COMMERCIAL SECURITY AGREEMENT
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Borrower:
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IsoRay Medical, Inc. a wholly owned
subsidiary of IsoRay, Inc. a Delaware corporation
000
Xxxxx Xx.
Xxxxx
000
Xxxxxxxx,
XX 00000
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| Lender: | Hanford Area Economic Investment Fund
Committee
0000
X. Xxxx Xxx. X000
Xxxxxxxxx,
XX 00000
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Location
of Collateral:
000
Xxxxx Xx. Xxxxxxxx, XX 00000 and 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxx, XX
00000
Grant
of Security Interest:
For
value received, and to secure both the payment of the indebtedness owed to
Lender and the performance of the obligations under this Security Agreement
and
any Related Documents, and in accordance with the definitions and terms set
forth below. Borrower grants Lender a security interest in all of the following
Collateral:
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A.
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Accounts
Receivables
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B.
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Inventory
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C.
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Equipment
& Machinery
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D.
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Assignment
of Lease
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E.
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Assignment
Life Insurance
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Borrower
agrees to insure the Collateral for at least its’
replacement value.
1.
Definitions.
1.1
Indebtedness. “Indebtedness”
shall
mean all amounts and liabilities of every kind and description, whether now
owed
or hereafter owed by Borrower to Lender, whether or not evidenced by a
promissory note or credit agreement and whether direct, indirect, or
contingent.
1.2
Related Documents. “Related
Documents”
shall
mean the promissory notes, loan agreements, guaranties, trust deeds, mortgages,
other security agreements, or any other documents executed in connection with
this Security Agreement or the Indebtedness, whether already existing, executed
now or later.
1.3
Collateral. “Collateral”
shall
mean the collateral described as:
A. “Accounts”
means
any right to payment for goods sold or leased, or to be sold or to be leased,
or
for services rendered or to be rendered no matter how evidenced, including
accounts receivable, chattel paper, contract rights, purchase orders, notes,
instruments, drafts, acceptances and other forms of obligations and
receivables.
B. “Inventory”
means
all of Borrower’s
goods,
merchandise and other personal property which are held for sale or lease
including those held for display or demonstration or out on lease or consignment
or to be furnished under a contract of service or are raw materials, work in
process or materials used or consumed, or to be used or consumed, in
Borrower’s
business, and shall include all general intangibles, proprietary rights,
patents, trademarks, copyrights, plans, drawings, diagrams, schematics, assembly
and display materials relating thereto.
C. “Equipment”
means
all of Borrower’s
equipment, including machinery and office equipment, together with all parts,
fittings, accessories, and special tools, and renewals or replacements of all
or
any part thereof; and in all work in process and finished goods, whether now
owned or hereafter acquired by borrower and wheresoever located. Including
specific equipment and machinery listed on attached Exhibit A.
D. “Assignment
of Lease”
means
that all of Borrower’s
rights,
title, and interest in a lease dated February 9, 2005 and amended by Revision
1dated May 5, 2005 and made by subsidiaries of the Parties now delineated as
signatories, is made and entered into this 1st
day of
November, 2005 between Nuvotec USA, Inc. as “Lessor”
and
IsoRay, Inc. “Lessee”.
Page 1
of 5
E. “Assignment
of Life Insurance”
means
all of Borrower’s
rights,
title, and interest in Life Insurance policies issued by Empire General Life
Assurance Corporation, or as may be modified, and issued as listed
below:
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1.
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Xxxxx
X Xxxxxx
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2.
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Xxxxx
X. Xxxxxxxx
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3.
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Xxxxxxx
X. Xxxxx
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4.
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Xxxxxxx
X. Xxxxxx
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| 2. |
Obligations
of Borrower.
Borrower
warrants and covenants:
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2.1
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Perfection
of Security Interest.
Borrower agrees to execute financing statements and to take whatever
other
action is requested by Lender to perfect and continue Lender’s
security interest in the Collateral. Upon request of Lender, Borrower
will
deliver to Lender any and all documents evidencing or constituting
the
Collateral. and Borrower will note Lender’s
interest upon any and all chattel paper. Borrower hereby appoints Lender
the Borrower’s
irrevocable attorney in fact for the purpose of executing any documents
necessary to perfect or to continue the security interest granted
herein.
Lender may at any time, and without further authorization from Borrower;
file copies of this Security Agreement as a financing statement.
Borrower
will reimburse Lender for all expenses for perfecting or continuing
this
security interest.
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2.2
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Removal
of Collateral.
Borrower warrants that the Collateral (or to the extent the Collateral
consists of intangible property such as accounts, the records concerning
the Collateral) is located at Borrower’s
address or the Collateral address shown above.
Except
in the ordinary course of its business
within the county in which the Collateral is located. Borrower shall
not
remove the Collateral from its location without the prior written
consent
of Lender, which shall not be unreasonably withheld. To the extent
the
Collateral constitutes vehicles, or other titled property, and except
for
sales of inventory in the ordinary course of its business, Borrower
shall
not take or permit any action which would require registration of
the
vehicles outside of the state in which the Lender is located, without
the
prior consent of Lender.
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2.3
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Transactions
Involving Collateral.
Except for inventory sold or accounts collected in the ordinary course
of
Borrower’s
business, Borrower shall not sell, offer to sell, or otherwise transfer
the Collateral. Borrower shall not pledge mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest,
or
charge, other than the Security interest provided for herein without
the
prior written consent of Lender. This includes security interests
even if
junior in right, to this Security Agreement. Unless waived by Lender,
all
proceeds from any disposition of the Collateral (for whatever reason)
shall be held in trust for Lender, and shall not be commingled with
any
other funds; provided, however, that this requirement shall not constitute
consent by Lender to any sale or other disposition. Borrower shall
immediately deliver any such proceeds to
lender.
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2.4
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Title.
Borrower
warrants that it holds marketable title to the Collateral subject
only to
the lien of this Security Agreement. Borrower shall defend
Lender’s
rights against the claims and demands of all
persons.
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2.5
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Use.
Borrower shall keep the Collateral in first class condition and repair.
Borrower will not commit or permit damage to or destruction of the
Collateral or any part thereof.
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2.6
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Taxes,
Assessments, and Liens.
Borrower will pay when due all taxes, assessments, and liens upon
the
collateral, its use or operation, upon this Security Agreement, upon
any
promissory notes evidencing the Indebtedness or upon any of the other
Related Documents. Borrower may withhold any such payment or may
elect to
contest any lien if Borrower is in good faith conducting appropriate
proceedings to contest the obligation to pay and so long as
Lender’s
interest in the Collateral is not jeopardized. If the Collateral
is
subjected to a lien which is not discharged within 15 days, Borrower
shall
deposit with lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in any amount adequate to provide
for the
discharge of the lien plus any interest, costs, attorneys’
fees or other charges that could accrue as a result of foreclosure
or
sale. In any contest Borrower shall defend itself and Lender and
shall
satisfy any final adverse judgment before enforcement against the
Collateral. Borrower shall name Lender as an additional obligee under
any
surety bond furnished in the contest
proceedings.
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Page 2
of 5
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2.7
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Compliance
With Governmental Requirements.
Borrower shall comply promptly with all laws, ordinances and regulations
of all governmental authorities applicable to the use of the Collateral.
Borrower may contest in good faith any such law, ordinance, or regulation
and withhold compliance during any proceeding, including appropriate
appeals, so long as Lender’s
interest in the Collateral is not
jeopardized.
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2.8
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Maintenance
of Casualty Insurance.
Borrower shall procure and maintain policies of fire and other casualty
insurance with standard extended coverage covering the Collateral
on the
basis and in at least the amount described above, and with loss payable
to
Lender. Policies shall be written by insurance companies reasonably
acceptable to Lender. Borrower shall deliver to Lender certificates
of
coverage from each insurer containing a stipulation that coverage
will not
be canceled or diminished without a minimum of 10 days prior written
notice to Lender.
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2.9
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Application
of Insurance Proceeds.
Borrower shall promptly notify Lender of any loss or damage to the
Collateral or any portion thereof having a fair market value in excess
of
$1,000. Lender may make proof of loss if Borrower fails to do so
within 15
days of the casualty. All proceeds of any insurance on the Collateral
shall be held by Lender as part of the Collateral. If Borrower and
Lender
agree to repair or replace the damaged or destroyed Collateral, Lender
shall, upon satisfactory proof of expenditure. Pay or reimburse Borrower
from the proceeds for the reasonable cost of repair or restoration.
If
Borrower and Lender do not agree to restore the Collateral, Lender
shall
retain a sufficient amount of the proceeds to pay all of the Indebtedness,
and shall pay the balance to Borrower. Any proceeds which have not
been
paid out within 180 days after their receipt and which Borrower has
not
committed to the repair or restoration of the collateral shall be
used to
prepay the Indebtedness.
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2.10
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Insurance
Reserves. Lender
may require Borrower to maintain with Lender reserves for payment
of
insurance premiums which reserves shall be created by monthly payments
of
a sum estimated by lender to be sufficient to produce, at least 15
days
before due, amounts at least equal to the insurance premiums to be
paid.
If 15 days before payment is due the reserve funds are insufficient.
Borrower shall upon demand pay any deficiency to lender. The reserve
funds
shall be held by Lender as a general deposit from Borrower and shall
constitute a noninterest-bearing debt from Lender to Borrower which
Lender
may satisfy by payment of the insurance premiums required to be paid
by
Borrower as they become due. Lender does not hold the reserve funds
in
trust for Borrower, and Lender is not the agent of Borrower for payment
of
the insurance premiums required to be paid by
Borrower.
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2.11
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Borrower’s
Report on Insurance.
If
requested by Lender within 60 days after the close of Borrower’s
fiscal year. Borrower shall furnish to Lender a report on each existing
policy of insurance showing:
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(a)
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the
name of the insurer;
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(b)
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the
risks insured;
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(c)
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the
amount of the policy;
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(d)
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the
property insured;
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(e)
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the
then current value and the basis of which insurance has been obtained
and
the manner of determining that
value;
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and
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(f)
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the
expiration date of the policy.
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Borrower
shall upon request have an independent appraiser satisfactory to Lender to
determine, as applicable, the cash value or replacement cost of the
Collateral.
3.
Borrower’s
Right to Possession.
Until
default, Borrower may have possession of the tangible personal property and
beneficial use of all of the Collateral and may use it in any lawful manner
not
inconsistent with this Security Agreement or the Related Documents.
4.
Expenditures by Lender.
If
not
discharged or paid by Borrower when due. Lender may discharge taxes, liens,
security interest, or other encumbrances at any time levied or placed on the
Collateral, may pay for insurance on the collateral, and may pay for maintenance
and preservation of the Collateral. All such payments shall become a part of
Borrower’s
obligations secured hereby, payable on demand, with Interest at the maximum
rate
permitted by law from date of expenditure until repaid. Such right shall be
in
addition to any other rights or remedies to which Lender may be entitled on
account of default.
Page 3
of 5
5.
Events of Default
Borrower
shall be in default under this Security Agreement upon:
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(a)
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Failure
to make any payment of Indebtedness when due;
or
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(b)
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Failure
to comply within 30 days after written notice from lender demanding
compliance with any other term, obligation, covenant or condition
contained herein (or in any of the Related Documents), provided,
if
compliance is not possible within 30 days, default shall occur upon
failure within 30 days to take steps that will produce compliance
as soon
as is reasonably practical; or
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(c)
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Any
warranty, representation, or statement made or furnished to Lender
by or
on behalf of Borrower proves to have been false in any material respect
when made or furnished; or
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(d)
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Borrower’s
death (if Borrower is an Individual), dissolution or termination
of
Borrower’s
existences a going business, insolvency, appointment of a receiver
for any
part of Borrower’s
property, any assignment for the benefit of creditors, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower; or
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(e)
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Commencement
of foreclosure, whether by judicial proceeding, self-help, repossession,
or any other method, by any creditor of Borrower against any of the
Collateral, but this subsection shall not apply in the event of a
good
faith dispute by Borrower as to the validity or reasonableness of
the
claim which is the basis of the foreclosure suit, provided that Borrower
provides lender with written notice of such claim and provides adequate
reserves therefore.
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6.
Rights of Lender.
| 6.1 | Rights Prior to Default or Thereafter. Lender and its designated representatives or agents may at all reasonable times examine and inspect the Collateral, wherever located. |
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6.2
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Rights
upon Default or Thereafter.
Upon default, or if Lender reasonably deems itself insecure, Lender
may
exercise any one ore more of the following rights and remedies in
addition
to any other rights or remedies that may be available at law, in
equity,
or otherwise:
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(a)
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Lender
may declare the entire Indebtedness including any prepayment penalty
which
Borrower would be required to pay, immediately due and
payable.
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(b)
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Lender
may require Borrower to deliver to Lender all or any portion of the
Collateral and any and all certificates of title and other documents
relating thereto. Lender may require Borrower to assemble the Collateral
and make it available to Lender at a place to be designated by Lender
which is reasonably convenient to both parties. Lender also shall
have
full power to enter upon the property of Borrower to take possession
of
and remove the Collateral.
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(c)
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Lender
shall have full power to sell, lease, transfer, or otherwise deal
with the
Collateral or proceeds thereof in its own name or that of Borrower.
Lender
may sell the Collateral at public auction. Unless the Collateral
threatens
to decline speedily in value or is of the type customarily sold on
a
recognized market, Lender will give Borrower reasonable notice of
the time
after which any private sale or any other intended disposition thereof
is
to be made. The requirements of reasonable notice shall be met if
such
notice is mailed by registered or certified mail postage prepaid,
to the
address of Borrower stated in this Security Agreement at led 10 days
before the time of the sale or disposition. Borrower shall be liable
for
expenses of retaking, hold, preparing for sale, selling, and the
like.
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(d)
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Lender
may have a receiver appointed as a matter of right. The receiver
may be an
employee of Lender and may serve without bond. All fees of the receiver
and his attorney shall be secured
hereby.
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(e)
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Lender
may revoke Borrower’s
right to collect the rents and revenues from the Collateral, and
may,
either itself or through a receiver, collect the same. To facilitate
collection, Lender may notify any account debtors of Borrower to
pay
directly to Lender.
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(f)
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Lender
may obtain a judgment for any deficiency remaining in the indebtedness
due
to Lender after application of all amounts received from the exercise
of
the rights provided in this section. Borrower shall be liable for
a
deficiency even if the underlying transaction is a sale of accounts
or
chattel paper.
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(g)
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Lender
shall have and may exercise any or all of the rights and remedies
of a
secured creditor under the provisions of the Uniform Commercial Code,
at
law, in equity, or otherwise.
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7.
Waiver.
Lender
shall not be deemed to have waived any rights hereunder (or under the Related
Documents) unless such waiver be in writing and signed by Lender. No delay
or
omission on the part of Lender in exercising any right shall operate as a waiver
of such right or any other right. A waiver by any party of a breach of a
provision of this Security Agreement shall not constitute a waiver of or
prejudice the party’s
right
otherwise to demand strict compliance with that provision or any other
provision. Whenever consent by Lender Is required herein, the granting of such
consent by Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required herein.
8.
Remedies Cumulative.
All
of
the Lender’s
rights,
and remedies, whether evidenced hereby or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or take action to perform an obligation of
Borrower under this Security Agreement after Borrower’s
failure
to perform shall not affect Lender’s
right
to declare a default and exercise its remedies under Section 6.
Page 4
of 5
9.
Successor Interests.
This
Security Agreement shall be binding upon and inure to the benefit of the
parties, their successors, and assigns, but whenever there is no outstanding
indebtedness, Borrower may terminate this Security Agreement upon written notice
to Lender.
10.
Notice.
Any
notice under this Security Agreement shall be in writing and shall be effective
when actually delivered or when deposited in the mail, registered or certified,
addressed to the parties at the addresses stated herein or such other addresses
as either party may designate by written notice to the other.
11.
Expenses, Costs, and Attorneys’
Fees.
In
the
event Lender is required to commence any suit or action to enforce any of the
terms of this Security Agreement, Lender shall be entitled to recover from
Borrower reasonable attorneys’
fees and
legal expenses at trial and also such fees and expenses on appeal, in addition
to all other sums provided by law. In the event that Lender is otherwise
required to incur any expenses whatsoever to protect or enforce its rights
hereunder, whether or not litigation is commenced. Lender shall be entitled
to
recover any and all such sums and all Incidental expenses, including reasonable
attorneys’
fees.
All such sums shall be part of the Indebtedness secured hereby.
12.
Applicable Law.
This
Security Agreement is accepted in and shall be governed by the laws of the
state
in which the lender is located.
13.
Multiple Parties; Corporate Authority.
If
Borrower consists of more than one person or entity, all obligations of Borrower
under this Security Agreement shall be joint and several. Where anyone or more
of Borrowers are corporations or partnerships It is not necessary for Lender
to
inquire into the powers of Borrowers or the officers, directors, partners,
or
agents acting or purporting to act on their behalf, and any indebtedness made
or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
IN
WITNESS WHEREOF, the parties have executed this Security Agreement as of the
dates shown below.
| LENDER: | BORROWER: |
| Hanford Area Economic Investment Fund Committee | IsoRay Medical, Inc. |
| By: /s/ Xxx X. Xxxxxx, Xx. | By: /s/ Xxxxx X. Xxxxxx |
|
Xxx
X. Xxxxxx, Xx.
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Xxxxx
Xxxxxx
|
| Title: Chair | Title: CEO/Chairman |
| Date: June 15, 2006 | Date: June 15, 2006 |
| IsoRay, Inc. | |
| By: /s/ Xxxxx X. Xxxxxx | |
| Title: CEO/Chairman | |
| Date: June 15, 2006 |
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