104 acres conveyed to David M. Hutton by deed dated January 13, 1992, recorded in Cumberland County Deed Book 35M, Page 80. 17. Lot Nos. 22, 23, 24, 25, 26 and 27 conveyed to Randy S. Shuman and Jill H. Shuman, his wby deed dated August 21, 1992, recorded in Cumberland County Deed Book 35V, Page 617. 18. Lot No. 28 containing 5.3632 acres conveyed to Van G. Hocker and Marian B. Hocker, his wife, by deed dated July 31, 1995, recorded in Cumberland County Deed Book 125, Page 1157. 19. Lot No. 11A containing 3.0069 acres conveyed to Ernest P. Fernsten and Barbara A. Fernsten, his wife, by deed dated November 21, 1996, recorded in Cumberland County Deed Book 149, Page 519. 20. Lot No. 16A containing 0.3559 acre conveyed to Roger L. Amsbaugh and Karmae M. Amsbaugh, his wife, by deed dated September 22, 1997, recorded in Cumberland County Deed Book 164, Page 934. BEING THE SAME PREMISES which Ruth W. McElwee, widow by Deed dated November 12, 1999 and recorded December 6, 1999, in the Office of the Recorder of Deeds for Cumberland County, Pennsylvania, in Deed book 212, page 699, granted and conveyed unto Thomas H. McElwee, Jr. and Becky S. McElwee. I -- - U. L' i L - jr?:?y: i7?, ? i?: ti?iF,' r4ik,.:)i??11'v 'il? ? ??wl• ???? n n Aaron D. Hollis. Esquire Blakinger, Byler & Thon 28 Penn Square Lancaster, PA 17603 (717) 299-1100 . - o L! ? I D A E` E! 1_ L ? 'PPPPfllgtlEtH1110?b Recorder d.deeds RECORDER ? 01 _u. F CAHlikLII* I CE10!Ui i OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (Franklin County) THIS OPEN-END MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (the "Mortgage") made this 11 th day of March, 2005, between THOMAS H. McELWEE, JR. and BECKY S. McELWEE, adult individuals, with an address of 250 Jumper Road, Newburg, PA 17240 (the "Mortgagor'), AND SCARFF BROS., INC., a Maryland corporation, with an address of 2300 Fallston Road, Fallston, MD 21047 (the "Mortgagee"). WITNESSETH THAT: Mortgagor has executed and delivered to Mortgagee a Third Amended and Restated Revolving Variable Rate Note in the face amount of $750,000.00 dated the date hereof (the "Note") wherein Mortgagor promises to pay to Mortgagee the aggregate principal sum of $750,000.00, with interest thereon at the rates and payable at the times, in the manner and according to the terms and conditions specified in the Note, all of which are incorporated herein by reference. THIS MORTGAGE IS AN OPEN-END MORTGAGE WITHIN THE MEANING OF PENNSYLVANIA LAW, 42 Pa. C.S.A. § 8143 AND 8144, THE OPEN-END MORTGAGE STATUTE. IT SECURES FUTURE ADVANCES MADE BY MORTGAGEE TO OR ON ACCOUNT OF MORTGAGOR AS PROVIDED IN THE NOTE. ANYTHING HEREIN CONTAINED TO THE CONTRARY NOTWITHSTANDING, $750,000.00 IS THE MAXIMUM AMOUNT OF INDEBTEDNESS (EXCLUSIVE OF INTEREST AND ADVANCES FOR THE PAYMENT OF TAXES, INSURANCE AND OTHER COSTS OR CHARGES HEREIN AUTHORIZED) WHICH MAY BE SECURED BY THIS MORTGAGE AT ANY TIME. DEFINED TERMS The following capitalized words and terms shall have the following meanings when used in this Mortgage. Unless specifically stated to the contrary, all references to dollar amounts shall 7 'r , ?, mean amoth-As in lawfttl money of the United Staws Af 4 me ca word. I i - 11sed in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Mortgage shall have the meanings attributed to such terms in the Uniform Commercial Code. "Collateral" shall mean that portion of the Mortgaged Property that may be collateral subject to the Uniform Commercial Code. "Debtor" shall mean Mortgagor. "Environmental Laws and Regulations" shall mean all laws, regulations, policies, and/or orders pertaining to the protection of health and welfare of persons and property and all state or federal common law or other causes of action relating to liability from use or misuses of Hazardous Substances (hereinafter defined). These include, but are not limited to, laws and regulations governing the manufacture, generation, storage, accumulation, control, treatment, processing, spilling, leaking, emitting, discharging, disposal, dispersal, transporting, escape or other handling of waste, hazardous waste, oil and petroleum products, toxic substances, liquids, Hazardous Substances, pollutants, contaminants, solid wastes, effluent, or sludges, as defined and regulated under: the Federal Resource Conservation and Recovery Act; Safe Drinking Water Act; Clean Air Act; Refuse Act of 1899; Clean Water Act; Federal Insecticide, Fungicide and Rodenticide Act; Toxic Substances Control Act; Hazardous Materials Transportation Act; Surface Mining Control and Reclamation Act; Atomic Energy Act; Uranium Mill Tailings Control Act of 1978, as amended; Low-Level Radioactive Waste Policy Act; Nuclear Waste Policy Act of 1982; National Environmental Policy Act; Federal Hazard Communication Standard (29 C.F.R. §1910.1200); Food, Drug & Cosmetic Act; Comprehensive Environmental Response, Compensation, and Liability Act, as amended; Emergency Planning and Community Right-To-Know Act; Solid Waste Disposal Act; Pennsylvania Hazardous Sites Cleanup Act; Pennsylvania Solid Waste Management Act; Pennsylvania Clean Streams Law; Pennsylvania Sewage Facilities Act (including all subtitles); Storage Tank and Spill Prevention Act; or other federal, state, or local laws, rules, policies or orders of general application, ordinances or the like having similar purposes. "Event of Default" shall mean: A. The failure of Mortgagor to pay any installment of interest or principal and interest, or any other sum required to be paid under the Note within ten (10) days after it is due; or B. The failure of Mortgagor to observe or perform any other of the covenants or agreements or conditions herein contained, required to be kept or performed or observed by Mortgagor and such failure shall continue unremedied for a period of ten (10) days after the giving of notice thereof to Mortgagor; or C. Any material representation or warranty made herein by Mortgagor shall prove to be untrue or inaccurate in any material respect; or H11. 27 i v '? 6) 9 2 Tl The ve _oF an Event nf Tl°fo„1t °eified the + e;ufrenE . n vr-- ?t0c? t13L iii i-?etlH?y --- Agreement, the Guaranty Agreement, or other Loan Documents. "Guaranty Agreement" shall mean the Third Amended and Restated Guarant- Agreement given by Becky S. McElwee for the obligations of Thomas H. McElwee, Jr. dated the date hereof. "Hazardous Substance" shall mean (1) any chemical, solid, liquid, gas, or other substance having the characteristics identified in, listed under, or designated pursuant to all Environmental Laws and Regulations; (2) petroleum, crude oil, waste oil, solvents, gasoline, natural gas, liquefied natural gas, synthetic fuel, or other petroleum, oil, or gas based products, nuclear, radioactive, or atomic substances, mixtures, wastes; compounds, materials, elements, products, or matters; (3) any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste (including materials to be recycled, reconditioned or reclaimed); (4) any other substance identified in any present or future law as presenting an imminent and substantial danger to the public health or welfare or to the environment, or as otherwise requiring special handling, collection, storage, treatment, disposal, or transportation; (5) and any other substance, mixture, waste, raw materials, ore, pollutants, contaminants, compound, material, element, product or matter that requires or may reasonably be foreseen to require an order requiring cost of clean up. "Indebtedness" shall mean the obligations of Mortgagor to Mortgagee under the Note and Guaranty Agreement.. "Leases" shall mean all leases or subleases of the Mortgaged Property, now existing or hereafter created and all extensions and renewals thereof and substitutions therefor, independent of the term or duration thereof and whether or not evidenced by a written document. "Loan" shall mean the loan made to Mortgagor by Mortgagee in the amount of $750,000.00 evidenced by the Note. "Loan Documents" shall mean the Note, the Guaranty Agreement, the Security Agreement, this Mortgage and any other document executed by Mortgagor in favor of Mortgagee. "Mortgaged Property" shall mean all of Mortgagor's right, title and interest in: A. the Property; and B. all buildings and other improvements erected or hereafter erected on the Property; and C. all fixtures and any appliances, machinery, furniture, furnishings and equipment of any nature whatsoever, belonging to Mortgagor and other articles of personal property belonging to Mortgagor now or at any time hereafter installed in, -j- attaGhed te, defli; zere-d te AF s4uated in er upon the; Prope-?or n1her- buildings and, -- improvements now or hereafter erected thereon, or used or intended to be used in connection with the Property or in the operation of any improvements, or business owned by Mortgagor, or in the operation or maintenance of any improvements or business situate on the Property, whether or not the personal property owned by Mortgagor is or shall be affixed thereto; and D. all building materials, fixtures, building machinery and building equipment delivered on site to the Property during the course of, or in connection with, construction of, or reconstruction of, or remodeling of any buildings and improvements; and E. any and all easements, rights-of-way, tenements, hereditaments and appurtenances belonging to the above-described Property or any part thereof hereby mortgaged or intended so to be, or in any way appertaining thereto, and all streets, alleys, passages, ways, water courses, and all easements and covenants now existing or hereafter created for the benefit of the Mortgagor or any subsequent tenant of the Property over ground adjoining the Property and all rights to enforce the maintenance thereof, and all other rights, liberties, and privileges of whatsoever kind or character, and the reversions and remainders, income, rents, issues and profits arising therefrom, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, at law or in equity, of the Mortgagor in and to the above-described Property or any part thereof, and F. all proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including without limitation, proceeds of insurance and condemnation awards; and G. all substitutes and replacements for, accessions, attachments, and other additions to, and tools, parts, and equipment used in connection with any of the above; and H. all rents with the right to collect such rents at any time for application to the Indebtedness and to utilize any collection or enforcement rights or remedies which may be available to the Mortgagor under the law or any of the Leases but without any duty or obligation to perform on behalf of the Mortgagor any of the Mortgagor's duties or obligations to any of the Leases; and 1. all property similar to the above hereafter acquired by Mortgagor. "Note" shall mean the Third Amended and Restated Revolving Variable Rate Note in the face amount of $750,000.00 dated the date hereof and executed by Mortgagor in favor of Mortgagee as may be amended, replaced or increased from time to time. "Property" shall mean the real property located at 2807 Wayne Road, Chambersburg, PA 17201, as more fully described on Exhibit A attached hereto. '?'.} 1 4 "Security Agreement" shall mean the Second -kmended and Restated Security :-agreement between Mortgagor and Mortgagee bearing even date herewith. NOW THEREFORE, in consideration of the Loan, and as security for payment to Mortgagee of the Indebtedness, and all other sums provided for in this Mortgage, the Note or the Guaranty Agreement according to their respective terms and conditions, and for performance of the agreements, conditions, covenants, provisions and stipulations contained herein and therein, Mortgagor has granted, conveyed, bargained, sold, aliened, released, confirmed and mortgaged, and by these presents does hereby grant, convey, bargain, sell, alien, release, confirm and mortgage unto Mortgagee, its successors and assigns, all of its right, title and interest in, of and to the Mortgaged Property and hereby grants unto Mortgagee, its successors and assigns, a security interest in and to the Mortgaged Property. TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed or mentioned and intended so to be, unto Mortgagee, its successors and assigns, to its own use forever. PROVIDED ALWAYS, and this instrument is executed upon the express condition that, if Mortgagor pays to Mortgagee the principal sum, the interest thereon and all other sums payable by Mortgagor to Mortgagee as are secured hereby, in accordance with the provisions of the Note and Guaranty Agreement, at the times and in the manner specified, without deduction, fraud or 'delay, and Mortgagor performs and complies with all the agreements, conditions, covenants, provisions and stipulations contained therein, then this Mortgage and the estate hereby granted shall cease and become void. In the event that any interest or portion of the Mortgaged Property or title to any other part of the Mortgaged Property or any portion thereof or any interest therein is transferred or conveyed to any person or entity other than Mortgagor in any manner whatsoever, the entire Indebtedness, at the option of the Mortgagee, shall be immediately due and payable. THIS MORTGAGE is executed and delivered subject to the following covenants, conditions and agreements and Mortgagor covenants, warrants and agrees as follows: 1. PAYMENT AND PERFORMANCE. Mortgagor shall pay to Mortgagee, in accordance with the terms of the Note, the Guaranty Agreement, and this Mortgage, and any other Loan Documents, the principal and interest, and other sums therein set forth, and Mortgagor shall perform and comply with all the agreements, conditions, covenants, provisions and stipulations therein set forth and shall timely perform all of its obligations and duties as landlord under any of the Leases now or hereafter in effect. 2. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall keep and maintain all buildings and improvements now or at any time hereafter erected on the Mortgaged Property and the sidewalks and curbs abutting them, in good order, condition and state of repair, and will make or cause to be made, as and when necessary, all repairs, renewals and ra p s r` -7 V OIL 2 5 1? s r" 5 foreseen and unforeseen. Mortgagor shall abstain from and shall not permit the commission of waste in or about the Mortgaged Property; and shall not undertake or permit any demolition or structural alterations or improvements to the Mort gaged Property without the prior written consent of the Mortgagee. 3. TAXES AND OTHER CHARGES. Mortgagor shall pay when due and payable and before interest or penalties are due thereon, without any deduction, defalcation or abatement, all taxes, assessments, water and sewer rents and all other charges or claims which may be assessed, levied, or filed at any time against the Mortgaged Property or any part thereof or against the respective interests of Mortgagor and Mortgagee therein, or which by any present or future law may have priority over the Indebtedness either in lien or in distribution out of the proceeds of any judicial sale-, and provided, that if after giving written notice to Mortgagee of its intended action and upon furnishing to Mortgagee such security or bond as Mortgagee shall require, Mortgagor shall contest in good faith and by appropriate legal action the validity of any such item, or the amount thereof, then Mortgagor shall not be required to pay the item so long as the contest operates to prevent collection, sale, forfeiture, or any other loss or damage to the Mortgaged Property or Mortgagor, is maintained and prosecuted with diligence, and shall not have been terminated or discontinued adversely to Mortgagor. All costs and expenses incidental to such contest shall be paid by Mortgagor and in the event of a ruling or adjudication adverse to Mortgagor, Mortgagor shall promptly pay such taxes, assessments, water and sewer rents, charges or claims. Mortgagor shall indemnify and save harmless the Mortgagee and the Mortgaged Property from any loss or damage arising from such contest. 4. INSURANCE. The Mortgagor shall keep or require any lessee to keep all buildings and improvements now or hereafter erected upon the Mortgaged Property continuously insured for the benefit of the Mortgagee, against all loss or damage by fire, with extended coverage and against all other hazards, under a comprehensive all-risk building insurance policy, with boiler and machinery coverage and comprehensive all-risk personal property insurance, in an amount not less than the full insurable value of the Mortgaged Property with extended coverage. The policies carried shall contain the "replacement cost endorsement." The policy shall not provide for more than a $10,000.00 deductible from the loss payable for any casualty. Insurable value shall be determined, upon request of the Mortgagee, not more than once annually and by an appraiser or rating bureau satisfactory to the Mortgagee. The Mortgagee shall be listed as a Mortgagee and as loss payee on all policies required by this Mortgage in a standard Mortgagee clause in favor of Mortgagee. Mortgagor shall also maintain general liability coverage (in an amount satisfactory to Mortgagee but not less than $1,000,000.00 property damage and $3,000,000.00 bodily injury to any one person and $3,000,000.00 bodily injury, per occurrence). In addition, the aforesaid policy shall have attached as a rider thereto, or the Mortgagor shall provide or cause to be provided by separate policy, coverage against loss or damage by vandalism and malicious mischief. s ; ?k ', ar?,i J3 6 During the period of any nonst +y' reGonstniainn or repair en, .-ef-imprevemettts tothe ---- Mortgaged Property, the Mortgagor or the Mortgagor's contractor on behalf of the Mortgagor shall maintain builder's risk insurance in an amount satisfactory to the Mortgagee, but in no event less than 100% of the costs of construction, against all risks of physical loss. A minimum amount of $1,000,000.00 property damage and $3,000,000.00 bodily injury to any one person and $3,000,000.00 bodily injury, per occurrence, shall be maintained by or on behalf of the Mortgagor's contractors. Mortgagor shall require its contractor to maintain workers' compensation insurance. Deductibles on the builder's risk insurance shall not exceed $100,000.00. Mortgagor shall maintain business interruption insurance providing coverage in such amount as is reasonably satisfactory to Mortgagee but in any event in an amount at least equal to the sum of the annual payments due under the Note and the annual payments for real estate taxes, insurance premiums and other ongoing expenses related to the Mortgaged Property. Mortgagor shall maintain workers' compensation insurance (including employer's liability insurance, if requested by Mortgagee) for all employees of Mortgagor engaged on or with respect to the Mortgaged Property, in such amount as is reasonably satisfactory to Mortgagee, or if such limits are established by law, in such amounts. The Mortgagee shall receive originals of all of said policies upon the execution of this Mortgage and upon each renewal, expansion, substitution or modification thereof, together with a current Accord Evidence of Property Insurance Certificate. Any modification of such insurance policy must be approved by the Mortgagee in writing prior to the effective date of such modification. All policies shall provide that the Mortgagee may settle all claims under all such policies and may demand, receive and receipt for all monies becoming payable thereunder. The proceeds under any policy shall be paid by the insurer to the Mortgagee as the Mortgagee's interest may appear. All of such policies shall contain provision for notice to the Mortgagee not less than thirty (30) days in advance of any cancellation of such policy, shall not be subject to contribution, and shall be for a term of at least one year at the time of execution of this Mortgage. If the insurance, or any part thereof, shall expire, or be canceled, or become void or voidable by reason of breach of any condition thereof, or if Mortgagee determines that such coverage is unsatisfactory by reason of the failure or impainnent of the capital of any company in which the insurance may then be carried, Mortgagor shall place new insurance on the Mortgaged Property, satisfactory to Mortgagee. Not less than thirty (30) days prior to the expiration of any coverage required by the Mortgage, Mortgagor shall deliver to Mortgagee a duplicate policy or certificate evidencing the renewal of such coverage and the payment of all premiums. The Mortgagor shall also secure such certificates from public officials as are available for the purpose or otherwise demonstrate to the satisfaction of the Mortgagee that the Mortgaged Property is not located within an area identified by the Federal Emergency Management Agency as having "special flood hazards," as such term is used in the National Flood Insurance Act of 'Ke '? 7 14-:)8, as amended and _suppiemp-nted by The- Flood Disaster Protection - Act of 19731-and in regulations, interpretations and rulings thereunder or in a zoned flood plain or flood hazard area as determined by local findings, determinations, ordinances, regulations or rulings, and if located therein, the Mortgagor shall secure the amount of flood insurance required by the Mortgagee in its discretion and demonstrate payment of all premiums due therefor. All insurance policies described in this Section 4 shall be written by insurance companies licensed to do business within the Commonwealth of Pennsylvania and shall be in form satisfactory to the Mortgagee, shall be issued by companies satisfactory to Mortgagee, and shall be maintained in full force and effect. 5. CASUALTY TO MORTGAGED PROPERTY. The Mortgagor shall promptly give written notice of any casualty affecting the value of the Mortgaged Property to the Mortgagee. Mortgagee may make proof of loss if not promptly done by Mortgagor. Any adjustment of a proof of loss shall require written consent of Mortgagee. The proceeds of all insurance on the Mortgaged Property shall be applied as follows: A. The Mortgagee may, at its option, apply proceeds of such insurance to prepayment of the amounts due under the Note, the Guaranty Agreement, this Mortgage, or any additional Loan Documents (any excess proceeds to be paid to Mortgagor); or B. If the Mortgagee does not exercise the option in subparagraph A. above, then: (1) The Mortgagor may, if the Mortgaged Property is partially or totally destroyed by fire, flood, windstorm or other casualty so as to render the Mortgaged Property unsuitable for Mortgagor's continued use, have the option of not replacing, restoring or repairing the damaged Mortgaged Property, but in lieu of such replacement, restoration or repair, and provided that the insurance proceeds together with any required funds of Mortgagor will prepay any remaining amounts secured hereby in full, Mortgagor may apply the full proceeds of such insurance on the Mortgaged Property toward the prepayment of the amounts secured hereby (any excess proceeds to be paid to Mortgagor); provided that the insurance proceeds, together with any required funds of Mortgagor, will prepay any remaining amounts secured hereby in full; or (2) If the Mortgagor does not elect to prepay the amounts secured hereby in full, the proceeds of all such insurance shall be held by the Mortgagee in a separate insurance loss account until such time as Mortgagor shall have delivered to Mortgagee for its approval and to its satisfaction, sufficient plans, specifications, and contracts containing a detailed breakdown of the costs to replace, restore or repair the damaged Mortgaged Property. Thereafter, the Mortgagee will, upon delivery to it of a certificate of the Mortgagor setting forth the costs theretofore incurred or paid, subject to Mortgagee inspection and acceptance of the replacement, restoration, or repair of the damaged Mortgaged Property, apply so much as may be necessary of restoration or repair. If said proceeds are not sufficient to pay in full the costs of such replacement, restoration or repair, the Mortgagor will nonetheless complete or cause to be completed the work thereof and will pay such excess cost prior to requesting Mortgagee to apply any of the proceeds of such insurance to the cost of such replacement, restoration or repair. Any balance of said proceeds of insurance remaining after the payment of all costs of such replacement, restoration or repair shall be applied toward the prepayment of the amounts secured hereby. If said amounts shall have been paid in full, any further balance of said proceeds of insurance shall be paid to the Mortgagor; provided, however, that if the Mortgagor does not elect to prepay the amounts secured hereby in full, there shall be no diminution in or postponement of future installments payable under the Note or hereunder until payment thereof in full, and the Mortgagor shall proceed promptly to replace, restore or repair the Mortgaged Property damaged or destroyed or cause said work to be done. All policies of insurance contemplated by this Mortgage, and all renewals thereof, are hereby assigned to Mortgagee as additional security for payment of the Indebtedness and Mortgagor hereby agrees that, if an Event of Default hereunder shall have occurred and be continuing, any amounts available thereunder upon cancellation or termination of any of such policies or renewals, whether in the form of return of premiums or otherwise, shall be payable to Mortgagee as assignee thereof. If Mortgagee becomes the owner of or obtains an interest in the Mortgaged Property, or any part thereof, by foreclosure or otherwise, such policies, including all right, title and interest of Mortgagor hereunder, shall become the absolute property of Mortgagee. 6. CONDEMNATION. Mortgagor hereby assigns, transfers and sets over to Mortgagee the entire proceeds of any award or claim for damage for any of the Mortgaged Property taken or damaged under the power of eminent domain or by condemnation. The proceeds of the award shall be applied in reduction of the Indebtedness unless Mortgagee elects to require Mortgagor to restore or rebuild, in which event the proceeds shall be held by Mortgagee and used to reimburse Mortgagor for the cost of restoring and rebuilding all Improvements in accordance with plans and specifications to be submitted to and approved by Mortgagee. In the event Mortgagee holds the proceeds to reimburse Mortgagor for the costs of rebuilding and restoring the premises, then the proceeds of the award shall be paid out in the same manner, and under the same terms and conditions, as provided in Section 5.13(2) hereof for the payment of insurance proceeds in reimbursement of the costs of rebuilding and restoration. If the amount of such award is insufficient to cover the cost of rebuilding and restoration, Mortgagor shall pay such cost in excess of the award before being entitled to reimbursement out of the award. Any surplus which may remain out of said award after payment of such costs of rebuilding and restoration shall, at the option of Mortgagee, be applied on account of the Indebtedness or be paid to any other party entitled thereto. 9 7. USE; COMPLIANCE IKITH LAI?VS. A. Mortgagor shall comply, and shall cause each lessee under the Leases or other user of the Mortgaged Property to comply, with all laws, ordinances, regulations and orders of all federal, state, municipal and other governmental authorities having jurisdiction of the Mortgaged Property- and the use made thereof and with all orders and directions of the Board of Fire Underwriters or similar body, and with all restrictions of record pertaining to the Mortgaged Property, improvements thereon and the use thereof. B. Without the prior written consent of Mortgagee, Mortgagor shall not (1) make, permit, or suffer any change to be made in the general nature of the occupancy of the Mortgaged Property; (2) initiate or acquiesce in any reclassification of the Mortgaged Property under any applicable zoning or similar laws, ordinances and regulations; or (3) make, permit or suffer any use of the Mortgaged Property that could with the passage of time result in the creation of any right of user, or any claim of adverse possession or easement on, to or against any part of the Mortgaged Property in favor of any person or the public. 8. OTHER LIENS, TRANSFERS. Without the prior written consent of Mortgagee, Mortgagor will not: A. Create, permit or suffer to exist any lien or security interest in the Mortgaged Property or any part or element thereof, or interest therein, except other liens in favor of Mortgagee. B. Sell, contract to sell, convey, alienate or transfer in any manner whatever the Mortgaged Property or any part thereof or any interest therein, whether legal or equitable, or lease, agree to lease, option or agree to option, the Mortgaged Property or any part thereof or any interest therein, whether legal or equitable, without first obtaining the written consent of the Mortgagee, which consent Mortgagee reserves the right to refuse; or be divested of title, or any interest therein, whether legal or equitable, in any manner or way, whether voluntary or involuntary. 9. INSPECTION. Mortgagee and any person authorized by Mortgagee shall have the right at any time, upon reasonable notice to Mortgagor, to enter the Mortgaged Property at any reasonable hour to inspect and photograph its condition and state of repair. 10. DECLARATION OF NO SET-OFF. Within 10 days after requested to do so by Mortgagee by notice to Mortgagor, Mortgagor shall certify to Mortgagee or to any proposed assignee of this Mortgage, in a writing duly acknowledged, the amount of principal, interest and other charges then owing on the Indebtedness and any other indebtedness secured by prior liens, if any, and whether there are any set-offs or defenses against them. p. P, . _ f 7"-. f „"n 1 au ?. A. This Mortgage is both a real property Mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Mortgaged Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor, by executing and delivering this Mortgage grants to Mortgagee, as security for the Indebtedness, a security interest in the Collateral. Mortgagor hereby authorizes Mortgagee to file financing statements in order to create, perfect, preserve and continue the security interest(s) herein granted. This Mortgage shall also be effective as a financing statement filed as "fixture filing" for the purposes of the Uniform Commercial Code, shall cover all items of the Mortgaged Property that are or are to become fixtures, and is to be filed for record in the Recorder's Office. This Mortgage shall also be effective as a financing statement covering any other of the Mortgaged Property and may be filed in the appropriate filing or recording office. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section 11. The addresses of the Debtor and Secured Party are as set forth at the beginning of this Mortgage. The record owner of the Property is: Thomas H. McElwee, Jr. and Becky S. McElwee. Information concerning the security interest(s) herein granted may be obtained from Mortgagee upon request. If an Event of Default shall occur, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Mortgaged Property or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation of the Mortgaged Property. Upon request or demand of Mortgagee, Mortgagor shall at its expense assemble the Mortgaged Property and make it available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses, including legal expenses and attorneys' fees and disbursements, incurred or paid by Mortgagee in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Mortgaged Property. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Mortgaged Property sent to Mortgagor in accordance with the provisions hereof at least five business days prior to such sale, disposition or auction shall constitute reasonable notice to Mortgagor. The proceeds of any disposition of the Mortgaged Property, or any part thereof, may be applied by Mortgagee to the payment of the Indebtedness in such priority and proportions as Mortgagee in its discretion shall deem proper. Mortgagor shall notify Mortgagee of any change in name or identity of Mortgagor or any change in location of the Mortgaged Property and shall promptly execute, file and record, at its sole cost and expense, such Uniform Commercial Code forms as are necessary to maintain the priority of the lien of Mortgagee upon and security interest in the 7 8 1--- additional Uniform Commercial Code forms or continuation statements as Mortgagee shall deem necessary and shall pay all expenses and fees in connection with the filing and recording thereof, provided that no such additional documents shall increase the obligations of Mortgagor under the Note or this Mortgage. Mortgagor hereby grants to Mortgagee an irrevocable power of attorney, coupled with an interest, to file with the appropriate public office on its behalf any financing or other statements signed only by Mortgagee, as secured party, in connection with the Collateral. B. That portion of the Mortgaged Property consisting of personal property and equipment shall be owned by Mortgagor and shall not be the subject matter of any lease or other transaction whereby the ownership or any beneficial interest in any of such property is held by any person or entity other than Mortgagor nor shall Mortgagor create or suffer to be created any security interest covering any such property as it may from time to time be replaced, other than the security interest created herein. 12. RIGHT TO REMEDY DEFAULTS. In case of any default by Mortgagor, Mortgagee may, but need not, make any payment or perform any act herein required, in any form and manner deemed expedient and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sale or forfeiture affecting the Mortgaged Property, or contest any tax or assessment. All moneys paid for any of the purposes herein authorized and all expenses paid or incurred in connection therewith, including attorney's fees and any other money advanced by Mortgagee to protect the Mortgaged Property and the lien hereof, shall be so much additional Indebtedness and shall become immediately due and payable without notice and with interest thereon at the applicable rate provided in the Note from the date of expenditure or advance until paid. No inaction on the part of Mortgagee shall be considered as a waiver of any right accruing to it on account of any default on the part of Mortgagor. 13. REMEDIES FOR DEFAULT. Upon the occurrence of an Event of Default and in addition to any and all other rights and remedies Mortgagee may have: A. The entire unpaid balance of the indebtedness and all other sums secured by this Mortgage shall become immediately due and payable, at the option of Mortgagee, without notice or demand. B. For the purpose of obtaining possession of the Mortgaged Property-upon the occurrence of any event which would constitute an event of default hereunder, Mortgagor hereby authorizes and empowers any attorney of any court of record in the Commonwealth of Pennsylvania or elsewhere, as attorney for Mortgagor and all persons claiming under or through Mortgagor, to sign an agreement for entering in any competent court an amicable action or actions in ejectment for possession of the Mortgaged Property and to appear for and confess judgment against Mortgagor, and against all persons claiming under or through Mortgagor, in favor of Mortgagee, for recovery by Mortgagee of possession ?, 12 'u? fi s ?? :a dr 3 sufficient warrant; and thereupon a writ of possession may immediately issue for possession of the Mortgaged Property, without any prior writ or proceeding whatsoever and without any stay of execution. If for any reason after such action has been commenced it shall be discontinued; or possession of the Mortgaged Property shall remain in or be restored to Mortgagor, Mortgagee shall have the right for the same default or any subsequent default to bring one or more further amicable actions as above provided to recover possession of the Mortgaged Property. Mortgagee may bring an amicable action in ejectment and confess judgment therein before or after the institution of proceedings to foreclose this Mortgage or to enforce the Note, or after entry of judgment therein or on the Note, or after a Sheriff's sale of the Mortgaged Property in which Mortgagee is the successful bidder, it being the understanding of the parties that the authorization to pursue such proceedings for obtaining possession and confession of judgment therein is an essential part of the remedies for enforcement of the Mortgage, the Note and the Guaranty Agreement, and shall survive any execution sale to Mortgagee. C. Mortgagee shall have the right, from time to time, to bring an appropriate action to recover any sums required to be paid by Mortgagor under the terms of this Mortgage, as they become due, without regard to whether or not any of the Indebtedness shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of mortgage foreclosure, or any other action, for any default by Mortgagor existing at the time the earlier action was commenced. D. Mortgagee may institute an action or actions of mortgage foreclosure against the Mortgaged Property, or take such other action at law or in equity for the enforcement of this Mortgage and realization on the mortgage security or any other security herein or elsewhere provided for, as the law may allow, and may proceed therein to final judgment and execution for the entire unpaid balance of the principal debt, with interest at the rate stipulated in the Note, together with all other sums due by Mortgagor in accordance with the provisions of the Note, the Guaranty Agreement or this Mortgage, including all sums which may have been loaned by Mortgagee to Mortgagor after the date of this Mortgage, and all sums which may have been advanced by Mortgagee for taxes, water or sewer rents, charges or claims, payments or prior liens, insurance or repairs to the Mortgaged Property, all costs of suit, together with interest at such rate on any judgment obtained by Mortgagee from and after the date of any Sheriffs sale until actual payment is made by the Sheriff of the full amount due Mortgagee, and a reasonable attorney's commission for collection, which attorney fee shall also be secured by this Mortgage. 14. ASSIGNMENT OF LEASES AND RENTS AFTER DEFAULT. As further security for payment of the indebtedness and performance of the obligations, covenants and agreements secured hereby, Mortgagor hereby assigns to Mortgagee all Leases, together with all rents to become due under such Leases. This assignment, however, shall be operative only in the event of the occurrence of an Event of Default hereunder, or under the Note and in any such case Mortgagor hereby confers on Mortgagee the exclusive power, to be used or not in its sole discretion, to act as agent, or to appoint a third person to act as agent for Mortgagor, with power c u F U 13 ?,?eolleet all rents b fiforn the b rents, at the option of Mortgagee, to the payment of the mortgage debt, taxes, assessments, and other expenses in such order or priority as Mortgagee may in its sole discretion determine, and to turn any balance remaining over to Mortgagor; but such collection of rents shall not operate as an affirmance of the tenant or lease in the event Mortgagor's title to the Mortgaged Property should be acquired by Mortgagee. Mortgagee shall be liable to account only for rents and profits actually received by Mortgagee. In exercising any of the powers in this paragraph contained; Mortgagee may also take possession of, and for these purposes use, any and all personal propert y contained in the Mortgaged Property and used by Mortgagor in the rental or leasing thereof or any part thereof. 15. RIGHTS AND REMEDIES CUMULATIVE. A. The rights and remedies of Mortgagee as provided in this Mortgage or the Note, or any other Loan Document shall be cumulative and concurrent, may be pursued separately, successively or together, at the sole discretion of Mortgagee, and may be exercised as often as occasion therefor shall arise. The failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. The remedies provided herein are in addition to all remedies of Mortgagee provided by law. B. Any failure by Mortgagee to insist upon strict performance by Mortgagor of any of the terms and provisions of this Mortgage, the Note, or any other Loan Documents shall not be deemed to be a waiver of any of the terms or provisions thereof, and Mortgagee shall have the right thereafter to insist upon strict performance by Mortgagor of any and all of them. C. Neither Mortgagor nor any other person now or hereafter obligated for payment of all or any part of the sums now or hereafter secured by this Mortgage shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated or the failure of Mortgagee to take action to foreclose on this Mortgage or otherwise enforce any provisions of the Mortgage, the Note, the Guaranty Agreement or any other Loan Document, or by reason of the release, regardless of consideration of all or any part of the security held for the Indebtedness. D. Mortgagee may release, regardless of consideration, any part of the security held for the Indebtedness without, as to the remainder of the security, in any way impairing or affecting the lien of this Mortgage or its priority over any subordinate lien. E. For payment of the Indebtedness, Mortgagee may resort to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect. 15. REQUIRED NOTICES. Mortgagor shall notify Mortgagee promptly of the occurrence of any of the following: gaL 5 !r'? ', '(d°q s 14 1r,ing damage tl ?m? t - b 2-r?crn.-ccrrrvcsrr? 00,000,0- Q or mora-- to the Mortgaged Property; B. Receipt of notice of condemnation of the ?Mortgaged Property; C. Receipt of notice from any governmental authority relating to the structure, use or occupancy of the Mortgaged Property; D. Receipt of any notice from any tenant of all or any portion of the Mortgaged Property; E. Substantial change in the occupancy- of the Mortgaged Property; F. Receipt of any notice from the holder of any lien or security interest in the Mortgaged Property; or G. Commencement of any litigation affecting the Mortgaged Property. 17. MORTGAGOR'S WAIVERS. Mortgagor hereby waives and releases: A. All errors, defects and imperfections in any proceeding instituted by Mortgagee under the Note, the Guaranty Agreement, this Mortgage, or any other Loan Document; B. All benefit that might accrue to Mortgagor by virtue of any present or future law exempting the Mortgaged Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment; and C. Unless specifically required herein, all notices of Mortgagor's default or of Mortgagee's election to exercise or Mortgagee's actual exercise, of any right, privilege, or remedy under the Note, the Guaranty Agreement, this Mortgage, or any other Loan Document. 18. COUNSEL FEES. If Mortgagee becomes a party to any suit or proceeding affecting the Mortgaged Property or title thereto, the lien created by this Mortgage or Mortgagee's interest therein, or if Mortgagee engages counsel to collect any of the Indebtedness or to enforce performance of the agreements, conditions, covenants, provisions or stipulations of this Mortgage, the Note or the Guaranty Agreement, or to represent Mortgagee in any bankruptcy or insolvency proceeding or reorganization, Mortgagee's costs, expenses and reasonable counsel fees, whether or not suit is instituted, shall be paid to Mortgagee by Mortgagor, on demand, with interest at the then effective rate set forth in the Note, and, until paid, they shall be deemed to be part of the Indebtedness. 15 d u -e A. Mortgagor hereby warrants and covenants that: (1) The present use of the Mortgaged Property is, and any currently contemplated future use of the Mortgaged Property will be in compliance with all applicable Environmental Laws and Regulations and no environmental liability exists on or in connection with the Mortgaged Property; (2) After inquiry and investigation by Mortgagor, conducted with due diligence, there are no Hazardous Substances located on the Mortgaged Property (except as disclosed in writing to Mortgagee and acknowledged, in writing, by Mortgagee as acceptable, and any such Hazardous Substances have been properly transported, stored or disposed of at other locations): (3) Mortgagor has all permits or authorizations under Environmental Laws and Regulations necessary to carry on its business, has filed all notifications and plans and has such information and plans available as required under Environmental Laws and Regulations, and is in compliance with all applicable Environmental Laws and Regulations, including but not limited to deed acknowledgment required by the Pennsylvania Solid Waste Management Act, 35 P.S. 6018.405 and the Pennsylvania Hazardous Sites Cleanup Act, 35 P.S. §6025.512(b); (4) Mortgagor is not aware of nor has Mortgagor received any claims, demands, orders, notices of violation, notices of intent to file a claim, demand, order, lawsuit, notices of deficiencies, or requests for information relating to actual or potential actions as described in subsection 19.A, any of which are based upon or refer to Environmental Laws and Regulations; (5) To the best of the information and belief of Mortgagor after a due diligence inquiry, subsections (1)'through (4) above are applicable to usage of the Mortgaged Property by predecessors in title or interest of Mortgagor and its lessees or tenants or invitees; (6) Mortgagor has received no notice and is unaware that the Mortgaged Property has been designated as a site on the National Priorities List or similar state list, or has been or is the subject of any removal or response action, private or governmental, under the Comprehensive Environmental Response, Compensation or Liability Act, as amended, or the Pennsylvania Hazardous Sites Cleanup Act or any similar state or federal law, and that no requests have been received to provide information or participate in any study, remedial design or response action under such laws; 16 r Ivi-ortgagor will exercise due care with respeet tO ant es ifl,el ding ---- but not limited to Hazardous Substances, which may be located on, disposed of, or placed on the Mortgaged Property; (8) Mortgagor will take reasonable precautions against the foreseeable acts or omissions of any third party in the location, disposal or placement of Hazardous Substances on the Mortgaged Property and the environmental consequences that could foreseeably result from such acts or omissions; (9) Mortgagor shall, and shall use its best efforts to cause each employee, agent or contractor to, use its or their best efforts to comply in all material respects with any applicable Environmental Laws and Regulations; provided, however, that this provision shall not prevent the Mortgagor from contesting, in good faith and with reasonable diligence, the validity or application of such laws by appropriate proceedings; (10) Mortgagor has not, by act or omission, caused or contributed to the release or threatened release of any Hazardous Substance on the Mortgaged Property; and (11) Mortgagor shall immediately notify Mortgagee and its successors in interest of any act or omission that could give rise to liability under any Environmental Laws and Regulations, as soon as it occurs, including, but not limited to, any of the events referred to in this subsection 19.A of this Mortgage. B. Conditioned upon notice from a governmental agency of a violation of Environmental Laws and Regulations or upon Mortgagee's reasonable suspicion of such violation or upon default and prior to the institution of foreclosure proceedings by Mortgagee, Mortgagor hereby grants to Mortgagee the right to require an environmental audit to be conducted at the expense of Mortgagor, including but not limited to such physical testing as may be reasonably concluded to be necessary to determine compliance with applicable Environmental Laws and Regulations. The exercise of this right shall be limited to a single completed audit unless one of the events in this paragraph has occurred and in which event Mortgagee's right to environmental testing shall only be limited by the reasonable necessity of Mortgagee to have a complete evaluation of the Mortgaged Property. Mortgagor warrants that it has produced or offered to produce for inspection copies or summaries of all oral or written reports or correspondence prepared by any person and relating to any of the matters described in this Section 19 heretofore prepared for Mortgagor or in its possession, including any audits, inspection reports, samples or data relating to any such report or investigations. C. Mortgagor covenants that it shall not construe this Mortgage or take any action which may cause the Mortgagee to be considered a generator of Hazardous Substances, an owner, an operator or a person in control of any facility or part of any business of the Mortgagor. F i w'?± 17 --- iees to def?nd, in'- hold harmless Mortgagee, its directors, officers, employees, agents, contractors, subcontractors, licensees, invitees, successors and assigns from and against any and all claims, demands, judgments, damages, actions, causes of action, injuries, administrative orders, consent agreements and orders, liabilities, penalties, costs, and expenses of any kind whatsoever including but not limited to claims arising out of environmental hazards, loss of life, injury to persons, property, or business, and/or damage to natural resources in connection with the activities of Mortgagor or its predecessors or successors in interest, lessees, invitees, or third parties who have trespassed on the Mortgaged Property, or any of them, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of Mortgagor which (1) arise out of the actual, alleged or threatened manufacture, discharge, dispersal, release, storage, accumulation, control, processing, spilling, leaking, emitting, transportation, treatment, generation, disposal, handling, or escape of Hazardous Substances, or (2) actually or allegedly arise out of the use, specification or inclusion of any product, material or process containing chemicals or Hazardous Substances, the failure to detect the existence or proportion of chemicals or Hazardous Substances in the soil, air, surface water or groundwater, or the performance or failure to perform the abatement of any pollution source or the replacement or removal of any object, soil, water, surface water or groundwater containing chemicals or Hazardous Substances. The Mortgagor, its successors and assigns, shall bear, pay and discharge when and as the same become due and payable, any and all such judgments or claims for contribution, indemnification, damages, penalties and attorneys, consulting and experts fees or otherwise against Mortgagee, shall hold Mortgagee harmless for such judgments or claims, and shall assume the burden and expense of defending all suits, administrative proceedings and negotiations of any description with any and all persons, entities, political subdivisions or government agencies arising out of any of the occurrences set forth herein. 20. NOTICES. All necessary notices, demands and requests shall be deemed duly given if and when (A) delivered personally, (B) transmitted by facsimile, confirmed by telephone and transmission report, together with same-day mailing by first class mail, postage prepaid, or (C) sent by a nationally recognized express courier service, postage or delivery charges prepaid, addressed as follows: To Mortgagee: Scarff Bros., Inc. 2300 Fallston Road Fallston, MD 21047 To Mortgagor: Thomas H. McElwee, Jr. Becky S. McElwee 250 Jumper Road Newburg, PA 17240 "I i. OPEN-END -- A. NOTICE OF JUNIOR LIEN. If (1) this Mortgage secures a line of credit or other facility pursuant to which advances are made from time to time by Mortgagee to Mortgagor, and (2) Mortgagee receives written notice pursuant to Section 8143(b) of the Open-End Mortgage Statute from a holder of a lien or encumbrance on the Mortgaged Property which is subordinate to the lien of the Mortgage, then and notwithstanding any provision to the contrary contained in the Note, the Guaranty Agreement, this Mortgage or any other Loan Document, Mortgagor agrees that Mortgagee shall not be responsible to make any further advances to Mortgagor (and Mortgagee is released from all liability for failure to make such advances) if Mortgagee determines in its sole discretion that any such advance requested by Mortgagor could be construed to be an unobligated advance under Section 8143(b) of the Open-End Mortgage Statute. B. NOTICE OF MECHANIC'S LIEN. If (1) this Mortgage secures a loan facility the proceeds of which are used to provide funds to pay toward all or part of the cost of completing any erection, construction, alteration or repair of any part of the Mortgaged Property, and (2) Mortgagee receives written notice pursuant to Section 8143(b) of the Open-End Mortgage Statute from a holder of a mechanic's lien for labor performed or to be performed or materials furnished or to be furnished for the erection, construction, alteration or repair or any part of the Mortgaged Property, then and notwithstanding any provision to the contrary contained in the Note, the Guaranty, this Mortgage, or any other Loan Documents, Mortgagor agrees that Mortgagee shall have the right to suspend (until such time as the lien is fully released) any further advances to Mortgagor (and Mortgagee is released from all liability for failure to make such advances) except advances which Mortgagee determines in its sole discretion are for the purpose of paying toward all or part of the cost of completing any erection, construction, and alteration or repair of any part of the Mortgaged Property the financing of which, in whole or in part, this Mortgage was given to secure. C. NOTICE OF LIMITATION OF INDEBTEDNESS. If Mortgagor should at any time elect to limit the liabilities secured by this Mortgage pursuant to Section 8143(c) of the Open-End Mortgage Statute, Mortgagor agrees that notice of such election shall (1) not be effective unless and until it is served upon Mortgagee in accordance with the requirements of Section 8143(d) of the Open-End Mortgage Statute and fully complies with the requirements for the giving of notices under this Mortgage; (2) release Mortgagee from all obligation to make any further advances under the Note notwithstanding anything to the contrary contained in such notice or the Note, or any other Loan Documents; (3) constitute, at the election of Mortgagee, an Event of Default under the Note or Guaranty Agreement; and (iv) not be effective to limit Mortgagor's liability for payment and performance of all liabilities for which Mortgagor is responsible under this Mortgage or the Note, or any other Loan Documents (including, without limitation, all reimbursement and indemnification agreements) whether such liabilities arise prior or subsequent to the date of such notice. :-1 1 fzaL z E'a 19 _ efa> referenee ei-Ay and de net - - constitute a part of this Mortgage. 23. APPLICABLE LAW. This Mortgage shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania. The parties have participated jointly in the negotiation and drafting of this Mortgage. In the event an ambiguity or question of intent or interpretation arises, this Mortgage shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any parry by virtue of the authorship of any of the provisions of this Mortgage. IN WITNESS WHEREOF, and intending to be legally bound hereby, Mortgagor has caused this instrument to be executed and sealed the day and year first above written. "MORTGAGOR" WITNESS: ADH:slb 4364060.1 (13106.014) 1 U ` y Thomas H. McElwee, Jr. F Becky S. McElwee 20 SS: COUNTY OF LANCASTER ) On this I I'h day of March, 2005, before me, the undersigned officer, personally appeared THOMAS H. McELWEE, JR. and BECKY S. McELWEE, known to me to be the persons whose names are subscribed to the within instrument, and that said persons acknowledged that they executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. COMMONWEALTH OF PENNSYLVANIA Notarial Seal Judy Ann Poglitsch, Notary Public City of Lancaster, Lancaster County My Commission Expires Oct. 14, 2008 Member, Pennsylvania Association of Notaries PROPERTY ALL THE FOT LOWING two tracts of described real estate, together aitL tl:e improvements thereon erected, `t °' l' being s iuute in *? the Tow ^ , sh >p of 0--, "ford, Franldm County, 1enn ? ?sylvaT,i bounded and lirm" _ - ng ana as follows: Tract No. 1 BEGINNING at an iron pin in the Chambersburg-Waynesboro Highway at corner of lands now or formerly of William Lowry and Mrs. Claude Wingerd; thence through said highway along lands of the latter, South 10 degrees 00 minutes West, 37.60 perches to an iron pin; thence through said highway along lands of the same, South 13 degrees 30 minutes West, 33.48 perches to a post in said highway at the east side of the Western Maryland Railroad right of way; thence with the East side of said right of way parallel to and 50.00 feet distance from the center of said Railroad, North 26 degrees 00 minutes West, 17.11 perches to a point on the East side of said Railroad; thence by the same, parallel to and 50.00 feet distance from the center line of said Railroad measured at right angles thereto, in a northwestwardly direction by a curve to right of 11,507.20 feet, radius 20.97 perches to a point on the east side of said right of way at lands now or formerly of W. H. and Harry A. Smith Estate; thence by said lands North 40.5 degrees East 27.60 perches to a stone; thence along lands now or formerly of William Lowry North 40 degrees 22 minutes East, 19.80 perches to the iron pin in said highway, the place of BEGINNING. CONTAINING 5 acres and 133.00 perches, more or less, as shown per draft of John H. Atherton, C. S. for David Elliot and James M. Heckman dated February 19, 1942. Tract No. 2 BEGINNING at a point on the West side of the Western Maryland Railroad right of way, 50.00 feet distance from the center line of said Railroad, measured at right angles thereto at corner of lands now or formerly of Freedman and Smootkins; thence by the latter North 86 degrees 00 minutes West, 21.80 perches to a point; thence by the same, North 20.5 degrees East, 24.85 perches to a white oak; thence along the West side of said right of way parallel to and 50 feet distance from the center line of said Railroad measured at right angles thereto by a curve to the right of 11,509.20 feet, radius 18.83 perches to a point; thence by the same South 26 degrees 00 minutes East, 10.70 perches to the place of BEGINNING CONTAINL'?1G 1.00 acre and 105.00 perches, more or less, neat measure, as shown by draft of John H. Atherton, C. S. for David M. Elliot and James M. Heckman dated February 19, 1942. BEING numbered and known as 2807 Wayne Road. BEING THE SAME PREMISES which Victor W. Wheelock, joined by his wife, Patricia A. Wheelock, by deed dated January 31, 2003 and recorded January 31, 2003 in the Franklin County Recorder of Deeds Office in Volume 2052, Page 279, granted and conveyed unto Thomas H. McElwee, Jr. and Becky S. McElwee, his wife. 0 EXHIBIT F 00425610.1 HARTMAN UNDERHILL & BRUBAKER LLP ATTORNEYS AT LAW ANDREW F. LUCARELLI WILLIAM C. McCARTY ALEXANDER HENDERSON,IE ROBERT M. FRANKHOUSER, JR. THOMAS W. BERGEN MICHAEL W. BABIC MARK STANLEY MARK E. LOVETT KEVIN M. FRENCH JOSHUA D. COHEN KIM R. SMITH STACEY L. MORGAN RORYO.CONNAUGHTON JEFFREY C. GOSS JOHN A. MATEYAK THEODORE L. BRUBAKER ROBERT W. PONTZ BRETT D. JACKSON JEFFREY P. OUELLET WILLIAM J. ZEE, III JOHN J. HERMAN DANA C. PANAGOPOULOS MICHELLE L. GROLEAU 221 EAST CHESTNUT STREET LANCASTER, PENNSYLVANIA 17602-2782 (717) 299-7254 FAX (717) 299-3160 Web Site: www.hublaw.com March 25, 2009 COUNSEL CHRISTOPHER S. UNDERHILL MARK L. JAMES JOHN I. HARTMAN. JR. (1919-2000) THEODORE L. BRUBAKER (1911-2002) GEORGE T. BRUBAKER (1942-2006) HARRY ST. C. GARMAN (1945-2006) Sent Via Facsimile (717)263-0279 and First Class Mail J. McDowell Sharpe, Esquire Sharpe & Sharpe, LLP 257 Lincoln Way East Chambersburg, PA 17201-2294 Re: McElwee / Scarff Bros, Inc. Dear Jack: This letter is in response to yours of March 16, 2009. Mr. Scarff has no interest in selling the Scarff Bros. Note (the Third Amended and Restated Revolving Variable Rate Note dated as of March 11, 2005, hereinafter referred to as the "Note) at a discount to $364,000. If Mr. McElwee's investor has genuine interest in acquiring Mr. Scarff's position, Mr. Scarff is willing to consider a serious offer-- but only a serious offer. You correctly observe that the initial interest rate on the Note is Wall Street Journal Prime plus 2%. It is possible that WSJ Prime plus 2% has been lower than the rate Scarff Bros. has been billing Mr. McElwee for some period of months. As indicated during our meeting, Scarff Bros. has been basing the rate (in recent months) on that which his lender has been charging him. But the point overlooked in all of this is that Mr. McElwee has been in default under the terms of the Note since at least March 15, 2008. Between February 1, 2008 and May 31, 2008, Mr. McElwee failed to make his contractual monthly interest payments, constituting an "Event of Default" under the terms of the Note. Other "Events of Default" by Mr. McElwee include, without limitation, Mr. McDowell Sharpe, Esquire "arch 25, 2009 Page 2 McEwlee's failure to pay real estate taxes on the various mortgaged premises on a timely basis (resulting in liens that impair Scarff Bros.' position) and allowing a federal tax lien to be entered against him. By virtue of these "Events of Default," Scarff Bros. is entitled under the terms of the Note to charge interest at the "Default Rate", which is five percent (5%) above the contract rate. Scarff Bros. has not been billing Mr. McElwee at the "Default Rate" to date, but since Mr. McElwee insists on standing on the terms of the loan documents, Scarff Bros. will make the appropriate adjustment and reflect the same on future monthly interest statements addressed to Mr. McElwee. In addition, Scarff Bros. will be billing Mr. McElwee for the five percent (5%) late charge on each missed payment provided under the terms of the Note. After receiving your March 16 letter, Mr. Scarff called AgChoice to discuss Mr. McElwee's proposals. Mr. Scarff spoke with Don Herring and Crystal Standish, who advised, in no uncertain terms, that: (a) The payoff on AgChoice's loan secured by the Wayne Avenue property is approximately $155,000, as confirmed by Ms. Standish during our recent meeting, not the $125,000 represented in your March 16 letter; and (b) AgChoice requires 100% of the sale proceeds of the building lots until Mr. McElwee's remaining loan balance is paid in full and will not "share" proceeds with Scarff Bros. in the interim, as Mr. McElwee suggests. In view of AgChoice's positions set forth above, an auction of the Wayne Avenue property alone, even if bidding would go as high as $450,000, will not substantially reduce Mr. McElwee's loan obligation to Scarff Bros. in the short term. Under no circumstances will Scarff Bros, accept a 20-year amortization of any part of the loan balance. Unless and until Mr. McElwee obtains considerable refinancing, either from AgChoice or from another lender or investor, or commits to sell one or both farms, Mr. Scarff sees little point in discussing the situation further. Accordingly, this letter will constitute DEMAND by Scarff Bros. for payment in full of Mr. McElwee's loan balance as follows: Principal Balance $710,467.70 Accrued Interest 56,304.52 Late Charges 1,271.37 Attorneys' Fees 2,500.00 TOTAL $770,543.59 J. McDowell Sharpe, Esquire 'March 25. 2009 Page 31 Interest will continue to accrue on the unpaid principal balance at the "Default Rate" under the tenns of the Note. The current "Default Rate" of interest is 10.25% per annum. The interest per diem is $202.29. All costs and expenses of collection, including attorneys' fees, will be added to the loan balance until paid in full. Please advise Mr. McElwee that if Scarff Bros. does not receive the requested payment in full on or before 4:00 p.m. on April 6, 2009, Scarff Bros. will not hesitate to exercise its legal rights with respect to the McElwee loan obligations and the collateral for such obligations, including, without limitation, its right confess judgment, and by foreclosure or otherwise, execute against the real and personal property collateral for the loan in such order as it may determine. Mr. McElwee's immediate response is essential if such steps are to be avoided. Until payment of the entire loan balance is received, Scarff Bros. will not hesitate to exercise all of its rights with respect to the loan and its collateral for the loan by all available legal means, in accordance with the terms of the loan documents, all without further notice. Receipt and acceptance of partial payments by Scarff Bros., if any are tendered, shall not constitute a waiver of Scarff Bros.' rights under the loan documents. Nor shall the receipt and acceptance of partial payments require Scarff Bros. to forbear from exercising any right or remedy available to it. Please do not hesitate to call me if it would be helpful to discuss these matters in more detail. Until then, Mr. McElwee should govern himself as set forth above. Very truly your pp?i Robert W. Pontz RWP/ald/00539961.DOC;1 cc: C. Howard Scarff, Pres. Scarff Bros, Inc. r . k VERIFICATION I hereby verify that I am President.of Scarff Bros., Inc.; that as such corporate officer I am authorized to make this verification; and that the information set forth in the foregoing Complaint is true and correct to the best of my knowledge, information and belief. I understand that any false statements contained herein are subject to the penalties of 18 Pa.C.S. § 4904, relating to unsworn falsification to authorities. Dated: C. Howard Scarff, President Scarff Bros., Inc. 00550646.1 OF THE FROM ON TARP 2OD9 JUN -8 PM 2: 41 ? Ih?rrs.;. ?. ?1?? rl Sheriffs Office of Cumberland County R Thomas Kline ?4?,,?tr st ??;+??rrf??? Edward L Schorpp Sheri Solicitor Ronny R Anderson Jody S Smith Chief Deputy oFFicE OF THE $46RIFF Civil Process Sergeant SHERIFF'S RETURN OF SERVICE 06/10/2009 02:12 PM - William Cline, Deputy Sheriff, who being duly sworn according to law, states that on June 10, 2009 at 1412 hours, he served a true copy of the within Complaint and Notice, upon the within named defendant, to wit: Thomas H. McElwee Jr., by making known unto himself personally, defendant at 250 Jumper Road Newburg, Cumberland County, Pennsylvania 17240 its contents and at the' same time handing to him personally the said true and correct copy of the same. 06/10/2009 02:12 PM - William Cline, Deputy Sheriff, who being duly sworn according to law, states that on June 10, 2009 at 1412 hours, he served a true copy of the within Complaint and Notice, upon the within named defendant, to wit: Becky S. McElwee, by making known unto herself personally, defendant at 250 Jumper Road Newburg, Cumberland County, Pennsylvania 17240 its contents and at the same time handing to her personally the said true and correct copy of the same. SHERIFF COST: $62.44 SO ANSWERS, June 11, 2009 R THOMAS KLINE, SHERIFF pu y e i 2009-2402 Scarff Bros. Inc. V Thomas & Becky McElwee G r-iC 4rn r-. w ze SCARFF BROS., INC. Plaintiff V. THOMAS H. McELWEE, JR. and : BECKY S. McELWEE, : Defendants IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY PENNSYLVANIA NO. 09-2402 Civil Term CIVIL ACTION - LAW NOTICE TO PLEAD SHARPE & SHARPE, LLP ATTORNEYS AT LAW 257 Lincoln Way East ClwmbersbuT& PA 17201 (717) 263-8447 To: Scarff Brothers, Inc. c/o Robert W. Pontz, Esq. Hartman, Underhill & Brubaker, LLP 221 East Chestnut Street Lancaster, PA 17602 YOU ARE HEREBY NOTIFIED TO PLEAD TO THE ENCLOSED NEW MATTER WITHIN TWENTY (20) DAYS FROM THE SERVICE HEREOF OR A DEFAULT JUDGMENT MAY BE ENTERED AGAINST YOU. By: SHARPE & SHARPE, LLP SCARFF BROS., INC. Plaintiff V THOMAS H. McELWEE, JR. and BECKY S. McELWEE, Defendants IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY PENNSYLVANIA NO. 09-2402 Civil Term : CIVIL ACTION - LAW ANSWER AND NEW MATTER NOW COME Defendants Thomas H. McElwee, Jr. and Becky S. McElwee, by and through his counsel, Sharpe & Sharpe, LLP, and files the following answer and new matter to the complaint to conform confessed judgment: Answer 1. Admitted. Admitted. Admitted. Admitted. 2. 3. 4. 5. SHARPE & SHARPE, LLP Admitted. ATTORNEYS AT LAW 257 Lincoln Way East Chambershurg, PA 17201 6. (717) 263.8447 Admitted. 7. Admitted. 8. The averment is a conclusion of law to which no response is required. The implicit averment that there was a default under the Note at the time the judgment was confessed is denied. 9. The averment of paragraph 9 is admitted in part and denied in part. It is SHARPE & SHARPE, LLP ATTORNEYS AT LAW 257 Lincoln Way East Chambersburg, PA 17201 (717) 263.8447 admitted that plaintiff confessed judgment on April 16, 2009. It is specifically denied that the confessed judgment reflects amounts due to plaintiff inasmuch as the judgment reflects sums due for interest and costs that are not due under the Note. It is further denied that payments were not made under the Note between February 1, 2008 and May 31, 2008. To the contrary such payments were advanced under Note as plaintiff knew and approved at the time due to setbacks in defendant's farming operations caused by the actions set forth in new matter. It is denied that plaintiffs position is impaired by the non-payment of taxes inasmuch as plaintiff is in a second lien position already and defendant has been paying his real estate taxes one year late so as not to impair the collateral. It is denied that Defendant allowed federal tax liens to be entered against him. Because of the situation created by plaintiff as set forth in new matter, defendant lacked cash flow to pay his taxes but has developed a plan to pay them so as not to impair plaintiffs position. It is admitted that defendant did not pay the entire balance due under the Note upon demand inasmuch as plaintiff demanded sums not due under the Note. 10. The averment is a conclusion of law to which no response is required. 11. Admitted. 12. The averment is denied. Plaintiff overcharged defendant on the Note and failed to properly apply payments to principal as applicable and retroactively imposed a default interest rate to time periods when no default existed and imposed retroactive late charges when none had accrued or been assessed. Defendant does not have all the information necessary to calculate the precise amount due. Further, the attorney commission is unreasonable. 13. The averment is a conclusion of law to which no response is required. 14. The averment is a conclusion of law to which no response is required. WHEREFORE, defendants demand judgment in their favor with his costs. New Matter 15. Defendant obtained the loan documented by the Note for the purpose of expansion of his facilities so as to raise plaintiff's cattle in large numbers. SHARPE & SHARPE, LLP ATTORNEYS AT LAW 257 Lincoln Way East Chambersburg, PA 17201 (717) 263-8447 16. In reliance on the expectation of income from the raising of cattle for plaintiff, defendant liquidated his herd and worked full time raising plaintiffs cattle with payment based upon the head count. 17. In the first quarter of 2008, plaintiff removed all its cattle from defendant's facility so that defendant lacked income to service the Note and other obligations and living costs. 18. Plaintiffs action was without substantial cause and in bad faith and constituted a predatory lending practice in an effort to put defendant out of business. 19. Plaintiff's actions should prevent defendant from strict compliance with the terms of the Note or a reduction in the amount due as plaintiff is not a holder in due course. WHEREFORE, defendants demand judgment in their favor with his costs. SHARPE &,49HARPE SHARPE & SHARPE, LLP ATTORNEYS AT LAW 257 Lincoln Way East Chambersburg, PA 17201 (717) 263-8447 rK By J. Mc owell SI Pa. I . #37505 VERIFICATION I hereby verify that the facts set forth in the foregoing Answer are true and correct to the best of my knowledge, information and belief, and that I make this verification subject to the penalties of 18 Pa.C.S. 4904 relating to unsworn falsification to Authority, as authorized by the Judicial Code and Pennsylvania Rules of Civil Procedure. Date: Thomas H. McElwee SHARPE & SHARPE, LLP ATTORNEYS AT LAW 257 Lincoln Way East Chambersburg, PA 17201 (717) 263.8447 CERTIFICATE OF SERVICE I hereby certify that this a day of July 1$ 2009, 1 have served a copy of the foregoing instrument upon the following person(s) by forwarding the same by first class, United States mail, postage pre-paid, addressed as follows: Robert W. Pontz, Esq. Hartman, Underhill & Brubaker, LLP 221 East Chestnut Street Lancaster, PA 17602 SHARPE & SHARPE, LLP ATTORNEYS AT LAW' 257 Lincoln Way East Chambersburg, PA 17201 (717) 263.8447 L Uv J ,t,_;' A J r ;,,