Exhibit 10.3  





*90901288243900000510010E40*


COMMERCIAL SECURITY AGREEMENT


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Principal

  $7,500,000.00

  	
  Loan Date

  11-23-2005

  	
  Maturity

  11-30-2006

  	
  Loan No

  51001

  	
  Call / Coll

  326

  	
  Account

  E9012882439

  	
  Officer

  GAL08

  	
  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:

  	
  ANGIODYNAMICS, INC.

  603 Queensbury Avenue

  Queensbury, NY 12804

  	
   

  	
  Lender:

  	
  KeyBank National Association

  NY-MM-Albany 

  66 S. Pearl Street 

  Albany,
  NY 12207

  	
   

  






THIS COMMERCIAL SECURITY AGREEMENT dated
November 23, 2005, is made and executed between ANGIODYNAMICS, INC. (“Grantor”)
and
KeyBank National Association (“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, equipment, accounts (including but not
  limited to all health-care-insurance receivables), chattel paper, instruments
  (including but not limited to all promissory notes), letter-of-credit rights,
  letters of credit, documents, deposit accounts, investment property, money,
  other rights to payment and performance, and general intangibles (including
  but not limited to all software and all payment intangibles); all
  attachments, accessions, accessories, fittings, increases, tools, parts,
  repairs, supplies, and commingled goods relating to the foregoing property,
  and all additions, replacements of and substitutions for all or any part of
  the foregoing property; all insurance refunds relating to the foregoing property; all
  good will relating to the foregoing property; all records and data and
  embedded software relating to the foregoing property,
  and all equipment, inventory and software to utilize, create, maintain and
  process any such records and data on electronic media; and all supporting obligations relating to the
  foregoing property; all whether now existing or hereafter arising, whether
  now owned or hereafter acquired or
  whether now or hereafter subject to any rights in the foregoing property; and
  all products and proceeds (including but not limited to all insurance
  payments) of or relating to the foregoing property.; whether any of the
  foregoing is owned now or acquired later; all accessions, additions,
  replacements, and substitutions relating to any of the foregoing; all records
  of any kind relating to any of the foregoing; all proceeds relating to any of
  the foregoing (including insurance, general intangibles and accounts
  proceeds)

  



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 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 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 any one or more of them, as
well as all claims by Lender against Grantor or any one 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. 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 and whether evidenced by a certificate
of deposit). 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 Kcogh 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.


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. 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

  











	
   

  	
   

  	
   

  
	
   

  	
  COMMERCIAL SECURITY
AGREEMENT

  	
   

  
	
  Loan No:
  51001

  	
  (Continued)

  	
  Page 2

  
	
  

  




	
   

  	
   

  
	
   

  	
  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. 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 Accounts. 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.

  
	
   

  	
   

  
	
   

  	
  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 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
  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 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, 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 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.

  











	
   

  	
   

  	
   

  
	
  Loan No: 51001

  	
  COMMERCIAL SECURITY AGREEMENT

  (Continued)

  	
  Page 3

  
	
  


  	
  


  	
  


  






	
   

  	
   

  
	
   

  	
  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 ten (10) 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 if the
  estimated cost of repair or replacement exceeds $500.00, whether or not such
  casualty or loss is covered by insurance. 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.
  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.

  
	
   

  	
   

  
	
   

  	
  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 AND TO COLLECT ACCOUNTS.
  Until 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 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; 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.

  
	
   

  	
   

  
	
  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.

  













	
   

  	
   

  	
   

  
	
  COMMERCIAL
  SECURITY AGREEMENT

  
	
  Loan No: 51001

  	
  (Continued)

  	
  Page 4

  
	
  


  






	
   

  	
   

  
	
   

  	
  Default In
  Favor of Third Parties. Should Borrower or any Grantor default under any loan, extension of
  credit, security agreement, purchase or
  sales agreement, or any other agreement, in favor of any other creditor or
  person that may materially affect any of Grantor’s property or Grantor’s or any Grantor’s ability to repay
the Indebtedness or perform
  their respective obligations under this Agreement or any of the Related Documents.

  
	
   

  	
   

  
	
   

  	
  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, endorser, surety, or
  accommodation party of any of the Indebtedness or guarantor, endorser, surety, or
  accommodation party 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.

  
	
   

  	
   

  
	
   

  	
  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 New York 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 (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. 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. 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 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
  SECURITY AGREEMENT

  
	
  Loan No: 51001

  	
  (Continued)

  	
  Page 5

  
	
  


  	
  


  	
  


  






	
   

  	
   

  
	
   

  	
  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.

  
	
   

  	
   

  
	
   

  	
  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.

  
	
   

  	
   

  
	
   

  	
  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 New York without regard to its conflicts of law provisions. This
  Agreement has been accepted by Lender in the State of New York.

  
	
   

  	
   

  
	
   

  	
  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. Grantor authorizes Lender to file a financing statement covering
  the Collateral without Grantor’s signature pursuant to Uniform Commercial
  Code Section 9-402(2)(e).

  
	
   

  	
   

  
	
   

  	
  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.

  
	
   

  	
   

  
	
   

  	
  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.

  
	
   

  	
   

  
	
  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.

  
	
   

  	
   

  
	
   

  	
  Borrower. The word “Borrower” means ANGIODYNAMICS, INC.
  and includes all co-signers and co-makers signing the Note and all their
  successors and assigns.

  
	
   

  	
   

  
	
   

  	
  Collateral. The
  word “Collateral” means all of Grantor’s right, title and interest in and to
  all the Collateral as described in the Collateral

  











	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMMERCIAL
  SECURITY AGREEMENT 

  
	
  Loan No: 51001 

  	
  (Continued) 

  	
  Page 6 

  
	
  


  	
  


  	
  


  
	
   

  	
   

  	
   

  
	
   

  	
  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 1801, 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 ANGIODYNAMICS,
  INC.

  
	
   

  	
   

  
	
   

  	
  Guaranty.  The word “Guaranty” means the guaranty from
  guarantor, endorser, surety, or accommodation party 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. Specifically, without limitation, Indebtedness
  includes all amounts that may be indirectly secured by the
  Cross-Collateralization provision of this Agreement.

  
	
   

  	
   

  
	
   

  	
  Lender.  The word “Lender” means KeyBank National
  Association, its successors and assigns.

  
	
   

  	
   

  
	
   

  	
  Note.  The word “Note” means the Note executed by
  ANGIODYNAMICS, INC. in the principal amount of $7,500,000.00 dated November
  23, 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.

  
	
   

  	
   

  
	
  GRANTOR
  HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS
  AGREEMENT IS DATED NOVEMBER 23, 2005. 

  
	
   

  
	
  GRANTOR:

  
	
   

  
	
  ANGIODYNAMICS, INC.

  
	
  By:

  	
  

  
	
   

  	
  


  	
   

  
	
   

  	
  Joseph G. Gerardi, Vice President of 

  
	
   

  	
  ANGIODYNAMICS, INC.