ex10_3.htm


    
      

    

    Exhibit
10.3

     

    
      SECURITY AND INTERCREDITOR
AGREEMENT

      


      


      THIS
SECURITY AND INTERCREDITOR AGREEMENT (this “Security Agreement”), dated April
___, 2009, by and among MIMEDX, INC., a corporation under the laws of the state
of Florida (“Grantor”), in favor of each
holder of the 3% Convertible Secured Promissory Notes issued by MiMedx Group,
Inc. (individually a “Holder” and collectively the “Holders”).

      


      R E C I T A L
S

      


      WHEREAS,
in connection with certain 3% Convertible Secured Promissory Notes, issued
pursuant to the Subscription Agreements (defined below), executed and delivered
by MiMedx Group, Inc., a corporation under the laws of the State of Florida, the
“Borrower”), payable to the order of each of the Holders, Borrower is required
to have executed and delivered this Security Agreement encumbering all of the
tangible and intangible assets of Grantor with the exception of
the membership interests held by Grantor in SpineMedica, LLC, a wholly-owned
subsidiary of Grantor, in favor of the Holders; and

      


      WHEREAS,
Grantor has determined that the Notes shall inure to the benefit of Grantor and
that it is in its best interest to execute this Security Agreement;

      


      NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt of which are hereby acknowledged, the parties hereto
agree as follows:

      


      1.         
   Defined
Terms.  The following terms shall have the following meanings
(such meanings being equally applicable to both the singular and plural forms of
the terms defined):

      


      “Borrower”
shall have the meaning set forth in the Recitals above.

      


      “Collateral"
shall have the meaning set forth in Section 2 hereof.

      


      “Collateral
Agent" shall have the meaning set forth in Section 5(h) hereof.

      


      “Event of
Default" shall have the meaning given to it in the Notes.

      


      “Holder”
or “Holders” shall have the meaning set forth in the heading to this Security
Agreement.

      


      “Majority
In Interest” means, at any time, Holders holding more than fifty percent (50%)
of the outstanding principal amount of the Notes at such time.

      


      “Notes”
means those certain 3% Convertible Secured Promissory Notes, issued pursuant to
the Subscription Agreements, executed and delivered by MiMedx Group, Inc.,
payable to the order of each of the Holders.


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      "Permitted
Dispositions” means (i) transfers in the ordinary course of
business,  including, without limitation, sales of inventory and
products made for sale, fixtures, furniture, and  transfers of worn
out, obsolete or surplus equipment; and (ii) any and all licenses of
intellectual property from the Grantor to third parties.

      


      "Permitted
Liens" means:

      


      (a)  Liens
consisting of any license or sublicense of intellectual property and any
interest of a licensor under any such license or sublicense;

      


      (b)  Liens
arising solely by virtue of any statutory or common law provision relating to
banker's liens, rights of setoff or similar rights and remedies as to deposit
accounts or other funds maintained with a Holder depository institution;
and

      


      (c)  Liens
arising from any Permitted Senior Indebtedness.

      


      “Permitted
Senior Indebtedness” means any bank debt not to exceed $5,000,000, hereafter
incurred by the Grantor or its affiliates.

      


      “Pro Rata
Share” shall have the meaning set forth in Section 5 (e) hereof.

      


      "Secured
Obligations" means all indebtedness, liabilities and obligations of Grantor to
Holders, whether now existing or hereafter incurred, pursuant to the
Notes.

      


      “Subscription
Agreements” means the Subscription Agreements for 3% Convertible Senior Secured
Promissory Notes between each Holder and the Borrower, pursuant to which the
Notes were issued.

      


      "UCC"
means the Uniform Commercial Code as the same may, from time to time, be in
effect in the State of Florida; provided, however, in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of Holder’s security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
Florida, the term "UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection of priority and for purposes of definitions related to
such provisions.

      


      2.        
    Grant of Security
Interest.  As collateral security for the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all the Secured Obligations and in order to induce the Borrower
and Holders to cause the Notes to be issued, Grantor hereby grants to Holders, a
security interest, subject to the subordination provisions set forth in Section
5 herein, in all tangible and intangible assets of Grantor, now or hereafter
owned or acquired by Grantor or in which Grantor now has or hereafter has or
acquires any rights, and wherever located, with the exception of
the  membership interest held by Grantor in SpineMedica, LLC, its
wholly-owned subsidiary (the “Collateral”).  The Collateral shall
include, but not be limited to, Grantor’s accounts, inventory, chattel paper,
contract rights; documents; equipment; fixtures; instruments; supporting
obligations and letter-of-credit rights; general intangibles; intellectual
property; investment property; goods; commercial tort claims; all money, cash,
cash equivalents and securities of any kind of Grantor; all of the Grantor’s
deposit accounts and payment accounts; and shall also include:


      
        
           


        

        
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      (i)        
    all
books, records and other property related to or referring to any of the
foregoing, including books, records, account ledgers, data processing records,
computer software and other property and general intangibles at any time
evidencing or relating to any of the foregoing; and

      


      (ii)       
    all
accessions to, substitutions for and replacements, products and proceeds of any
of the foregoing, including, but not limited to, proceeds of any insurance
policies, claims against third parties, and condemnation or requisition payments
with respect to all or any of the foregoing.

      


      (iii)           to
the extent not otherwise included, all proceeds of each of the foregoing and all
accessions to, substitutions and replacements for, and rents, profits and
products of the Collateral.

      


      Notwithstanding
the foregoing, "Collateral" shall not include any contract which prohibits the
granting of a security interest in such contract or any asset leased by
Grantor.

      


      3.       
      Perfection and Protection of
Security Interest.

      


      (a)       
    Perfection of Security
Interest.  Grantor shall, at its expense, perform all steps
requested by the  Collateral Agent at any time to perfect, maintain,
protect, and enforce the Holders’ Liens, including:  (i) executing,
delivering and/or filing of financing or continuation statements, and amendments
thereof, in form and substance reasonably satisfactory to the Holders; (ii) when
an Event of Default has occurred and is continuing, if requested by the
Collateral Agent, transferring the Collateral to warehouses or other locations
designated by the Collateral Agent; (iii) placing notations on Grantor’s books
of account to disclose the Holders’ security interest; and (iv) taking such
other steps as are deemed necessary or desirable by the Collateral Agent to
maintain and protect the Holders’ Liens.

      


      (b)        
   Financing
Statements.  Grantor hereby irrevocably authorizes the
Collateral Agent at any time and from time to time to file in any filing office
in any Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral (i) as all of the assets of
Grantor or words of similar effect (excepting only the membership interests of
SpineMedica held by Grantor), regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the UCC or
the Uniform Commercial Code of such jurisdiction, or (ii) as being of an equal
or lesser scope or with greater detail, and (b) contain any other information
required by part 5 of Article 9 of the UCC of the State of Florida for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether the Grantor is an organization, the type of organization
and any organization identification number issued to the Grantor, and (ii) in
the case of a financing statement filed as a fixture filing, a sufficient
description of real property to which the Collateral relates.  Any
such filing, and any amendment, continuation or termination with respect
thereto, shall be made only with the approval of the Majority In Interest for
and on behalf of all of the Holders. Grantor agrees to furnish any such
information to the Holders promptly upon request.  Grantor agree that
a carbon, photographic, photostatic, or other reproduction of this Security
Agreement or of a financing statement is sufficient as a financing
statement.


      
        
           


        

        
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      (c)       
    Confirmation.  From
time to time, Grantor shall, upon the Collateral Agent’s request, execute and
deliver confirmatory written instruments pledging to the Holders the Collateral,
but Grantor’s failure to do so shall not affect or limit any security interest
or any other rights of the Holders in and to the Collateral with respect to
Grantor.  Until all Secured Obligations have been fully satisfied, the
Holders’ Liens shall continue in full force and effect in all
Collateral.

      


      4.           
  Power of
Attorney.  Subject to compliance with Section 5(b) hereof,
Grantor hereby appoints the Collateral Agent and any other designees appointed
by the Collateral Agent from time to time, as the Grantor’s attorney-in-fact,
with power:  (a) to endorse the Grantor’s name on any checks, notes,
acceptances, money orders, or other forms of payment or security that come into
the Holders’ possession; (b) to sign the Grantor’s name on any invoice, bill of
lading, warehouse receipt or other negotiable or non-negotiable document
constituting Collateral, on drafts against customers, on assignments of
accounts, on notices of assignment, financing statements and other public
records and to file any such financing statements by electronic means with or
without a signature as authorized or required by applicable law or filing
procedure; (c) to notify the post office authorities to change the address for
delivery of the Grantor’s mail to an address designated by the Collateral Agent
and to receive, open and dispose of all mail addressed to the Grantor; (d) to
send requests for verification of accounts to customers or account debtors; (e)
to complete in the Grantor’s name or the Holders’ name, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof; (f) to file such financing statements with respect to this
Security Agreement, with or without the Grantor's signature, or to file a
photocopy of this Security Agreement in substitution for a financing statement,
as the Collateral Agent may deem appropriate, and to execute in the Grantor's
name such financing statements and amendments thereto and continuation
statements which may require the Grantor's signature; and (g) to do all things
necessary to carry out the fulfillment of the obligations of the Grantor under
the Notes and this Security Agreement.  Grantor hereby ratifies and
approves all acts of such attorney-in-fact.  Neither the Majority In
Interest nor the Collateral Agent or other designees or attorneys will be liable
for any acts or omissions or for any error of judgment or mistake of fact or law
except for their willful misconduct.  This power, being coupled with
an interest, is irrevocable until the Secured Obligations have been fully
satisfied.

      


      5.        
     Subordination and
Intercreditor Provisions.

      


      (a)      
     Subordination to Permitted
Senior Indebtedness.  Enforcement of Holder’s security interest
in the Collateral, and payment of principal and interest on the Notes, is
expressly subordinate and junior in right of payment and lien priority to all
principal, interest, charges, expenses and security interests arising out of or
relating to all Permitted Senior Indebtedness, pursuant to the following terms
and conditions.  The Collateral Agent is expressly authorized to
execute on behalf of the Holders a subordination agreement in favor of a bank
which issues Permitted Senior Indebtedness that is consistent with the terms
hereof.


      
        
           


        

        
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      (b)       
    Standstill.  Holders
shall not accelerate payment of the Notes, or commence any action, suit or
proceeding against Grantor with respect to the Notes, or otherwise pursue any
remedy to enforce Holders’ rights to payment of the Notes, or to enforce the
rights of Holders as secured creditors with respect to the Collateral, while any
Permitted Senior Indebtedness is outstanding, until after ninety (90) days
notice to Grantor of the occurrence of an Event of Default. After the 90 day
period, and if the Event of Default has not been cured within such time period,
the Holders may, with the approval of a Majority In Interest, acting
through the Collateral Agent,   pursue any and
all  remedies under the Notes and this Security
Agreement.

      


      (c)       
    Rights With Respect to
Notes.   Upon an Event of Default, the Majority In
Interest, acting through the Collateral Agent and subject to Section 5(b), shall
have the right to accelerate the maturity of the Notes.

      


      (d)       
    Waivers.  Waivers
granted pursuant to this Security Agreement shall be effective as against all
Holders if in writing executed by the Collateral Agent.

      


      (e)       
    Sharing of Payments and
Proceeds.  The Holders shall share pari passu on a ratable
basis equal to its Pro Rata Share (defined below) in all payments from any
source made on any of the Notes, and in the Collateral and any proceeds
therefrom.   "Pro Rata Share" shall mean an amount equal to the
amount which results when the total amount of principal that is owing to that
Holder is divided by the aggregate principal owing to all Holders (expressed as
a percentage).

      


      (g)       
    Amendment.  No
amendment of any provision of this Security Agreement shall in any event be
effective unless the same shall be in writing and signed by the Majority In
Interest.

      


      (h)       
    Collateral
Agent.  Each Holder hereby appoints Gilford Securities
Incorporated as its collateral agent hereunder (in such capacity, the "Collateral
Agent"),  who shall act as a representative of the Holders to
carry out instructions and directives of the Majority In Interest for purposes
of this Security Agreement and to have the other responsibility and authority
set forth in this Security Agreement.  The Holders’ approval of this
Security Agreement shall include confirmation of the authority of the Collateral
Agent.  Grantor may rely upon the acts of the Collateral Agent for all
purposes permitted hereunder.

      


      The
Collateral Agent shall have full power of attorney to act in the name, place,
and stead of the Holders in all matters in connection with this Security
Agreement, upon the approval of the Majority In Interest or as may be
specifically provided herein.  The Collateral Agent’s authority to act
on behalf of the Holders includes the power to execute all such documents,
waivers, amendments, and instruments as are approved by the Majority In Interest
or by this Security Agreement.

      


      The
Collateral Agent shall have no duties or obligations except as specifically set
forth in this Security Agreement.  In acting on behalf of the Majority
In Interest, the Collateral Agent may rely upon, and shall be protected in
acting or refraining from acting upon, an opinion or advice of counsel,
certificate of auditors or other certificate, statement, instrument, opinion,
report, notice, request, consent, order, arbitrator’s award, appraisal, bonds,
or other paper or document reasonably believed by them to be genuine and to have
been executed or presented by the proper party or parties.  The
Collateral Agent shall not be personally liable to the Majority In Interest for
any action taken, suffered, or omitted by him, except for willful misconduct or
gross neglect.


      
        
           


        

        
          5

          
            

          

        

        
           


        

      


      The
Collateral Agent and each Holder hereby agree that the Majority In Interest
shall have the full and complete right and authority to give instructions to,
and otherwise direct, the Collateral Agent in respect of the Collateral or any
action with respect to any Collateral.  The Collateral Agent shall not
have by reason of this Security Agreement or any other document a fiduciary
relationship in respect of any Holder.

      


      6.          
   Representations and
Warranties.  Grantor hereby represents and warrants to the
Holders that except for the security interest granted under this Security
Agreement and Permitted Liens, Grantor is the sole legal and equitable owner of
each item of Collateral in which it purports to grant a security interest
hereunder, having good, marketable title thereto and that the Holders shall have
a valid, binding and enforceable lien and/or security interest in and to the
Collateral.

      


      7.         
    Covenants.  Grantor
covenants and agrees with the Holders that from and after the date of this
Security Agreement and until the Secured Obligations have been performed and
paid in full:

      


      7.1       
    Further
Assurances.  At any time and from time to time, upon the
written request of the Collateral Agent, and at the sole expense of Grantor,
Grantor shall promptly and duly execute and deliver any and all such further
instruments and documents and take such further actions as the Holders may
reasonably deem desirable to obtain the full benefit of this Security
Agreement.

      


      7.2        
   Maintenance of
Records.  Grantor shall keep and maintain at its own cost and
expense satisfactory and complete records of the Collateral. Grantor shall allow
reasonable access to such records upon reasonable notice from
Holders.


      
        
           


        

        
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      7.3      
     Collateral.  The
Grantor agrees that it will not, without the prior written consent of the
Collateral Agent, consent to, permit or suffer to occur any sale,
transfer,  hypothecation, lien, or use of any of the Collateral
adversely affecting the interest of the Holders therein, other
than  pursuant to Permitted Senior Indebtedness, Permitted
Liens, and Permitted Dispositions.

      


      8.          
   Rights and Remedies Upon
Default.

      


      (a)  
 Upon the occurrence and during the continuation of an Event of Default
(subject to the provisions of Section 5(b)), the Holders, acting through the
Collateral Agent, shall have the right to take title to, seize, assign, sell,
and otherwise dispose of the Collateral, or any part thereof, either at public
or private sale, in lots or in bulk, for cash, credit or otherwise, with or
without representations or warranties, and upon such terms as shall be
reasonable, and any Holder may bid or become the purchaser at any such
sale.  If notification to Grantor of any intended disposition by the
Holders of any of the Collateral is required by applicable law, such
notification will be deemed to have been reasonable and proper if given at least
20 days prior to such disposition.

      


      (b)  
 If any Event of Default shall occur and be continuing, the Holders, acting
through the Collateral Agent,  may exercise in addition to all other
rights and remedies granted to it under this Security Agreement, all rights and
remedies of a secured party under the UCC.

      


      (c)  
 Except as specifically provided for herein, Grantor hereby waives
presentment, demand, protest or any notice (to the maximum extent permitted by
applicable law) of any kind in connection with this Security Agreement or any
Collateral.

      


      (d)   
The proceeds of any sale, disposition or other realization upon all or any part
of the Collateral shall be distributed in the following order of priorities
(subject to payment in full of any Permitted Senior Indebtedness):

      


      First, to
the Collateral Agent in an amount sufficient to pay in full the reasonable costs
of the Collateral Agent in connection with such sale, disposition or other
realization, including all fees, costs, expenses, liabilities and advances
incurred or made by the Collateral Agent in connection therewith, including,
without limitation, reasonable attorneys' fees;

      


      Second,
to the Holders in the amount of the Pro Rata Share owing to each Holder;
and

      


      Finally,
upon payment in full of the Secured Obligations, to Grantor or its
representatives or as a court of competent jurisdiction may direct.

      


      9.            
 Reinstatement.  This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against Grantor for liquidation or
reorganization, should Grantor become insolvent or make an assignment for the
benefit of Holders or should a receiver or trustee be appointed for all or any
significant part of Grantor's property and assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made.  In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.


      
        
           


        

        
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      10.        
   Miscellaneous.

      


      10.1          No Waiver; Cumulative
Remedies.

      


      (a)    Holders
shall not by any act, delay, omission or otherwise be deemed to have waived any
of their respective rights or remedies hereunder, nor shall any single or
partial exercise of any right or remedy hereunder on any one occasion preclude
the further exercise thereof or the exercise of any other right or
remedy.

      


      (b)   
The rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law.

      


      (c)  
 None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except as provided herein.

      


      10.2  Termination of this Security
Agreement. This Security Agreement shall terminate upon the payment and
performance in full of the Secured Obligations.

      


      10.3  Successor and
Assigns. This Security Agreement shall be binding upon the successors of
Grantor and Holders and may not be assigned by any party.

      


      10.4  Governing Law. In all
respects, including all matters of construction, validity and performance, this
Security Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida applicable to contracts made
and performed in such state, without regard to the principles thereof regarding
conflict of laws.

      


      10.5  Counterparts. This
Security Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

      


      10.6  Titles and Subtitles.
The titles of the sections and subsections of this Security Agreement are not to
be considered in construing this Security Agreement.

      


      10.7  Severability. In case
any provision of this Security Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

      


      10.8  Agreement is Entire
Contract. This Security Agreement, together with the Notes and the
Subscription Agreements, constitutes the final, complete and exclusive contract
between the parties hereto with respect to the subject matter hereof and no
party shall be liable or bound to the other in any manner by any warranties,
representations, guarantees or covenants except as specifically set forth herein
and in such other documents referred to above. Nothing in this Security
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto, and their respective successors and assigns, any right,
remedies, obligations or liabilities under or by reason of this Security
Agreement, except as expressly provided herein.


      
        
           


        

        
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      In
Witness Whereof, the undersigned have caused this Security Agreement to be
executed and delivered by its duly authorized officer on the date first set
forth above.

      


      


      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  GRANTOR:

                                
	 
      	 
      	 
      
	
                                  MiMedx,
      Inc.

                                
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                  By:

                                	 
      	 
      
	
                                  Name:  
      

                                	 
      	 
      
	
                                  Title:

                                	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                  COLLATERAL
      AGENT:

                                
	
                                  Gilford
      Securities Incorporated

                                
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                  By:

                                	 
      	 
      
	
                                  Name:

                                	 
      	 
      
	
                                  Title:

                                	 
      	 
      


                        

                      

                    

                  

                

              

            

          

        

      

      


      


      


      HOLDERS’
COUNTERPART SIGNATURE PAGE TO SECURITY AND INTERCREDITOR AGREEMENT
FOLLOWS


      
        
           


        

        
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      HOLDERS’
COUNTERPART SIGNATURE PAGE TO

      SECURITY
AND INTERCREDITOR AGREEMENT

      


      


      


      HOLDERS:

      


      
        
          
            
              
                
                  
                    
                      
                        	
                                Signature
      for Corporate, Partnership, or other Entity Holder:

                              	
                                Signature
      for Individual Holder:

                              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                (Print
      Name of Entity)

                              	 
      	
                                (Signature)

                              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                                By:

                              	 
      	 
      	
                                Print
      Name:

                              	 
      
	
                                Print
      Name:

                              	 
      	 
      	 
      	 
      
	
                                Print
      Title:

                              	 
      	 
      	 
      	 
      


                      

                    

                  

                

              

            

          

        

      

       

       

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