exv10w40



 





EXHIBIT 10.40




COMMERCIAL SECURITY AGREEMENT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal

$1,000,000.00
	 	Loan Date

09-30-2005
	 	Maturity

09-30-2006
	 	Loan No.

519900828192
	 	Call / Coll

4A / 60
	 	Account
	 	Officer

***
	 	Initials





References in the shaded area are for Lender’s use only and do not limit the applicability of this document to 

any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.




	 	 	 	 	 	 	 
	Grantor:

	 	SYNERGETICS, INC. (MISSOURI CORPORATION)
	 	Lender:
	 	Union Planters Bank NA
	 

	 	(TIN: 43-1585312)
	 	 	 	Clayton Commercial Lending
	 

	 	3845 CORPORATE CENTRE DRIVE
	 	 	 	8182 Maryland Avenue Suite 200
	 

	 	O’FALLON, MO 63368
	 	 	 	St. Louis, MO 63105






THE LIEN GRANTED PURSUANT TO THIS AGREEMENT MAY ALSO SECURE FUTURE ADVANCES



THIS COMMERCIAL SECURITY AGREEMENT dated September 30, 2005, is made and executed between
SYNERGETICS, INC. (MISSOURI CORPORATION) (“Grantor”) and Union Planters 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 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 Accounts, Chattel Paper, Inventory, Equipment, Instruments, Investment Property,
Documents, Deposit Accounts, Letter-of Credit Rights, General Intangibles, Supporting
Obligations, Patents, Trademarks and all other Goods.


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, replacements of 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, consignment or ether 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.


Despite any other provision of this Agreement, Lender is not granted, and will not have, a
nonpurchase money security interest in household goods, to the extent such a security interest
would be prohibited by applicable law. In addition, if because of the type of any Property, Lender
is required to give a notice of the right to cancel under Truth in Lending for the Indebtedness,
then Lender will not have a security interest in such Collateral unless and until such a notice is
given.



RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in
all Grantor’s accounts with Lender (whether checking, savings, or some other account). 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 IRA or Keogh accounts, or any trust accounts for
which setoff would be prohibited by law. Grantor authorizes Lender, to the




 









 




extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to
allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.



GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the
Collateral, Grantor represents and promises to Lender that:





Perfection of Security Interest. Grantor agrees to take whatever 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.




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, as defined by the Uniform Commercial Code, 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. 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 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.




Removal of the Collateral. Except in the ordinary course of Grantor’s business, Grantor
shall not remove the Collateral from its existing location 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.
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



					
	 
	 	 	 	 
	 
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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 and inspect the Collateral wherever
located.




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, 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 or for the generation, 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



					
	 
	 	 	 	 
	 
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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, pay or 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.




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.




Financing Statements. Grantor authorizes Lender to file a UCC financing statement, or
alternatively, a copy of this Agreement to perfect Lender’s security interest. At Lender’s
request, Grantor additionally agrees to sign all other documents that are necessary to
perfect, protect, and continue Lender’s security interest in the Property. Grantor will pay
all filing fees, title transfer fees, and other fees and costs involved unless prohibited by
law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute documents necessary to transfer title if there is a default.
Lender may file a copy of this Agreement as a financing statement. If Grantor changes
Grantor’s name or address, or the name or address of any person granting a security interest
under this Agreement changes, Grantor will promptly notify the Lender of such change.


GRANTOR’S RIGHT TO POSSESSION. Until default, 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. 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 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




					
	 
	 	 	 	 
	 
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paying all costs for insuring, maintaining and preserving the Collateral. All such expenditures
incurred or paid by Lender for such purposes 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;
or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and
payable at the Note’s maturity. The Agreement 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.



REINSTATEMENT OF SECURITY INTEREST. If payment is made by Grantor, whether voluntarily or
otherwise, or by guarantor or by any third party, on the Indebtedness and thereafter Lender is
forced to remit the amount of that payment (A) to Grantor’s trustee in bankruptcy or to any similar
person under any federal or state bankruptcy law or law for the relief of debtors, (B) by reason of
any judgment, decree or order of any court or administrative body having jurisdiction over Lender
or any of Lender’s property, or (C) by reason of any settlement or compromise of any claim made by
Lender with any claimant (including without limitation Grantor), the Indebtedness shall be
considered unpaid for the purpose of enforcement of this Agreement and this Agreement shall
continue to be effective or shall be reinstated, as the case may be, notwithstanding any
cancellation of this Agreement or of any note or other instrument or agreement evidencing the
Indebtedness and the Collateral will continue to secure the amount repaid or recovered to the same
extent as if that amount never had been originally received by Lender, and Grantor shall be bound
by any judgment, decree, order, settlement or compromise relating to the Indebtedness or to this
Agreement.



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 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 or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by any creditor
of Grantor or by any governmental agency against any collateral securing the Indebtedness,
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.




Events Affecting Guarantor. Any of the preceding events occurs with respect to any
Guarantor of any of the Indebtedness or Guarantor dies or becomes incompetent or revokes or
disputes the validity of, or liability under, any Guaranty of the Indebtedness.




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.




Insecurity. Lender in good faith believes itself insecure.



					
	 
	 	 	 	 
	 
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Cure Provisions. If any default, other than a default in payment is curable and if Grantor
has not been given a notice of a breach of the same provision of this Agreement within the
preceding twelve (12) months, it may be cured if Grantor, after receiving written notice
from Lender demanding cure of such default: (1) cures the default within fifteen (15) days;
or (2) if the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient to produce compliance
as soon as reasonably practical.


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 Missouri Uniform
Commercial Code. In addition and without limitation, Lender may exercise any one 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.




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. 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, and other persons as required by law, reasonable notice of
the time and place of any public sale, or the time after which any private sale or any other
disposition of the Collateral is to be made. However, no notice need be provided to any
person who, after Event of Default occurs, enters into and authenticates an agreement
waiving that person’s right to notification of sale. 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, shall become a part of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of expenditure until repaid.




Appoint Receiver. 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. The receiver may serve without bond if permitted by
law. 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.
Employment by Lender shall not disqualify a person from serving as a receiver.




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. 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, sue 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.




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



					
	 
	 	 	 	 
	 
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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 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 shall not exclude pursuit of any other remedy, and an election
to make expenditures or to take action to perform an 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.


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.




Arbitration. Grantor and Lender agree that all disputes, claims and controversies between
them whether individual, joint, or class in nature, arising from this Agreement or
otherwise, including without limitation contract and tort disputes, shall be arbitrated
pursuant to the Rules of the American Arbitration Association in effect at the time the
claim is filed, upon request of either party. No act to take or dispose of any Collateral
shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration
agreement. This includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a
writ of attachment or imposition of a receiver; or exercising any rights relating to
personal property, including taking or disposing of such property with or without judicial
process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or exercise of any
right, concerning any Collateral, including any claim to rescind, reform, or otherwise
modify any agreement relating to the Collateral, shall also be arbitrated, provided however
that no arbitrator shall have the right or the power to enjoin or restrain any act of any
party. Judgment upon any award rendered by any arbitrator may be entered in any court
having jurisdiction. Nothing in this Agreement shall preclude any party from seeking
equitable relief from a court of competent jurisdiction. The statute of limitations,
estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of an action for
these purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.




Attorneys’ Fees; Expenses. Grantor agrees to pay upon demand all of Lender’s costs and
expenses, including Lender’s 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 attorneys’ fees and legal expenses whether
or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or injunction), and
appeals, 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.




Governing Law. This Agreement will be governed by federal law applicable to Lender and, to
the extent not preempted by federal law, the laws of the State of Missouri without regard to
its conflicts of law provisions. This Agreement has been accepted by Lender in the State of
Missouri.




Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender’s request to submit to
the jurisdiction of the courts of St. Louis County, State of Missouri.



					
	 
	 	 	 	 
	 
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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 appoints Lender as Grantor’s irrevocable attorney-in-fact
for the purpose of executing any documents necessary to perfect, amend, or to continue the
security interest granted in this Agreement or to demand termination of filings of other
secured parties. Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse Lender for all expenses
for the perfection and the continuation of the perfection of Lender’s security interest in
the Collateral.




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 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.



					
	 
	 	 	 	 
	 
	 	8	 	 






 









 






Borrower. The word “Borrower” means SYNERGETICS, INC. (MISSOURI CORPORATION) and includes
all co-signers and co-makers signing the Note.




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 state, federal and
local statutes, regulations and ordinances relating to the protection of human health or the
environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
(“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
(“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1601, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable
state or federal laws, rules, or regulations adopted pursuant thereto.




Event of Default. The words “Event of Default” mean any of the events of default set forth
in this Agreement in the default section of this Agreement.




Grantor. The word “Grantor” means SYNERGETICS, INC. (MISSOURI CORPORATION).




Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any
or all of the Indebtedness.




Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including
without limitation a guaranty of all or part of the Note.




Hazardous Substances. The words “Hazardous Substances” mean materials that, because of
their quantity, concentration or physical, chemical or infectious characteristics, may cause
or pose a present or potential hazard to human health or the environment when improperly
used, treated, stored, disposed of, generated, manufactured, transported or otherwise
handled. The words “Hazardous Substances” are used in their very broadest sense and include
without limitation any and all hazardous or toxic substances, materials or waste as defined
by or listed under the Environmental Laws. The term “Hazardous Substances” also includes,
without limitation, petroleum and petroleum by-products or any fraction thereof and
asbestos.




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.




Lender. The word “Lender” means Union Planters Bank NA, its successors and assigns.




Note. The word “Note” means the Note executed by SYNERGETICS, INC. (MISSOURI CORPORATION)
in the principal amount of $1,000,000.00 dated September 30, 2005, together with all
renewals of, extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.




Property. The word “Property” means all of Grantor’s right, title and interest in and to
all the Property as described in the “Collateral Description” section of this 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 or hereafter existing, executed in connection with the
Indebtedness.


WAIVE JURY. All parties to this Agreement hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by any party against any other party.



THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.




					
	 
	 	 	 	 
	 
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GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES
TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 30, 2005.




	 	 	 	 	 
	GRANTOR:	 	 
	 
	 	 	 	 
	SYNERGETICS, INC. (MISSOURI CORPORATION)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Gregg D. Scheller	 	 
	 

	 	 	 	 
	 

	 	GREGG D. SCHELLER, President of SYNERGETICS,
INC. (MISSOURI CORPORATION)	 	 






					
	 
	 	 	 	 
	 
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