COMMERCIAL SECURITY AGREEMENT
Grantor:
Scientific Industries, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Lender:
JPMorgan Chase Bank, NA
New Hyde Park Business Banking LPO
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxx Xxxx, XX 00000
THIS COMMERCIAL SECURITY AGREEMENT dated June 14, 2011, is made and
executed between Scientific Industries, Inc. ("Grantor") and
JPMorgan Chase Bank, NA ("Lender").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants
to Lender a security interest in the Collateral to secure the Indebtedness
and agrees that Lender shall have the rights stated in this Agreement
with respect to the Collateral, in addition to all other rights which
Lender may have by law.
COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement
means the following described property, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever located,
in which Grantor is giving to Lender a security interest for the payment
of the Indebtedness and performance of all other obligations under the
Note and this Agreement:
All Inventory, Chattel Paper, Accounts, Equipment and General
Intangibles
All of which "Collateral" shall have the meaning attributed to such
word in the Uniform Commercial Code referenced in the section of this
Agreement captioned "Definitions" (whenever such word appears in this
Agreement, and whether the first letter of such word is upper case or
lower case). In addition, the word "Collateral" also includes all the
following, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements and additions to any of the collateral described herein,
whether added now or later.
(B) All products and produce of any of the property described in this
Collateral section.
(C) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.
(D) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section, and sums due from a third party who has
damaged or destroyed the Collateral or from that party's insurer,
whether due to judgment, settlement or other process.
(E) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
CROSS-COLLATERALIZATION. In addition to the Note, this Agreement
secures all obligations, debts and liabilities, plus interest thereon, of
Grantor to Lender, or anyone or more of them, as well as all claims by
Lender against Grantor or anyone or more of them, whether now existing
or hereafter arising, whether related or unrelated to the purpose of
the Note, whether voluntary or otherwise, whether due or not due,
direct or indirect, determined or undetermined, absolute or contingent,
liquidated or unliquidated whether Grantor may be liable individually or
jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise, and whether recovery upon such
amounts may be or hereafter may become barred by any statute of
limitations, and whether the obligation to repay such amounts may be
or hereafter may become otherwise unenforceable.
RIGHT OF SETOFF. Grantor grants to Lender a security interest in, as
well as a right of setoff against, and hereby assigns, conveys, delivers,
pledges and transfers to Lender, as security for repayment of the
Indebtedness, all Grantor's right, title and interest in and to all
Grantor's accounts (whether checking, savings, or some other account)
with Lender or any subsidiary or affiliate of JPMorgan Chase & Co. (each
hereinafter referred to as a "Lender Affiliate") and all other
obligations at any time owing by Lender or any Lender Affiliate to
Grantor. This includes all accounts Grantor holds jointly with someone
else and all accounts Grantor may open in the future. However, this
does not include any XXX or Xxxxx accounts, or any trust accounts for
which the grant of a security interest would be prohibited by law.
Grantor authorizes Lender, without prior notice to Grantor and
irrespective of (i) whether or not Lender has made any demand under
this Agreement or the Related Documents or (ii) whether such
Indebtedness is contingent, matured or unmatured, to the extent
permitted by law, to collect, charge and/or setoff all sums owing on the
Indebtedness against any and all such accounts and other obligations,
and, at Lender's option, to administratively freeze or direct a Lender
Affiliate to administratively freeze all such accounts and other
obligations to allow Lender to protect Lender's security interest,
collection, charge and setoff rights provided in this paragraph.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
COLLATERAL. With respect to the Collateral, Grantor covenants,
agrees, represents and warrants to Lender that:
Perfection of Security Interest. Grantor hereby authorizes Lender
to file such financing statements with respect to the Collateral as
Lender shall deem appropriate and Grantor shall take whatever other
actions are requested by Lender to perfect and continue Lender's
security interest in the Collateral. Upon request of Lender, Grantor
will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's interest
upon any and all chattel paper and instruments if not delivered to
Lender for possession by Lender. This is a continuing Security
Agreement and will continue in effect even though all or any part
of the Indebtedness is paid in full and even though for a period of
time Grantor may not be indebted to Lender.
Notices to Lender. Grantor will promptly notify Lender in writing
at Lender's address shown above (or such other addresses as Lender may
designate from time to time) prior to any (1) change in Grantor's name;
(2) change in Grantor's assumed business name(s); (3) change in the
management of the Corporation Grantor; (4) change in the authorized
signer(s); (5) change in Grantor's principal office address; (6) change
in Grantor's state of organization; (7) conversion of Grantor to a new
or different type of business entity; or (8) change in any other aspect
of Grantor that directly or indirectly relates to any agreements
between Grantor and Lender. No change in Grantor's name or state of
organization will take effect until after Lender has received notice.
No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is
a party, and its certificate or articles of incorporation and bylaws
do not prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists
of accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and fully complies
with all applicable laws and regulations concerning form, content
and manner of preparation and execution, and all persons appearing to
be obligated on the Collateral have authority and capacity to
contract and are in fact obligated as they appear to be on the
Collateral. At the time any account becomes subject to a security
interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred
by the account debtor, for merchandise held subject to delivery
instructions or previously shipped or delivered pursuant to a
contract of sale, or for services previously performed by Grantor
with or for the account debtor. So long as this Agreement remains
in effect, Grantor shall not, without Lender's prior written consent,
compromise, settle, adjust, or extend payment under or with regard
to any such account. There shall be no setoffs or counterclaims against
any of the Collateral, and no agreement shall have been made under
which any deductions or discounts may be claimed concerning the
Collateral except those disclosed to Lender in writing.
Location of the Collateral. Except in the ordinary course of
Grantor's business, Grantor agrees to keep the Collateral (or to the
extent the Collateral consists of intangible property such as
accounts or general intangibles, the records concerning the
Collateral) at Grantor's address shown above or at such other
locations as are acceptable to Lender. Upon Lender's request,
Grantor will deliver to Lender in form satisfactory to Lender a
schedule of real properties and Collateral locations relating to
Grantor's operations, including without limitation the following:
(1) all real property Grantor owns or is purchasing; (2) all real
property Grantor is renting or leasing; (3) all storage facilities
Grantor owns, rents, leases, or uses; and (4) all other properties
where Collateral is or may be located. If the Collateral is
equipment, such equipment shall be located at the addresses shown
and shall not be attached to or incorporated into any real property
in such a manner that it becomes a fixture thereon.
Removal of the Collateral. Except in the ordinary course of
Grantor's business, including the sales of inventory, Grantor shall
not remove the Collateral from its existing location without Lender's
prior written consent. To the extent the Collateral consists of
accounts or general intangibles, the Grantor shall not relocate the
records concerning such Collateral from Grantor's address shown above
without written notification to and approval of the Lender. To the
extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles
outside the State of New York, without Lender's prior written
consent. Grantor shall, whenever requested, advise Lender of the
exact location of the Collateral.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business,
or as otherwise provided for in this Agreement, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may
sell inventory, but only in the ordinary course of its business and
only to buyers who qualify as a buyer in the ordinary course of
business. A sale in the ordinary course of Grantor's business does
not include a transfer in
COMMERCIAL SECURITY AGREEMENT
(Continued)
Page 2
partial or total satisfaction of a debt or any bulk sale. Grantor shall
not pledge, mortgage, encumber or otherwise permit the Collateral to
be subject to any lien, security interest, encumbrance, or charge,
other than the security interest provided for in this Agreement, without
the prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under this
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, this requirement shall not constitute consent by Lender to any
sale or other disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds to Lender. Title. Grantor represents and
warrants to Lender that Grantor holds good and marketable title to the
Collateral, free and clear of all liens and encumbrances except for the
lien of this Agreement. No financing statement covering any of the
Collateral is on file in any public office other than those which
reflect the security interest created by this Agreement or to which
Lender has specifically consented. Grantor shall defend Lender's
rights in the Collateral against the claims and demands of all other
persons.
Repairs and Maintenance. Grantor agrees to keep and maintain, and
to cause others to keep and maintain, the Collateral in good order,
repair and condition at all times while this Agreement remains in
effect. Grantor further agrees to pay when due all claims for work done
on, or services rendered or material furnished in connection with the
Collateral so that no lien or encumbrance may ever attach to or be
filed against the Collateral.
Inspection of Collateral. Lender and Lender's designated
representatives and agents shall have the right at all reasonable
times to examine, audit and inspect the Collateral wherever located.
To the extent any of the following types of property are included in
the Collateral, then as often as Lender shall require, in detail
satisfactory to Lender, Grantor shall deliver to Lender schedules of
accounts and general intangibles, including, without limitation,
names and addresses of account debtors and aging reports, and lists
and descriptions of the nature and location of inventory and equipment.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Grantor
may withhold any such payment or may elect to contest any lien if
Grantor is in good faith conducting an appropriate proceeding to contest
the obligation to pay and so long as Lender's interest in the
Collateral is not jeopardized in Lender's sole opinion. If the Collateral
is subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs reasonable
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender
as an additional obligee under any surety bond furnished in the contest
proceedings. Grantor further agrees to furnish Lender with evidence that
such taxes, assessments, and governmental and other charges have been
paid in full and in a timely manner. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to
pay and so long as Lender's interest in the Collateral is not
jeopardized.
Compliance with Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable
to the ownership, production, disposition, or use of the Collateral,
including all laws or regulations relating to the undue erosion of
highly-erodible land or relating to the conversion of wetlands for
the production of an agricultural product or commodity. Grantor
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, in Lender's
opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used in violation of any Environmental
Laws, that the business operations of Grantor are not now, and have
never been, the subject of any governmental authority's investigation
regarding non-compliance with Environmental Laws, that Grantor is
not aware of any material contingent liability related to the violation
of any Environmental Law, and that the Collateral shall not be used for
the improper or unlawful manufacture, storage, transportation, treatment,
disposal, release or threatened release of any Hazardous Substance. The
representations and warranties contained herein are based on Grantor's
due diligence in investigating the Collateral for Hazardous Substances.
Grantor hereby (1) releases and waives any future claims against Lender
for indemnity or contribution in the event Grantor becomes liable for
cleanup or other costs under any Environmental Laws, and (2) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This
obligation to indemnify shall survive the payment of the Indebtedness
and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages and
basis reasonably acceptable to Lender and issued by a company or companies
reasonably acceptable to Lender. Grantor, upon request of Lender, will
deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations
that coverages will not be cancelled or diminished without at least
thirty (30) days' prior written notice to Lender and not including any
disclaimer of the insurer's liability for failure to give such a notice.
Each insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act,
omission or default of Grantor or any other person. In connection
with all policies covering assets in which Lender holds or is offered a
security interest, Grantor will provide Lender with such loss payable
or other endorsements as Lender may require. If Grantor at any time
fails to obtain or maintain any insurance as required under this
Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if Lender so chooses
"single interest insurance," which will cover only Lender's interest
in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make proof of
loss if Grantor fails to do so within fifteen (15) days of the casualty.
All proceeds of any insurance on the Collateral, including accrued
proceeds thereon, shall be held by Lender as part of the Collateral. If
Lender consents to repair or replacement of the damaged or destroyed
Collateral, Lender shall, upon satisfactory proof of expenditure, payor
reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to
pay all of the Indebtedness, and shall pay the balance to Grantor. Any
proceeds which have not been disbursed within six (6) months after their
receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the Indebtedness. Grantor
hereby appoints Lender as its attorney-in-fact with full power and
authority to endorse in Grantor's name any check or draft representing
the proceeds of any insurance on the Collateral and to settle or
compromise in Grantor's name any claims with respect to such insurance.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender to
be sufficient to produce, at least fifteen (15) days before the premium
due date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are insufficient,
Grantor shall upon demand pay any deficiency to Lender. The reserve funds
shall be held by Lender as a general deposit and shall constitute a
non-interest-bearing account which Lender may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become due.
Lender does not hold the reserve funds in trust for Grantor, and Lender
is not the agent of Grantor for payment of the insurance premiums required
to be paid by Grantor. The responsibility for the payment of premiums shall
remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (1)
the name of the insurer; (2) the risks insured; (3) the amount of the
policy; (4) the property insured; (5) the then current value on the basis
of which insurance has been obtained and the manner of determining that
value; and (6) the expiration date of the policy. In addition, Grantor
shall upon request by Lender (however not more often than annually) have
an independent appraiser satisfactory to Lender determine, as applicable,
the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until the occurrence
of any Event of Default and except as otherwise provided below with respect
to accounts, Grantor may have possession of the tangible personal property
and beneficial use of all the Collateral and may use it in any lawful
manner not inconsistent with this Agreement or the Related Documents,
provided that Grantor's right to possession and beneficial use shall not
apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral.
Until otherwise notified by Lender, Grantor may collect any of the
Collateral consisting of accounts. At any time and even though no Event
of Default exists, Lender may exercise its rights to collect the accounts
and to notify account debtors to make payments directly to Lender for
application to the Indebtedness. If Lender at any time has possession
of any Collateral, whether before or after an Event of Default, Lender
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that
purpose as Grantor shall request or as Lender, in Lender's sole
discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed
to be a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in the
Collateral against prior parties, nor to protect, preserve or maintain
any security interest given to secure the Indebtedness.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that
would materially affect Lender's interest in the Collateral or if
Grantor fails to comply with any provision of this Agreement or any
Related Documents, including but not limited to Grantor's failure to
discharge or pay when due any amounts Grantor is required to discharge
or pay under this Agreement or any Related Documents, Lender on
COMMERCIAL SECURITY AGREEMENT
(Continued)
Page 3
Grantor's behalf may (but shall not be obligated to) take any action that
Lender deems appropriate, including but not limited to discharging or
paying all taxes, liens, security interests, encumbrances and other claims,
at any time levied or placed on the Collateral and paying all costs for
insuring, maintaining and preserving the Collateral All such expenditures
incurred or paid by Lender for such purposes, with the exception of
insurance premiums paid by Lender with respect to motor vehicles, but
including the payment of attorneys' fees and expenses, will then bear
interest at the rate charged under the Note from the date incurred or
paid by Lender to the date of repayment by Grantor. All such expenses will
become a part of the Indebtedness and, at Lender's option, will (A) be
payable on demand, (B) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become
due during either (1) the term of any applicable insurance policy,
(2) the remaining term of the Note, or (3) be treated as a balloon
payment which will be due and payable at the Note's maturity. The
Collateral also will secure payment of these amounts. Such right shall
be in addition to all other rights and remedies to which Lender may be
entitled upon Default.
DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Payment Default. Grantor fails to make any payment when due under
the Indebtedness.
Other Defaults. Grantor fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents or to comply with or to perform any
term, obligation, covenant or condition contained in any other
agreement between Lender and Grantor.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Grantor or on Grantor's behalf under this
Agreement, the Note, or the Related Documents is false or misleading in
any material respect, either now or at the time made or furnished
or becomes false or misleading at any time thereafter
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest
or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence
as a going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure,
replevin, repossession, attachment, levy, execution, or forfeiture
proceedings, whether by judicial proceeding, self-help, or any other
method, by any creditor of Grantor, or by any governmental agency
against the Collateral or any other assets of Grantor. This includes
a garnishment of any of Grantor's accounts, including deposit accounts,
with Lender. However, this Event of Default shall not apply if there
is a good faith dispute by Grantor as to the validity or reasonableness
of the claim which is the basis of the creditor or forfeiture proceeding
and if Grantor gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender,
in its sole discretion, as being an adequate reserve or bond for the
dispute.
Adverse Change. A material adverse change occurs in Grantor's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Events Affecting Guarantor. Any of the preceding Events of Default
occurs with respect to any guarantor of the Indebtedness as if the
word "guarantor" were substituted for the word "Grantor" in such
Event of Default, or any guarantor dies or becomes incompetent, or
revokes or disputes the validity of, or liability under, any guaranty
of the Indebtedness.
Insecurity. Lender in good faith believes itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under
this Agreement, at any time thereafter, Lender shall have all the
rights of a secured party under the New York Uniform Commercial Code.
In addition and without limitation, Lender may exercise anyone or
more of the following rights and remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required
to pay, immediately due and payable, without notice of any kind to
Grantor (except that in the case of any Event of Default of the type
described in the DEFAULT - Insolvency section herein, such
acceleration shall be automatic and not at Lender's option).
Assemble Collateral. Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all
certificates of title and other documents relating to the Collateral.
Lender may require Grantor to assemble the Collateral and make it
available to Lender at a place to be designated by Lender. Lender
also shall have full power to enter upon the property of Grantor to
take possession of and remove the Collateral, and prior to completion
of the removal, disable or otherwise secure the Collateral to prevent
its use by Grantor or any third parties, with or without process of
law, and with or without notice or demand. If the Collateral contains
other goods not covered by this Agreement at the time of repossession,
Grantor agrees Lender may take such other goods, provided that Lender
makes reasonable efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof
in Lender's own name or that of Grantor. Lender may sell the Collateral
at public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor reasonable notice of the
time after which any private sale or any other intended disposition
of the Collateral is to be made. Lender may buy the Collateral, or
any portion thereof, at public sale or, if the Collateral is of the
type which is sold in a recognized market or subject to widely d
istributed price quotations, at private sale. Lender shall not be
obligated to make any sale of the Collateral regardless of notice of
sale having been given. Lender may adjourn any public or private sale
by announcement at the time and place fixed therefor, and such sale
may be made, without further notice, at such time and place announced
at such adjournment. The requirements of reasonable notice shall be
met if such notice is given at least ten (10) days before the time
of the sale or disposition. All expenses relating to the disposition of
the Collateral, including without limitation the expenses of retaking,
holding, insuring, preparing for sale and selling the Collateral
(including legal fees and costs), shall become a part of the Indebtedness
secured by this Agreement and payable from the proceeds of the
disposition of the Collateral, and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law Lender
shall have the right to have a receiver appointed to take possession
of all or any part of the Collateral, with the power to protect and
preserve the Collateral, to operate the Collateral preceding foreclosure
or sale, and to collect the Rents from the Collateral and apply the
proceeds, over and above the cost of the receivership, against the
Indebtedness. Lender's right to the appointment of a receiver shall exist
whether or not the apparent value of the Collateral exceeds the
Indebtedness by a substantial amount. The right to a receiver shall be
given to Lender regardless of the solvency of Grantor and without
any requirement to give notice to Grantor.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from
the Collateral. Lender may at any time in Lender's discretion transfer
any Collateral into Lender's own name or that of Lender's nominee
and receive the payments, rents, income, and revenues therefrom and
hold the same as security for the Indebtedness or apply it to payment
of the Indebtedness in such order of preference as Lender may determine.
Upon notice from the Lender or upon any Event of Default, the Grantor
agrees that all sums of money it receives on payment, settlement or
otherwise related to any Collateral, including, without limitation, on
any accounts, shall be held by Grantor as trustee for Lender without
commingling with any of Grantor's funds and shall be immediately
delivered to the Bank. Insofar as the Collateral consists of accounts,
general intangibles, insurance policies, instruments, chattel paper,
choses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, xxx for, foreclose, or realize
on the Collateral as Lender may determine, whether or not Indebtedness
or Collateral is then due. For these purposes, Lender may, on behalf
of and in the name of Grantor, receive, open and dispose of mail
addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment,
shipment, or storage of any Collateral. To facilitate collection,
Lender may notify account debtors and obligors on any Collateral to
make payments directly to Lender. Grantor acknowledges that the Lender
shall not be obligated in any manner to make any demand, make any
inquiry as to the nature and sufficiency of any payment received by
Lender, present or file any claim, or take any other action to collect
or enforce the payment of any amounts which may have been due relate
to the Collateral, including without limitation, any amounts due on
accounts.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the
rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is
a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the New York
Uniform Commercial Code, as may be amended from time to time. In
addition, Lender shall have and may exercise any or all other rights
and remedies it may have available at law, in equity, or otherwise.
Election of Remedies. Except as may be prohibited by applicable law,
all of Lender's rights and remedies, whether evidenced by this
Agreement, the Related Documents, or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election
by Lender to pursue any remedy will not bar any other remedy, and an
election to make expenditures or to take action to perform an
COMMERCIAL SECURITY AGREEMENT
(Continued)
Page 4
obligation of Grantor under this Agreement, after Grantor's failure
to perform, shall not affect Lender's right to declare a default and
exercise its remedies.
JURY WAIVER. THE UNDERSIGNEDAND LENDER(BY ITS ACCEPTANCE HEREOF)HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVINGANY DISPUTE (WHETHERBASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNEDAND LENDER
ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT, THE RELATED
DOCUMENTS, OR ANY RELATIONSHIP BETWEENOR AMONG THE UNDERSIGNEDAND LENDER
WHETHER ANY SUCH RIGHT NOW OR HEREAFTER EXISTS. THIS PROVISION IS A
MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING EVIDENCE DBY THIS
DOCUMENT AND THE RELATED DOCUMENTS.
GOVERNING LAW. The Lender's loan production office for this transaction
is located at the address and in the State (the "LPO State") indicated
in the LPO address or the loan production office address on the first
page of this document. This document will be governed by and interpreted
in accordance with federal law and the laws of the LPO State, except
for matters related to interest and the exportation of interest, which
matters shall be governed by and interpreted in accordance with federal
law (including, but not limited to, statutes, regulations, interpretations
and opinions) and the laws of the State of Ohio. However, if there is
ever a question about whether any provision of this document is valid or
enforceable, the provision that is questioned will be governed by whichever
state or federal law would find the provision to be valid and enforceable.
The loan transaction which is evidenced by this document has been made in
the State of Ohio.
VENUE. If there is a lawsuit, the undersigned agrees to submit to the
jurisdiction of the courts of the county in the LPO State in which the
Lender's loan production office is located.
INFORMATION WAIVER. Lender may provide, without any limitation whatsoever,
to anyone or more purchasers, potential purchasers, or affiliates of
JPMorgan Chase & Co., any information or knowledge Lender may have about
Grantor or about any matter relating to this Agreement, and Grantor
hereby waives any right to privacy Grantor may have with respect to such
matters.
EXAMPLES OF INDEBTEDNESS, INCLUDING DEPOSIT ACCOUNT INDEBTEDNESS, LOAN
INDEBTEDNESS, ETC. Grantor agrees the Indebtedness described herein is
used in its most comprehensive sense and means and includes any and all
liabilities, obligations and debts of Borrower, or anyone of them, to
Lender, now existing or hereinafter incurred or created, whether any
such Indebtedness is voluntarily or involuntarily incurred, due or not
due, absolute or contingent, liquidated or unliquidated, determined or
undetermined; whether Borrower may be liable individually or jointly
with others, or primarily or secondarily, or as guarantor or surety;
whether recovery on the Indebtedness may be or may become barred or
unenforceable against Borrower for any reason whatsoever; and whether
the Indebtedness arises from transactions which may be voidable on
account of infancy, insanity, ultra xxxxx, or otherwise. As examples,
and not as limitation, the Indebtedness of Borrower includes: (a) any
overdraft in any deposit account of Borrower, accruing for any reason,
(b) any obligations, including any overdraft in any deposit account of
Borrower, related to Automated Clearing House ("ACH") services or
products, deposit account services or products, or treasury management
services or products, including any agreement with respect thereto;
(c) any transaction (including any agreement with respect thereto)
between Borrower and the Lender or JPMorgan Chase & Co., or any of its
subsidiaries or affiliates or their successors, which is a rate swap,
basis swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, forward transaction, currency
swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to
any of these transactions) or any combination thereof, whether linked
to one or more interest rates, foreign currencies, commodity prices,
equity prices or other financial measures (each a "Rate Management
Transaction"); (d) any obligation related to any loan or credit
transaction (including any agreement with respect thereto), whether
evidenced by a promissory note, credit agreement, letter of credit
application, or any other agreement; (e) any obligation related to
commercial credit card transactions (including an agreement with respect
thereto); (f) any obligation related to any lease (including an
agreement with respect thereto); (g) any obligation related to any
guaranty of the obligations of others by Borrower; (h) any obligation
under a Related Document; and (i) all other obligations of Borrower to
Lender.
MISCELLANEOUS PROVISIONS. POWEROF ATTORNEY. Notwithstanding anything
contained in this Agreement to the contrary, Lender agrees that, it
shall not exercise any power or authority granted to it in subparagraphs
(a), (b), (c) or (d) of this Paragraph until the occurrence of a
default or Event of Default under this Agreement or the Related Documents.
RIGHT TO CURE. Notwithstanding anything to the contrary contained in this
Agreement or in any Related Documents, no condition or event shall be a
default under this Agreement or an "Event of Default" as defined in any
Related Document provided that (A) such event or condition is other than
the commencement of a bankruptcy or insolvency proceeding by or against
Borrower or any Guarantor, or by or against any party that has granted
collateral, and (B) Borrower has not, within the preceding twelve (12)
months, (i) been given notice of the same event, condition or failure,
or (ii) been given notice of the occurrence of three (3) or more of the
conditions of default set forth in this Agreement, and (C) if, after
Lender sends Borrower written notice demanding cure of any such
condition, event or failure, Borrower cures or causes to be cured:
(a) any failure to pay any sum due under the provisions of this
Agreement within 10 days after such notice; or (b) any other event,
condition or failure under the provisions of this Agreement or any
Related Document within 30 days after such notice. Any notice
delivered hereunder to Borrower shall be effective when deposited
with a nationally recognized overnight courier or when deposited in
the United States mail, first class postage prepaid, addressed to
Borrower at Borrower's last known mailing address.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are
a part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties
as to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by
the alteration or amendment.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all
of Lender's costs and expenses, including Lender's reasonable
attorneys' fees and Lender's legal expenses, incurred in connection
with the enforcement of this Agreement. Lender may hire or pay
someone else to help enforce this Agreement, and Grantor shall pay
the costs and expenses of such enforcement. Costs and expenses
include Lender's reasonable attorneys' fees and legal expenses
whether or not there is a lawsuit, including reasonable attorneys' fees
and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Grantor also shall pay
all court costs and such additional fees as may be directed by the
court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.
No Waiver by Lender. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given 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 Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Grantor, shall constitute a waiver of any of Lender's
rights or of any of Grantor's obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
Notices. Any notice required to be given under this Agreement shall
be given in writing, and shall be effective when actually delivered,
when actually received by telefacsimile (unless otherwise required by
law), when deposited with a nationally recognized overnight courier,
or, if mailed, when deposited in the United States mail, as first class,
certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Agreement. Any party may change its
address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice
is to change the party's address. For notice purposes, Grantor agrees
to keep Lender informed at all times of Grantor's current address. Unless
otherwise provided or required by law, if there is more than one
Grantor, any notice given by Lender to any Grantor is deemed to be notice
given to all Grantors.
Power of Attorney. Grantor hereby irrevocably appoints Lender as its
true and lawful attorney-in-fact, such power of attorney being
coupled with an interest, with full power of substitution to do the
following in the place and stead of Grantor and in the name of Grantor:
(a) to demand, collect, receive, receipt for, xxx and recover all sums
of money or other property which may now or hereafter become due, owing
or payable from the Collateral; (b) to execute, sign and endorse any and
all claims, instruments, receipts, checks, drafts or warrants issued in
payment for the Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of Grantor, to
execute and deliver its release and settlement for the claim; (d) to file
any claim or claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor, or otherwise,
which in the discretion of Lender may seem to be necessary or advisable; (e)
to execute any documents or instruments necessary to perfect or continue
Lender's security interest in the Collateral; and (f) to file such
financing statements (including filing carbon, photographic or other
reproduction of any financing statement or this Agreement for use as a
financing statement) or other documents or instruments to perfect or continue
Lender's security interest in the Collateral. This power is given as security
for the Indebtedness, and the authority hereby conferred is and shall be
irrevocable and shall remain in full force and effect until renounced by
Lender.
Indemnity. Grantor hereby agrees to indemnify, defend and hold harmless
Lender, and its officers, directors, shareholders, employees, agents and
representatives (each an "Indemnified Person") from and against any and all
liabilities, obligations, claims, losses, damages,
COMMERCIAL SECURITY AGREEMENT
(Continued)
Page 5
penalties,actions, judgments, suites costs, expenses or disbursements of
any kind or nature (collectively, the "Claims") which may be imposed on,
incurred by or asserted against, any Indemnified Person (whether or not
caused by any Indemnified Person's sole, concurrent or contributory
negligence) arising in connection with this Agreement or the Collateral
(including, without limitaion, the enforcement of this Agreement and the
Related Documents and the defense of any Indemnified Person's action and/or
inactions in connection with this Agreement and the Related Documents),
except to the limited extent that the Claims against the Indemnified Person
are proximately caused by such Indemnified Person's gross negligence or
willful misconduct. The indemnification provided for in this Section shall
survive the termination of this Agreement and shall extend and continue to
benefit each individual or entity who is or has at any time been an
Indemnified Person hereunder.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible,
the offending provision shall be considered modified so that it becomes
legal, valid and enforceable. If the offending provision cannot be so
modified, it shall be considered deleted from this Agreement. Unless
otherwise required by law, the illegality, invalidity, or unenforceability
of any provision of this Agreement shall not affect the legality, validity
or enforceability of any other provision of this Agreement.
Successors and Assigns. Subject to any limitations stated in this
Agreement on transfer of Grantor's interest, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors
and assigns. If ownership of the Collateral becomes vested in a
person other than Grantor, Lender, without notice to Grantor, may deal
with Grantor's successors with reference to this Agreement and the
Indebtedness by way of forbearance or extension without releasing Grantor
from the obligations of this Agreement or liability under the
Indebtedness.
Survival of Representations and Warranties. All representations,
warranties, and agreements made by Grantor in this Agreement shall
survive the execution and delivery of this Agreement, shall be continuing
in nature, and shall remain in full force and effect until such time
as Grantor's Indebtedness shall be paid in full.
Time is of the Essence. Time is of the essence in the performance
of this Agreement.
DEFINITIONS. The following capitalized words and terms shall have the
following meanings when used in this Agreement. 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 Agreement shall have the meanings attributed
to such terms in the New York Uniform Commercial Code:
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended
or modified from time to time, together with all exhibits and
schedules attached to this Commercial Security Agreement from time
to time.
Borrower. The word "Borrower" means Scientific Industries, Inc.,
and all other persons and entities signing the Note in whatever
capacity.
Collateral. The word "Collateral" means all of Grantor's right,
title and interest in and to all the Collateral as described in the
Collateral Description section of this Agreement.
Default. The word" Default" means the Default set forth in this
Agreement in the section titled" Default".
Environmental Laws. The words "Environmental Laws" mean any and
all federal, state, local and foreign statutes, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees, plans,
injunctions, permits, concessions, grants, franchises, licenses,
agreements and other governmental restrictions relating to (i) the
protection of the environment, (ii) the effect of the environment
on human health, (iii) emissions, discharges or releases of
pollutants, contaminants, hazardous substances or wastes into
surface water, ground water or land, or (iv) the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
Event of Default. The words" Event of Default" mean any of the
events set forth in the section of this Agreement entitled" Default".
Grantor. The word "Grantor" means Scientific Industries, Inc.
Hazardous Substances. The words "Hazardous Substances" mean all
explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, including petroleum
or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.
Indebtedness. The word "Indebtedness" means the indebtedness
evidenced by the Note or Related Documents, including all principal and
interest together with all other indebtedness and costs and expenses
for which Grantor is responsible under this Agreement or under any
of the Related Documents. In addition, and without limitation, the
term "Indebtedness" includes all amounts identified in the
Cross-Collateralization, Revolving Line of Credit and Future
Advances paragraphs as contained in one or more of the Related
Documents.
Lender. The word "Lender" means JPMorgan Chase Bank, NA, its
successors and assigns.
Note. The word "Note" means the Note executed by Grantor in the
principal amount of $700,000.00 dated June 14, 2011, together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean all
promissory notes, credit agreements, loan agreements, environmental
agreements, guaranties, security agreements, mortgages, deeds of trust,
security deeds, collateral mortgages, and all other instruments,
agreements and documents, whether now existing or hereafter arising,
executed in connection with the Indebtedness.
GRANTOR HAS READ AND UNDERSTOODALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENTIS DATED
JUNE 14,2011.
GRANTOR:
SCIENTIFIC INDUSTRIES, INC.
By: /s/Xxxxxx X. Xxxxxx By: /s/Xxxxxx X. Xxxxxxx
________________________ ___________________________________
Xxxxxx Xxxxxx, President of Xxxxxx Xxxxxxx, Executive President
Scientific Industries, Inc. of Scientific Industries, Inc.
